Ladies and gentlemen, welcome to the Societe Generale 4th Quarter and Full Year 2019 Presentation. Frederic Cudair, Chief Executive Officer and William Cartus Johnson, Chief Financial Officer will present the group results. Gentlemen, please go ahead.
Okay. Thank you. Good afternoon to all. Thanks for attending this presentation of our Q4 and full year results for 2019. Let me just mention that we have our colleagues in Paris connected, and you will be able to interact with them And with also some colleagues in Paris, we'll be able to ask some questions.
We'll go through the presentation as Quickly as possible with William and again, then enter into the Q and A. So please, let's go immediately to the slides and Slide 4. First of all, we've tried to recap the achievements of 2019. Can I say that We have met all our objectives, commercial, operational and financial? And in particular, if I refer to the financial objectives in this slide, first of all, obviously, on the capital, which was the core priority, Remember the beginning of the year, the question marks.
I think we have answered. We end up the year with
a 12.7%
Core Tier 1 ratio. You will see the detail. It's even 12.8 percent pro form a. The disposal of our Norwegian Leasing Business, which is not yet closed. And it's again a strong increase in the 4th quarter.
Knowing that, of course, it takes into account the payments of €2.2 per share Dividend, Cal Dividend as a Committee. I don't enter into the detail, but you know it's the results Strong organic capital generation, very successful disposal program, which is has been achieved for 70% of this. And of course, the successful restructuring of the GBIS with A strong decrease of risk weighted assets. Beyond this, we have, I think, worked very much on the profitability. And when I say that, first of all, it's on the cost.
The costs are decreasing by 1% versus 2018 despite the fact that we carry on investing, Investing in IT, investing in compliance remediation program. I think that shows the discipline we've had. And when you look at this business in terms of profitability, the French Retail did pretty well with a return on normative equity, which is basically flat, which is Flat, which is quite an achievement. With IBF as International Retail Financial Services, which deliver in a higher range of the profitability target between 17% 18%. And with GBIS, which is Working on its profitability, but as I said, we already some benefits of the savings, but everything is now secured.
44% was accounted this year in 2019, and we'll get the full benefit of our savings next year. Last thing that we would like to mention, the cost of risk, 25 basis points for the full year. The lower level of the range, 20 to 30 basis points. NPLR going down. We are providing the comparison according to the EBA in the appendix.
And you can see that With the standard calculation, we have lower than average NPL ratio and with also very good coverage ratio. So that means we enter into 2020 with a pretty robust balance sheet and trade portfolio. Next slide, just to mention that, Of course, we are probably just at the beginning of a big transition in terms of energy and Climate Change Issues. There's still a lot to be done, but Societe Generale is at the forefront of that. And you have on this slide a few rankings, a few acknowledgments of where we stand.
And I think it's something which is also and will be more and more important for our clients, for our investors and for all our stakeholders. And
We will
propose to discuss that during the year with a specific session. In the order in the sake of trying to save time, let me just go through the next slide Quickly, I'd like to highlight that beyond what already I've mentioned to strengthen the business model in terms of refocusing working on profitability, Allocating as precisely as possible the capital, I just would like to highlight the digitalization, which is absolutely crucial. I insist It is the number one operational transformation in all the businesses, whether they are retail or on the corporate side. Same thing. It's a journey, but I think we've made further progress.
I'm very happy to see what How we're implementing digital technologies and the change in the IT architecture in French Retail. And we are making also further progress in the development of new business model, Bausar, obviously. But recently, we launched a new startup for the kind of porcelain for small very small unit size corporate. I think being The next slide, and I will finish then and turn to William to answer much more in the detail. 2020 outlook.
In terms of capital, we will maintain the same discipline. We have the same target, 12% Core Tier 1 target. Happy to talk about 2020 because I think it might be the turning point for the European banking system. And I must say, I'm more positive now than I was 6 months ago. And I think there are pieces of the jigsaw which are being put.
And I think we'll have clarity earlier and happy to discuss about this. We will, for the time being, maintain, of course, the same policy and with a buffer above this target, which is probably now a conservative one, but let's wait. And we will monitor the group at a high level. Regarding profitability, what we can say is the commitment to, 1st of all, deliver growth of revenues. 4th quarter is obviously very promising from that perspective.
But beyond for the full 2020 year, it's important We show that. Section positive jaws across all the businesses and In particular, in the French retail, we confirm, but also, of course, in GBIS. And then we are just lowering our range of core Cost of Risk. You know we had the range from 35 to 40 basis points. And actually, looking at the full year for 2019, the perspective of the portfolio, We are lowering the range between 30 and 35 basis points, a slight increase versus this 2019 year.
It means effectively an improvement of the profitability, the return on tangible equity. Regarding our shareholder return, beyond, of course, the objective to increase the to increase the EPS and the net asset per share. Let me mention we are adjusting Our dividend policy, we are based our policy on a payout ratio, 50% payout ratio. I think it's More or less the standard, the norm for European banks. Underlying results and after the AT1 coupon, Let's be very clear and specific on this.
That's something which, again, is also, I would say, for me, a nice way of looking at it, the normal way of looking at it. And knowing that within this 50%, we are going to include up to a 5th, So 10% of the net profit of share buybacks, we had a lot of discussions with the market, our shareholders, And we think that at least with this current valuation, it makes sense to do that. And The idea, of course, will be to start as quickly as possible on that program. That's what I wanted to say As an introduction, now I leave the floor immediately to William to answer more in to his remarks.
Thank you, Frederic. Good afternoon, everyone. So I'll start, as usual, commenting the highlights for the Q4 of 2019 as well as the full year results as It relates to the key pillars of the group, the core business pillars and the corporate center. The one thing I would like to stress particularly, as Frederic hinted already, for this quarter, is that we are back to growing revenues. Underlying revenues have been growing at a pace of 4.8%, close to 5% in current terms this quarter over the same quarter of last year.
It's about 7%, 6.8% adjusted for scope and foreign exchange. This is combined with a decrease in underlying cost of 0.7%, so minus 0.7%. It means positive jaws, a decrease in costs to income by 4 points, adjusted The group net income stands at €875,000,000 on underlying terms, which is 8.7% up relative to the separate of last year and RoTE is at 6.2% for the quarter. For the year, the group net income stands at nearly €4,100,000,000 and RoTE ends at 7.6%. I would like also to stress the fact that net tangible value book value Is up 5.6% year on year.
Now turning to the key elements on the businesses and more looking at an annual performance. French Retail Banking ended the year with the resilient profitability we've been talking for about a few quarters at 11.1 percent return. With business performance, which is very much in line, actually better than what we guided. Revenues for the year are up 0.3%, Excluding per cell effect, as it is usual for French banks to report, it's ahead of what we've guided you to. We had said revenues may be in the red 0 zone, I.
E. Between 0 and minus 1, which actually of plus 3. We had said cost would go up between 1% and 2%, costs are actually up 1.3%. Adjusted for €55,000,000 of restructuring costs, which we have in this quarter, costs are only up 0.3% year on year. On International Retail Banking, strong growth again this quarter, 5.6% for the year, adjusted for foreign exchange and scope and combined with strong profitability at 16%.
Same for Insurance and Financial Services. That growth is nearly 3%, combined with an increase in the profitability to nearly 21%, 20.8 percent more exactly. Where we have obviously very positive development this quarter and ending much better the year than we had started is in Global Banking and Investor Solution. I'll come back to it. Profitability is still At the unsatisfactory level of 7.4%, still more work to be done.
Yet revenues for the year adjusted for The runoff of activities and deleveraging impact are up 1% year on year, which costs have decreased, adjusted for restructuring cost by 2.5%. So this is positive jaws. And as for the quarter as far as the quarter is concerned, adjusted for the one off, revenues are up 11% in CIB and costs are down 2%. Finally, Corporate Center. I guess, the gross operating income can be considered as better than guidance at EUR 246,000,000.
What I would like to point you to is, obviously, there are 2 elements of 1 off here. 1 is was known by you largely, which is the impact of IFRS 5 Related to our disposals, EUR 137,000,000 we had talked about the impact of signing of Norwegian Equipment Finance Business. Plus, we incur in this quarter the impact of the write off of the group minority stake in Lebanon. We have 16.8% stake in Societe Generale, Yvonne, which we I'd like to turn to the next page And just to summarize, with a few numbers, the efforts we have made and we Continue to make on cost. We delivered a decrease in absolute term of the cost base of the group For the quarter, positive jaws, quite significantly, plus 4.8% revenues, minus 0.7% on cost.
And this is largely due to strict cost discipline across the board, but also the implementation of the cost plans we had announced. You remember the cost plan of €1,100,000,000 we had announced back in November 2017. We have executed 70% of it. We also had announced earlier this year the implementation of a new cost plan for an equivalent of net cost reduction of €500,000,000 in CIB. We had said at the time, we expected that we would be able to implement between 20% 30% of that ambition.
We actually managed to deliver 44%. So that's 60% of the total cost plan. Cost of risk, which is the next page, Frederic already loudly commented. Cost of risk, we ended the year at 25 basis point, which is at the very low end of the range we had announced, 25% to 30%. And as Frederic said, we see An increase next year to 30% to 35%.
This is very gradual. It is really based on the fact that We have very strong volumes across the board in France, in CIB, Restructured Finance, in International Retail and Financial Services, And it is logic that we have some gradual increase in the cost of risk. Very importantly, we continue to work on decreasing the NPL ratio. We stand at 3.2%. So Frederic alluded to The transparency report by EBA, which you have in the appendix, the equivalent ratio is 2.6 As far as NPL is concerned, which is one of the very best ratio in Europe, the average for European banks in the sample is 3%.
And we also fare very well in terms of growth coverage ratio. Capital, I guess you're starting to get used to the fact that we produce capital every quarter. We produced 24 basis point Capital this quarter over the Q3, it stands at €12.71 plus The additional benefit from the signed disposal less the cost of the acquisitions, It is a pro form a of 12.8%. This is 2 70 basis points above MDA to be compared with our target of 200 basis points. That includes €2.2 per share fully provisioned as for the dividend.
And also, as you may have seen, this also includes A little capital increase we have done for our insurance activities. This is already in the ratio, nothing to be expected in the future. So this is a very strong, I consider, 12.8 percent. Some of you, I know, are a bit nostalgic of because we had that comment of the Capital Work page. So referring to it, I'd like to stress that on organic capital, we had announced for the period of 2019 to 20, 50 basis points.
We've completed 41 basis points organically, up 30 basis points in the solely in the Q4. Year to date is 41%. On global market RW reduction, we had said 25 basis points. We've done the 25 basis point. We had said other RWA reduction between 10 20, Mainly in the form of risk transfer, we've done 17.
We had said refocusing program 80 to 90. Through the end of 2020, we have done 57%, which is 70% of the program. And we had said, unfortunately, we will have some headwinds on the regulatory side, 30 to 50. We only had 2 basis points of it in the year. I'd like to be a bit specific on that.
We now have a better visibility. We consider this probably be rather the 50 Then the certainty that you have to consider. But all in all, I think we can make the competition and put in perspective what Frederic has said, which is We target 12%. We are comfortable that we should be above everything else being equal. Leverage ratio stand at 4.3 Saint Hilaire, Cameron.
We are compliant. We have increased our liquidity buffer in the year by EUR 18,000,000,000. We end up with €119,000,000 I don't comment the next page usually, which is just the table. But just to stress again, One number particularly which is not in the detail. The revenues from businesses Adjusted for scope and foreign exchange are flat year on year.
So you have a base effect for the group because you may remember last year, we had the revaluation of the euro share in euro clear, which creates French Retail. There are again some elements on the commercial dynamics. Very simply, first, we continue to acquire clients, both for the traditional or so called traditional networks on the target clients, which you know for us are corporates, Professionals will see impact from your clients and as far as Bussorama is concerned, full digital clients. In a sense, you had some numbers on corporate clients, on wealthy clients. We continue to grow also the target professional clients.
And Boursorama is well ahead of its plan with an additional 540 ks clients acquired this year. Production, number 2, is continues to be very strong. And this year, we had medium term corporate loans up around 7%. Same for individual client outstanding, up around 7% year on year. Bank Insurance makes good progress.
This is a key element of our growth, whether this is life insurance. And we had a better performance in the past months, Especially on unit linked. So outstanding are up and unit linked are up as well. And personnel for protection is progressing towards a ratio close to 22 percent penetration. Private Banking had record net inflows at €4,200,000,000 3rd, we continue to adapt network.
We consider should you you have here a statistic on Societe Generale network, but should you add Cite General and Credit D'Noors. We've completed nearly 85% of the program of branch closures we have set in 20 15% for 2020. So we are very confident we're going to go there. And the consumption of products online, be it self care of clients or increasingly buying products or banking business Online is increasing as planned. As far as the results are concerned, which is the next page, I won't repeat the trend on revenues and cost.
So just on the quarter, revenues are up strongly at 2.3%, and costs are also Very well contained at 0.4%. Cost in the quarter includes €55,000,000 so what I the €400,000,000 I mentioned is adjusted obviously for that provision. I'd like To point out that for the next year, we don't change the guidance we have given to you a few months ago, We see some pressure on revenues. So probably, we see again that We could end up in the red 0 to minus 1%, even what has happened particularly on the red side and the macro. But we strive for a decrease in the cost base and positive jaws in French Retail in 20 20.
Last comment I would make on French Retail. Increasingly, we will communicate to you differentiating the profitability of the various networks. The so called traditional networks have a profitability of 12%. And Boursorama, Adjusted for the cost of acquisition, you may be used to it because we presented that and the deep dive is very well in line with what had been presented to you in terms of profitability, which is above that 12%. On International Retail, a story that is very consistent with what we have been discussing In the past quarters and what Philippe and his team mentioned to you in the recent deep dive, still strong production, both loan and deposits in Europe, in Eastern Europe, in Russia and in Africa.
Let me stress specifically that in consumer lending, Which is mostly a Western European business for us, Germany, Italy, France, plus effectively Czech Republic and Russia, Outstanding has been growing 10% this year. And as you know, the average profitability of that business is Close to 17%, so very strong. What we wanted to stress particularly is also the fact that we work on efficiency in these areas. So when you look at these numbers of brand closures to pick some data on the page. This is quite significant Because in fact, beyond the absolute terms, this is a reduction of 15% of the branches in Russia, 6% in the Czech Republic, 10% in Romania in 1 year.
So we will continue in these countries where we see Strong intake of mobile banking usage by clients to optimize the setup. Another data point I'd like to stress, Fred Sien Philippe and his teams have already mentioned it. We have 21% of our sales made on digital channel in Russia, which is the best rate we have in the group. And obviously, we will strive to convert the group toward that level and increasing. Next page is on Insurance and Financial Services.
Strong dynamic combined with Hi, RONI of 20.8%, as I mentioned. So insurance outstanding, life insurance are up 8%, Protection Premier up 8%. P and C is up 9%, of which You have a growth in France of 5%. ALD, some of you may have followed the release of the results today, very much in line with What had been announced, fleet, including some bolt on acquisition, is up 6% and now is very close to the world leader at €1,800,000 very good profitability as well guidance achieved in equipment finance Up 2.5%. Let me stress the fact that the net income of Geth, our Equipment Finance business, number 2 in Europe, is up by 30%.
So in a nutshell, Very good year for International Retail and Pivotal Services, nearly €2,000,000,000 net result contribution, Close to 18% return on normative equity, which is very much in line with our guidance for 2020. That combined with a revenue growth of about 5% overall. On CIB, that's obviously a very bright spot for us in this quarter. And that's very, as Frederic mentioned, reassuring for us When you embark in a not so favorable economic and market context into a deep transformation. I remember your very wise questions as to whether we would destroy even more the franchise which we had to do some cost savings.
And what we can say that for us at least the 4th quarter indicates that the franchises In good health after this focusing exercise and this cost reduction. Talking about starting with market activities, global markets activities revenues are up 13% And 18%, excluding activities in runoff, that is mainly the citywide activities in the FICC. That means FIC revenues are up 41% year on year in Q4. Equities are up 9% I'd like to insist on that because it's clearly a core franchise for us. This 9% has to be put in context.
You may remember that in Q4 2018, although we had bad numbers, They were, in average, better, specifically in equities than in the rest of the sector. So we don't have the same base effect, at least not to the same order of magnitude. 2nd, this 10% compares quite very well to the pool numbers. I'll let you check the numbers, but it's quite a head start. The performance is very much related to the Equity Derivative franchise.
I'm sure you apart from a few exceptions, You have often heard in this Q1 that people were very happy with cash equities, much less so about equity derivatives. So we consider we gained share in the VACOR franchise. Financing and Advisory for the year, revenues are up 3%, actually adjusted for The deleveraging, they are up 6%. They are slightly down in the 4th quarter. We had a very good 4th quarter 2018 in terms of production, but adjusted for deleveraging, they are up 1%.
A little comment on Transaction Banking. We had mentioned to you, we were investing heavily in reshaping that area 2 years ago, revenues were up 9% year on year in that division, and the return is 15% for that division. Wealth and Asset Management is back on growth. Revenues were up 8% year on year in the 4th quarter. So when you turn to what we have been trying to do, I.
E, maintain Some dynamic in the franchise with doing a heavy lifting on the restructuring. What you have on these pages on the left hand side, the targets we consider we have achieved. Number 1, on the RWA reduction, done. Actually, we exceeded the intention of 2020, already in 2019. We had said we would do 20% to 30% of that 500.
I've already said We completed EUR 220,000,000 which is EUR 44,000,000. We had said we would incur EUR 250,000,000 to EUR 300,000,000 restructuring cost. The actual number is EUR 268,000,000. So we're very much in the ballpark of what we had said to you. And we had said, unfortunately, there will be some consequences on the On the revenues, minus €300,000,000 What I can say is for 9 months, it's not a full year, it's about €190,000,000 So we're quite confident we will exceed that number.
So adjusted for a number of factors, You know, revenues are up 1%, as I said, and costs are down 2.5% for the year in CIB. And obviously, we don't want it to be the 1st and only year where we decrease cost. As you know, we are embarked into that intention to decrease cost reduction. So we'll turn towards the €6,800,000,000 cost base in CIB. In a nutshell, which is what you have on the next page, revenues are up, as I said, 11% adjusted Q4 plus 1.
I don't comment more on the other numbers. We've already said net income is up 61 Q4 on Q4. The run year again is 7.4%. And as Frederic Stated, we are not happy with that. We're working to improve it.
That's clearly a lever for us in terms of improving the profitability To quote Frederic in his own words. Corporate Center, I don't suggest we spend too much time. I've already mentioned The key elements, I leave it for questions. I mean, you have the 2 one offs and the slight the over performance relative 2 guidance. And I turn to Frederic again for the conclusion.
Yes. Thank you very much, William. Just a few words of conclusion. So After this successful 2019, we want to pursue, 1st of all, in 2020 according to the same kind of directions, disciplines, Costs on capital. And again, with this benefit of probably being able to focus More attention on also the business opportunities having done the restructuring, this and the restructuring behind us.
But we will also prepare for the next phase, 2021, 2025. We will pursue the transformation. The transformation will not stop 2020. We have 3 main axes. Clearly, customer satisfaction, customer experience in this world of digital, This is going to make the difference in the long run.
Secondly, efficiency. When I talk about efficiencies, it's in particular Fully digest the benefit of the investment of Equity and also having the post remediation phase. In our cost, we are embarking still heavy cost of remediation. In the next 2 to 3 years, It will go. And beyond, as I said, with the benefit of investment we are currently making in our new systems.
And third, sustainability. It's very important, climate. As I said, it's just the start. It's not just about financing renewable. It's Thinking the portfolios on credit, on investments, but it's also on the retail side.
So we want really To think about what it can mean, and it's beyond climate. It's around also social responsibility regarding the staff, Transformation and also Africa, as you know, which is specific to us but very important. So what we would like to propose to you is this year. Perhaps the first session in the first half around sustainability, just to show how we think about it. And it's in second half around efficiency and digital, how we combine the 2 to make our business in a more efficient way.
And Again, I will not repeat what we want to achieve in terms of shareholder value creation, but I think 2020 will be a successful year as 2019 has been.
So that's
what we wanted to say to present. Now, I mean, again, we are ready for your questions. Normally, I think Paris is connected. We had them on the screen. Can you hear us, Paris?
Yes.
We can hear you.
Okay, great. Well, so we'll yes, okay, here you are. Thank you very much. We'll start, Tarik and then Jean Corvie. Okay, so
Hi. Adzura Guasti, Citi. I have a question on the target. You haven't confirmed the RoTE target for 2020 that you presented last year. I assume that the difference is mainly coming from the CIB division, and CIB actually was better.
Can you explain us a little bit what's the work on the revenue Capital Allocation for that division. The second one is on capital. It seems that the regulatory environment is relaxing a bit on capital, and Several banks have announced either buyback or filling buckets in with different category of capital. Would you consider starting the buyback earlier than when you announced the dividend next year if the condition are met or is it something that is for February 2021.
I will take this question on capital and perhaps So if I could comment more specifically on JIB, can I just also mention, first of all, on the debt, we maintain the 9% to 10% target? Let me just mention, this year, we will monitor the bank, as I said, above a 12% target. Of course, that impacts. It means some capital will not be deployed this year. And then effectively, it's more on the GBIS, the prudence still on the GBIS.
But again, Severin and William can comment. I'd like to spend some time on the capital because I think it's very important. First of all, on the environment. As I said, it's a personal comment. But I tend to think, as I said, the pieces of the jigsaw are being put in place step by step by Europe.
And 2020 might be a crucial year to get visibility and maybe to have a revision of the way the market has been thinking so far. We'll have first the Basel implementation. As you know, the draft of the commission should be ready mid year. And I think we'll have a good idea of the end gig. The final one maybe then to dialogue with the council, but Still, it will give us more clarity.
Beyond that and beyond the fact That, of course, may be in certain portfolios I have in mind, for example, the large corporates, the banks loss given default, which will increase Just because there's not enough losses, so behind the density, you will have many steps. 1st, The SSM is going to have achieved its trim exercise. So fundamentally, We'll be able to say to the market, I'm done, I'm happy, it's harmonized, I'm happy. 2nd, the stress test. And it's likely that the results after a few years of additional capital, less NPL, etcetera, will be Which will be also a way to say fundamentally no need to put market in the system.
So it means that even if you Have a density which will vary. You will have then the benefit of the new CRT V, for example, on the composition of the P2R. And the fact that, of course, naturally, the P2G, which covers other risk, will not be inflated by the mechanical increase of the risk weighted asset. And I think and it's a personal comment, but it will be a way actually to comply with the fact that there will be no significant increase of the Basel Capital You see it. So I again, at this stage, we keep the same target, The same capital monitoring.
But it's fair to say the perspective today is better than it was with more uncertainty 9 months ago. Regarding our own share buyback program, the idea is not to wait for February 2021, Obviously, we need to have approval, formal approval by the SSM. What we've been proposing has It's been, of course, I may see, presented. So now it's just also a question of process. Perhaps, Severin, on GBIs, the outlook, what we want to achieve.
Yes. Thank you. 4th May of this year. We expect revenues for GBIS higher than what we delivered in 2019, Thanks to the good momentum we have still today and we observed last year despite the deleveraging on financing advisory first and Transaction Banking, 2nd. And we have also an expectation to have better revenue on double market, thanks to the EMC integration, which was the impact on revenue last year was limited.
So all that, meaning that we are expecting revenue higher than this year last year, sorry. But as just said by Alfred, I grew up also prudent And the level of sentiment is on the global market is still there. We don't, for example, embed today the impact of the Chinese virus impact. It's too early to say. Today is if it lasts very short term, the impact will be limited, but we don't know what time it will last.
So it's just a sign of prudence in my mind.
Tariq? Yes.
Thank you. Tariq Emejat from Bank of America Securities. So just a question back on capital. I mean, if we do quickly, Mats, I mean, your range is 12.6%, 12.9%, If we take the mid range by end of this year, so this way, it will be 12.7%, you have an impact of Basel IV of 130 basis points. So If we take the output floor as well.
And if you use the Pillar 2 requirements relief for you is around 80 basis points. And you already over issued in AT1 and Tier 2, so it will cost you nothing in terms of EPS. So basically, you will be compliant Basel IV in pro form a basis by year end. First question, does TRIM overlap with Basel IV or is it something extra? And second question, how would be your thinking then about capital and dividend?
I mean, Some of the banks were very excited quickly and start to talk about free capital or special dividends. I mean, do you think for you, it would be more an opportunity to actually Restructure deeper the business because you will have some money to do it without hurting the sale of capital allocation on other divisions. And I'm thinking really about CAB. Can you go deeper into the restructuring? And my second question is on consolidation.
I mean, there's been I mean, every day, there will be some comments of some speech from ECB or local authorities saying that this is something that has to happen. So how fast do you think the banking union or EDIS will progress? And I think you said you want to play a role in that. So how do you see you playing this role? In what sense, yes?
Perhaps I will let Johnny Deveau To answer more specifically your question, the overlap, yes, there is some that Jonny will comment. Can I just mention from a strategic point of view, we want fundamentally to complete the restructuring, the refocusing, the major reallocation of capital from one business to the other at the end of this year? And You know the refocusing program has gone well. We will complete it, but it's 1 or 2 asset. It will be done.
And we think on the GBS, and Sylvain can elaborate, that we've done the job also now. We think it can deliver and work And effectively, deliver a decent profitability. Of course, the restructuring or the improvement of We will not end 2020. As I said in each the retail in France, we will not stop in the 2020. It's not the benefit of the usage of digital.
We carry on. Bouxorama, which is conquering clients, will Turn from still a negative figure to something very positive in the coming 3 years. We will benefit further in Going forward, sir, what I'm just saying, at this stage, the idea is that we have done a lot and that this model If we were wrong, we would review. But I don't think that if you wish this New capital perspective should in itself change the fundamental industrial strategic perspective. And again, let's wait.
We are maybe more prudent. What I've mentioned to you at this stage is a perspective. We'll see. I tend to think it probably will happen, but let's wait to see that it has really happened to reconsider, if any, the capital usage. First, Jonny, on the TRIM, Andy, in
Yes. So 3 months and the decisions we are expecting in the coming weeks months will be Indeed, mostly on what we call the low default portfolios, large corporates, banks, markets. And that's where we expect also the bulk of the impact in Basel IV. So part of it is indeed overlapping as The way we estimate the TRIM impact is basically applying LGDs, loss given defaults, which are closer to What would be under Basel IV, the rule and the foundation applicable in terms of on banks and corporates. So indeed, we can say that part of TRIM is a fork loading based For impact, but at this stage in our estimate, we have kept the initial estimate of Basel 1,000,000,000,000,000,000,000,000,000, part of it is indeed overlapping.
At this stage, we maintain a conservative assumption.
Perhaps again, Sylvain, could you just come back to GBIS and the refocusing we've done that just I reiterate that we are confident that this business model makes sense. As it stands now, and I can tell you the perspective of the The management team is that it's today stronger and more consistent. Can you elaborate a little bit on this, Sylvain?
Yes, of course. And I have with me Jean Francois, Gregoire, just on my left. So perhaps Jean Francois could be more specific on the global market. But very clearly today, we have refocused our and Adjust our capital allocation to the area where we have the leading position. And it's visible, if I may say, already in 2019.
Just speaking about Global and Finance and Advisory and Global Banking Advisory. This year, we made the delivery thing, and you saw that Leveraging is around EUR 7,000,000,000 uniquely in this division among the EUR 25,000,000,000 risk weighted asset decrease. Despite this Deliberating, we have made a slight increase in terms of revenue, as mentioned by William earlier. Just to demonstrate to you that we have a real bidding capability In summary, we are refocusing our asset allocation.
So that's
a plus point, and we see still positive momentum for the next period of time on this part. We have also done Significant, we're focusing on our global transaction banking activity. As mentioned earlier, we have invested a lot in the last 3 years, and now we are benefiting from that. And clearly, last year, As mentioned already, we have an 89% growth. But more importantly on that, the return on equity on that activity has been doubled last year, Around 15% now.
We have still a good area of improvement. And this is for us also a labor where we are now good at and we have labor to increase in average the return of GPNs. And of course, and I can let Jean Francois now comment on what we did on the global market. We're focusing our 3 main activities: Investment Solution, Financing Solution and specific co activities while we are differentiating factor. And doing that, we are also reallocating the capital within the bank on the area where we can deliver higher return.
So now we have done the job refocusing, exiting from activities where we are not so good at and keeping the leading position or the leadership position we are in the market. The good news for me is in 2019, we have maintained our capability to gain market share on the area where we are in position. And this is very visible, if I may say, as mentioned earlier by William, on the Equity franchise. On the Equity franchise, we have protected it even if we are refocusing it on the solution investment, as I said, and financing activity. But we have gain market share in 2019 in a moment where we are deeply restructuring the global market activity.
So something which is not so easy to deliver, but I would say that the 4th quarter is just the first demonstration what we had in mind to do.
Yes. Hello, Jean Francois. Yes.
Yes. Maybe just a few more words. So as we explained, so we have Investment Solutions, Financing and the Flow Business. In Investment Solutions, this is our core DNA where we have been awarded again The top position in Biomist Meneg in terms of the structure product. So that's quite remarkable in a year Transformation.
And second leg of this business is the warrant ETF business, where all the teams are full preparing the final integration that will happen very soon, the E and C integration. Then on the financing part, this is an area that is the most profitable part where we increased our revenues And where we have our prime activities, mostly the clearing of futures and options, where there has been a very strong restructuring with actually same revenues but far, far less capital. And this was a very good outcome as well. And lastly, on the Flow business, Equity Tier say that we still we secured our top positions on this franchise, very important for us. And on the Fluor business in FICC, which was a bit an issue last year with a management overall that was Very profound.
We were able to grasp the opportunities in Q3 and Q4, And it's very satisfying to see that we are back on track.
And perhaps, Tariq, on your question on consolidation, If you see, I think there's more clarity going forward on capital. I'm a little bit less More prudent on the banking unit because here you see still trends towards fragmentation, Still inconsistency between the different supervisors, etcetera. So we'll see what happens in 2020. The jury is out really on this. So I mean, it's not for tomorrow.
It's So mid- and long term, I've already said that some consolidation should be a logical outcome of a completed banking union. It was part of the Architecture, more integrated market. The fact is, we see steel markets which are pretty different, dynamic are different. We'll see what the European Commission wants to do. We hear a lot about also Capital Markets Union.
Whether or not it will be delivered, I don't know. It's a lot it's part of the agenda. It's clear. I see no more. And clearly, you need first to have clarity on all the capital On that front, to know whether there are again opportunities which could create even more value, that's what you can achieve on your own.
What is very clear to me is that on our own, we can deliver, I think, further profitability, further growth. It's very clear in my mind. And then we will see. And as I already said, you don't have so many banks which will be able to participate. Need to have synergies, not we're not if you put just 2 retail banks aside from one country to the other 0 synergy for the next 5 years.
It's around more global businesses. And at the same time, we believe it's on balance sheet. You will not have EUR 3,000,000,000 or EUR 4,000,000,000,000 does not exist. So I mean, there would be conditions to do that. We will see, again, at this stage, our focus is on our business model, complete the trajectory for 2020.
And precisely look at this 2021, 2025 period with more visibility on all these parameters, which were concerns for the market, which I think will be more clear, more visible and with the opportunity or not. But on our side, we are building also a strategy which
Thank you. I have 3 questions. I'll make them quick. First one, Can you remind us, you probably gave the number, Ambril, sorry, the ingrained restructuring costs that remain to be booked for 2020? In the sense of the question is linking to dividend, which is a little bit headachy this morning for the payout policy in 2020.
If I look Because you're going to do a buyback as well. The total amount you're going to return to shareholders, dividend plus buyback, There is a case to say if you do a little bit math that you would need underlying earnings growing by about 10% to actually get the same amount return to shareholder. Is it something that you grew as a little bit too conservative? Or do you think can actually deliver that to return the same amount of money? It's a way to actually ask if you're going to cut It's total amount returned, okay.
And I think it's actually quite clear you can at least give a little bit of guidance on that. 3rd question, great to have a deep dive on sustainability in H1. Are you going to be able to give some clarity or bit of information about the degree of climate risk you have with regards to the sectors that are exposed to transitions and define your green policy because everybody every bank seems to have a different definition of what they mean by green and Sustainable Development Funding. Thank you.
We'll let William talk about The dividend, the amount of restructuring. And Pat, Joni Lebo is also in the general management team, more in charge specifically on the Climate change risk approach, etcetera. William? So essentially, when you sum up what we incurred In
terms of restructuring costs for what the plans we've announced this year, which is CIB, plus The headquarters of international retail plus French retail, the additional restructuring, which we have announced in a few weeks ago. You end up with EUR 268,000,000 plus EUR55,000,000 plus EUR34,000,000 Some of it has been incurred as accounting provision, some is not, but I guess it's a detail. As far as this restructuring program are concerned, I don't expect more provisioning of any charge, Neither accounting wise or otherwise. And as we said, we're in the ballpark of what we Now coming to the dividend, the way we think is that we need to offer predictability on the dividend for shareholders. And this is the very reason why we move to a payout on underlying.
Because we think that you can project The underlying net income, what you can't project, obviously, is should there be Capital gain or a loss or a restructuring charge, should there be some in the next year? So that at least You can project through the noise. The way we think about it is we really think it's 50% distribution. If we do 0 share buyback, Then you calculate the DPS on 50%. If it is 10% share buyback, then it's easy When I look at the future and based on what Frederica said, which is there should be an increase in the underlying net income for next year.
Even taking the 40% and 10%, I don't recognize your math because I don't have the numbers you have done on your side, but I can say that it's probably Well positioned relative to the expectations without your buyback.
Jonny, perhaps on the climate. Yes.
So we have integrated indeed Assessment of Climate Risk in our risk appetite and the way we analyze Vulnerabilities in our portfolios. We view it as not a separate risk, but a risk which is, in a way aggravating factor of credit risk, and that's the main area where we see Exposure Related to Transition. And we have integrated in our risk assessment and the credit assessment of clients and Sector. The risk associated to transition, taking into account scenarios and common methodologies, in particular scenario related to transition allowing alignment with Paris Agreement. So first of all, assessing risks and vulnerabilities in our credit portfolio and most exposed sectors.
And it's already integrated in our risk management, risk appetite and rating of our clients, and We will be able to give more information on that. 2nd part of our strategy and analysis is The transition and how we align progressively our portfolio and our risk to the various scenarios, in 2 degree scenario. And there, we have already communicated commitments and precise commitments, such as being Total year of coal by 2,030 or 2,040 depending on the regions and reducing our exposure progressively to the fossil fuels. And in parallel, we have also taken quite important commitments In financing the transition, and we are committed to finance up to EUR 120,000,000,000 of financing, either through a direct financing of renewables or by arranging bonds which are compatible with sustainable development goals. So it's twofold, reducing our exposure and analyzing risks and accompanying the transition.
And second, occupying the transition by increasing our exposure and financing to Renewable and Sustainable Financing. So it's a strategy which is 2 fold, and this is what we are going to Present Risks and Opportunities and how this is fully integrated in our strategy and our business development.
Thank you. Delphine?
Yes. Delphine from JPMorgan. Just so two questions. First of all, to come back on capital. You had an increase in P2R as of 1st Jan 2019.
And since then, you've done a lot of progress on capital. What are the conditions for that reversal or improvement? Is it the completion of your deleveraging program? Or I mean, what are the key milestones you have to achieve to get that relief even without using Article 104. And related to that, I mean, if you get this relief at some point in the future and Also in the context of CRD V, what level of capital would you be feel would you feel comfortable running at?
I mean, If you look at it in absolute level, what kind of buffer over FDA? I mean, if you could give us a little bit of color, that would be helpful. The second question is just going back to your RRT target, which now you're now committing to 9% to 10% for 2020. Sort of what has changed in the environment? Is it just mostly rates?
Or is there anything else that you want to flag? I mean, because you've revised your French Retail
Yes. Okay. Starting with Capitum and P2R. Effectively, we're working towards reducing again the P2R. But as you know, First of all, the €175,000,000 is pretty way compared relative to the average.
But second, There is quantitative elements and qualitative elements behind the P2R. On the quantitative elements, Be it capital or liquidity or risk, I think it's fair to say that the DB already recognizes that we've made progress or we're still very well running on liquidity and risk is what they had already mentioned. On the qualitative assessment, it revolves around governance and remediations, including Data quality, be it liquidity or risk, it revolves around the permanent control framework, which Joni is spearheading, so I think they recognize we also have made quite significant progress in these areas. But there is a qualitative judgment into it in comparison with other banks, including some elements on business model. The stress testing, for example, the quantitative part of stress test, the future stress test to be run, It has an impact on P2G, but the qualitative element of it, I.
E, the speed at which you provide The data, the quality of what you provide, etcetera, is part of general assessment. So we are working fundamentally towards Having a better rating and going back to where we were, but we can't commit on it. So which comes back to your second question. What we are doing is steering the capital of this company so that at any point in time, There is around a 200 basis point buffer above MDA, be it in Basel III or in Basel IV environment. And as Frederic stated, Maybe we are a bit conservative relative to others, but it happens that we don't count on the reduction of B2R.
We're working towards it, but we don't count on it. We don't count on CRD V, although we think it's very probable. We don't count on anything nice on the It's also in discussions. And obviously, there could be also change in the requirements for P2G going forward. So what we want to do in our assumption is take reasonably conservative assumption, and that's how we share capital so far.
But at any point in time, it's 200 basis points above NDA, which is €7,500,000,000 capital buffer around If requirements decreases, I don't think we will want to go back to 300 or 400 basis points above MDA, which will adapt.
Can I just again, we don't want to speculate But fundamentally, if you think about capital having to absorb a loss in the stress test, There's a kind of absolute amount to a certain extent? You can think that even if the risk weighted assets have been increasing, The percentage which represent at the end of the day, the absolute amount should decrease. And so fundamentally, maybe the 200 basis points might at some point 150 basis points because it's based on also a bigger risk weighted that's announced. So again, behind all the reasoning I think of the SSM, there is everything around this. Now I think it's a little bit premature to change already our capital management policy, why we don't have all this clarity.
And perhaps It's not that we don't count or we don't think we get it, but we don't compute yet, if I'm missing. The computing and the calculation at this stage, I think it's Clearly, in the last 6 months, there has been a series of announcements, speeches, Which I think is changing the perspective. Let's wait. Let's wait. And for 2020, we'll manage, Including with the buffer, which is one of the explanations behind also a lower return on tangible and beyond effective year.
I'd say There are 3 components to your second question. And one is effectively rates because when we talked about 9% to 10%. It was before the to come decision of If you remember that, Ms. Philippe Henrique, we had said initially that we were expecting revenues to grow slightly in French Retail. And then we Came back to you and said, listen, given what's happening, it's probably another picture.
So expect it to be another red 0 year, so 0 minus. If you take 1% revenue growth for French Retail, that's about €80,000,000 to €90,000,000 If take minus €1,000,000 is €90,000,000 as well. So add a plus €1,000,000 minus €1,000,000 is probably Not far away from the difference
as far as this is concerned.
Non capital base between 12 And EUR 12,700,000,000, it's a good EUR 2,000,000,000 difference. So you need to have EUR 200,000,000 net income To make it work at 10%. And then I want to repeat what Sever has said. We see some growth In CIB, next year, we see we are very confident on the reduction of cost. Fundamentally, profitability of CIB, as far as we are concerned, will be more based on the cost reduction and hope on revenue outlook.
But then you end up with the number you compute Depending upon that assumption on the revenues of CIB, we obviously think things will improve based on a modest improvement on revenues. The middle mover is Pekin Miska.
Hi, Omar from Barclays. Just three questions. So just on the buyback size, Can you just highlight what the constraints were in terms of that size and the decision making process? Why 10% of earnings and not half of the payout? Is it something that's come up in the discussions with SSM Or looking further forward, that's not really a set maximum.
And then the second question is Just on international retail and the top line trends there this quarter because if we look at Slide 56% 57%, pretty much every division this quarter has seen a slower rate growth in revenues compared to the full year. So is there something specific to call out, some additional margin pressure, something like that? And then the last question is just to help us with our modeling on the expenses. So basically, you had EUR 17,700,000,000 of expenses and then We removed the €300,000,000 of restructuring costs this year. You have another €300,000,000 of cost savings from CIB And then EUR 300,000,000 or so from the EUR 1,100,000,000 old cost savings plan.
So we're at like EUR 16.8 ish. So is it as simple as us just applying what we think wage inflation for the group is 2%, 3% Well, there are some other factors that we need to think about over and above that.
Okay. I will let William answer on the cost I will take the Sherpa Bank. There was absolutely no conflict from the SSM. But in this subtype balance, you had different first of all different shareholders, some We still prefer a cash dividend, etcetera. And with 10%, if you think that you do it at least for something like 2 years, Roughly, you then take out the dilution coming from the scrip dividend.
So for us, it was not a stupid figure and to try to match also the expectation of our shareholders. So Nothing more in that balance. Perhaps Philippe, on the trends in international retail. Yes.
So good afternoon, everybody. So on the trend in International Retail, you have seen that on a full year basis, What is striking is that we managed to offset the effect of asset disposals, and this is quite an achievement. So this is underwing A bit of a kind of slowdown in Q4. So it's fair to say that we have 2 elements there to mention. First, in insurance, in spite of a very good commercial activity, and let me highlight that Premiums in P and C are up by 8%.
That we ended up with €125,000,000,000 Europe. So in spite of the very good commercial activity, we had more claims in Q4. And that's why for the first time, we had declining revenues in insurance in Q4. 2nd element to mention is around Czech Republic, Where we have some kind of subdued Q4, the effect of more, let's say, dynamic volumes in Q4, Some tension in spreads. It's true.
We have seen the effect in Czech Republic of the interest interest rate curve. Long term interest rates today at around 1.7%, while short term at 2%. This is a sign of a strong appetite of investors for Czech bonds. But having said that, the trends for And this confirmed today by Jan Mikkelter, at the same call you organized today with investors in Czech Republic. We have a positive outlook for Czech Republic.
So down the road, firmly what I can say is that we have a pretty good sense of to trends in revenues for International Retail.
Thank you. And William, on the cost,
Omar, I'm going to disappoint you because I won't give you the number we have in the budget, the exact number for cost reduction. But because I do think you have Plenty of things to model, but maybe I'll guide you through it. We've set CIB towards 6.8%. We've said French Retail, the cost base of French Retail is about 5.7 percent will decrease in absolute terms. You can assume, because you know us, that we charge the vast bulk of the corporate functions into the businesses.
There is no mystery Of course, that could increase as well apart from some cost of remediations, which Frederic has mentioned, but We remain overall for Corporate Center in the ballpark of what you know and what you get used to. And so You should expect some cost growth in International Retail and Pile Floor Services, It is consistent with the fact that this is an area where we've been growing consistently at about 5% a year. I'm taking also in consideration that In a country such as the Czech Republic where you have 2% unemployment rate, there is some wage inflation. But as Philippe reiterated, We want to keep positive jaws there. So you can make your assumption.
You take whatever is the growth rate you consider around this 5%. Take positive jaws and assume the rate of growth of cost in International Retail and Partial Services. And I think With that, you should have all the elements that leads you to the fact that there should be a decrease in absolute term in the cost base of That comes again next year, combined with positive jaws. That's how I would say you have plenty of information.
Okay, yes. Mike?
Thank you. Yes, Kiri Vijrajo, HSBC. Can I go back to the revenue growth you're targeting
on GBIS? Is it fair
to assume You also targeted jaws between revenue growth and RWA growth in GBIS. And linked to that, On market risk, this time last year, you had very elevated market risk. And through the course of 2019, that kind of normalized. So was going to be a useful tailwind in managing the RWAs down. Obviously, it would have benefited GBIS.
So my question is, looking forward, Is that kind of normalization on the market risk models now played out? Or are there some other kind of tailwinds still to help you there in terms of RWA efficiency on the GBIS side of business. Thank you.
And we will benefit from having both Severin and Jean Francois, on the phone number, the normalization of market risk, it's not just a question of Smart modeling, yes? First of all, normalization in the market conditions. So we are back to 13, 14. What I would say is, as we already mentioned, steering the capital of this company, we take a little buffer above that Because we know that market risk should normally should move a little either because there's a bit of stress in a given quarter or because Jean Francois' team produced a lot and then of course, you have a bit more market RWA. There are some optimizations which we have done in the form of the type of exposure we take, some risk limit, Some better computation of the risk, which help us, for example, to reduce the IRC component of the market risk through a better tracking of collaterals and these things.
Maybe Jean Francois will be able to get more details. But fundamentally, this is due to the fact that Things have normalized. To your point on sort of the operating leverage, I mean, you're totally correct. What we have already said back in the deep dive on CIB is that expect RWA To have a very limited growth as far as CIB is concerned. So if listening to Severin, who Repeated that we expect some revenue growth relative to 2019.
You can deduct from it that This is very efficient RWA at work, an increase of return on RWA that we are obviously targeting. I don't know, Francois, if you want to add something more on market, please?
Yes, yes, you said it all actually. The €8,000,000,000 decrease that we got this year has been obtained through active deleveraging, so discussion in POSE and POSE with customers on clearing activities where We renegotiated some collateral and managed to get much more collateral, so less RWA. And with the good outcome actually to almost not lose any customer in our business. Then on some exotic activities, there has been a lot of work to hedge the book and arrange them differently so that They are less risky, that's for example, on the credit exotics. But then it happens that, yes, There could be some fluctuation if we enter into a crisis, but we are quite happy to have implemented A discipline that will be maintained through quite sophisticated schemes That are playing to all traders around the world with incentives to on a day to day basis Really incentivize them at their level to optimize and track all unnecessary risk level based on our experience of how we want to manage that going forward.
Thank you. Next question, perhaps question also. We'll take the last question in the room and then answer the questions on the phone. Greg Waldesen from Morgan Stanley. 1 question on Botswana.
You have acquired around 4,000 clients since 2018. How do you assess The level of cannibalization risk with your traditional banking offers. That's my first question. And second, How do you assess the level of competition or the competitive pressure from banking players like Revolut and 20 6, which are gaining A lot of market share in France. I will let Philippe Henrique answer.
I'd like to insist We talk here about a different business model than Revolut. Revolut is fundamentally, so far, a payment, a credit card. Here we talk about a much more complete business product. Philippe?
Yes. Good afternoon to everybody. Yes, of course, we track the number of clients From Societe Generale, who will become clients of Boursorama because as you know, To become a client of pro form a, actually, you need to have an existing bank account. So it's quite easy to track. And basically, the market share of the new clients of Bofourama coming from Stetjall and Creanor is exactly the market share of Stetjall and Creanor.
So there is no cannibalization, I mean, especially. Regarding the competition from Michel from Revolut of N26. As Frederic mentioned, Boustourne is a Fund kind of bank offering a very wide range of products and services. So we are tracking very Yes. So the many key PI, especially, of course, the cost of acquisition.
And this year, again, I mean, in 2019, the cost of acquisition has been reduced. We also track, of course, the number of products subscribed by the clients, The amounts of credit and deposit year after year. And we still have very good momentum there. And the 3rd important KPI is, of course, operational risk because last year, we have acquired more than 500,000 clients. And of course, you have also to be very careful with proportional risk, and this one is also under control.
Thank you. So perhaps we can go to the people on the phone.
Thank you.
And the first question comes from the line of Lauren Greeras from UBS. Please go ahead. Your line is now open.
Hi, hello. Good afternoon. Thank you for taking my questions. The first thing I would like to ask is, I don't know if you remember, but I think you. Few years ago, when you IPO Amundi, you did disclose what was the ROE impact of actually disposal of Amundi.
So I was wondering whether you could actually quantify the ROE impact of the disposal that you have made so far. And also, as you've done a number of disposals, I was wondering whether you could actually update us with the tax rate guidance for 2020 onwards. Thank you.
Thank you, Darren. William, on the do we have we discussed the total amount? I think we can
give you a proxy and repeat what I think We had told you, but with more updated numbers, with the 57 bps, let's call it 60 bps. So it's around EUR 10,000,000,000 sorry, EUR 60 bps divided By 3, you can make your own computation on terms of RWA and hence capital. That's what we create with the disposal we've announced. We have an impact of about EUR 220,000,000 EUR 230,000,000 of net income. We have on the other side the acquisition of EMC, which we've told you, would cost about 10 bps and would represents around €100,000,000 post tax of earnings.
So when you sum it up, knowing that EUR 100,000,000 of net income is about 22 basis points of RoTE, We can square the equation.
And another way maybe to answer your question and then we will answer to the tax rate. But when you look at the International Retail Banking and Financial Services, you see that the return on normative equity has remained absolutely similar. So yes, we've lost Some contribution, but not at the detriment of the return on normative equity of the division. Perhaps on the tax rate, Guillaume?
Well, I
think that we it's very consistent with what we had in the past years, except that you have For the adjustment you have to make on the implementation of the new County Group IAS 12 for the Groupons. So we ended the year, if I'm not mistaken, at 23.7 percent tax rate. Groupe LaVon. You had roughly 400 basis points, and you come back to the range that we've guided to back in November 2007. And for the next year, you should expect Something very similar.
Thank you. Next question?
Sorry, excuse me. So the target, The tax rate for next year is between 26% 28%?
Is that correct?
No. The tax rate for this year is 23.7%, Okay. I was just adding back the impact of the new accounting of 2Q for you to be able to compare With the previous guidance that we had set forth in 2017, so now that we are with a new accounting regime, You should expect something very similar with what we had this year.
Okay, great. Thank you.
Thank you.
Next question.
And the next question comes from the line of Pierre Chedebel from Centimeters CIC Securities. Please ask your question. Your line is now open.
Hello, good afternoon. One question regarding the P and C. You mentioned in your slide that you had an increase In your P and C claims this quarter, could you give more color on that increase? And regarding the Global Leaf Insurance business, what is your policy regarding future development and particularly towards SMEs. Do you have any ideas on that particular types of customers and euro franchise in insurance in France and in Europe.
Regarding Lixir, as far as I understand, You developed particularly this year in active management more than in passive management and particularly in terms of net inflows. Maybe I'm wrong, but it's what I understood through some articles I read. Do you confirm this? And if it's the case, How do you see this active management development within Lixir in the framework of your partnership or future new partnership, I would say, with Amundi, what is exactly what are you doing And as I am in France, I'm not invited in the defense this year. I will ask a third question, if you may.
What is your view regarding mortgage In terms of production this year, increase in production compared to your mutualist peers, Do you feel that you are losing some market share here or not? Thank you very much.
Yes. Hi. I will let Philippe Haim answer on your question on insurance and perhaps Severin elaborate on So the development of the collection, Philippe Emerick will answer specifically on Societe Generale. Can I just answer your question on mortgage with my Head of Chairman of the Different Banking Federation? Just to mention that you know that there are some developments in the markets, In particular, with some recommendations of the committee, the all committed Stabiliteschnancier, which has recommended effectively to avoid at least going further into longer maturity, Being careful on the to differ, what's the name in English, the percentage of salary you can dedicate Dear, reimbursements and also on the margin.
So I think these recommendations fundamentally go in the right direction from our to have a little bit more discipline on the market. Perhaps Philippe, I'm first on insurance, P and C. First of all, The higher impacts and more generally, the with the SMEs, I guess you talked maybe about retirement schemes, things like this, thanks a lot. Philippe?
Yes, sure. Thank you, Pierre. So some more color regarding what happened in Q4. So yes, we had more claims. So let me highlight that on the commercial side, we had premiums up by 8% with double digit growth abroad.
So regarding claims, this is a phenomenon. The part was widely shared by other players in France is related to climate events, namely droughts we have and this summer. And also some specific individual cases. So I would say that this is a statistical event. So in the long run, it is absorbed by our reserve.
Bottom line, keep in mind that we have an insurance business delivering a return According to our conversation and the allocated capital of 25%, so a very good performance. So from a strategy standpoint,
We cover,
let's say, main types of products. You mentioned product dedicated to SMEs. On Professional, this is one of our key objectives. And maybe this is something I share with Philippe Heineck in the French network. The point is to cover the needs, for example, of our clients with Credit Boulinor and Societe Generale.
And this is clearly an element of development because, As you know, we want to increase the commitment rate of our clients, and it is supporting our strategy in the long run to increase our commissions in the network.
Sylvain, Luxor, can you elaborate perhaps on the Connection of new assets under management.
Yes. As you know, IXR has 2 businesses and not new. IXR has historically built an ETF franchise and have also developed an active asset management activity for a while. Nexaord had a good year this year in term of active asset management, thanks to good commercial performance and a good collection of new money. So the total asset under management at the end of last year is EUR 149,000,000,000 For LIXOR, among this, you have €70,000,000,000 on the active part, on the Active Asset Management.
So we had This year, a better year on Active Asset Management than on ETFs. The reason is market of ETFs in 2019 was mainly driven by fixed income underlying ETFs, As you know, and historically and still today, VIXOR is more geared on equity based ETF and European Equity Based ETF. We are developing today and enlarging the mixed product and the offering of Luxor ETF on fixed income. But it's fair to say that this year, we didn't benefit from the dynamic of the market of ETF in Europe because it was mainly driven by fixed underlying products.
Philippe, Eimari, on market share in mortgage.
But for us, what is critical, it's our market share mortgages on our core clients or core targets. And in 2019, I think we really had the good mix between volume. You have seen that our mortgages or upstandings have increased By more than 7%, so a good mix between volumes, pricings because we have been able to increase our margin and Risk Policy. So maybe overall, there is a slight decrease in our market share, but not on our market share regarding our key clients. And I think regarding the measures which have been announced, I think that will have no major impact to us.
For example, now in France, it's not possible any longer to underwrite mortgages both 25 years, and we didn't do that before. So there is no change for us.
Thank you. Next questions?
Thank you. And the next question comes from the line of Stefan Stohlman, Autonomous Research. Please ask your question. Your line is now open.
Yes, good afternoon. Thanks for taking my questions. I have 2, please. The first one is, there was recently an announcement that you are setting up a low cost offering in your networks. I think it's called Capsule.
I was wondering if you could talk a little bit about what the rationale here is given that I would have expected this to be the natural domain for Boursorama to offer. And the second question regarding your future dividend accrual policy for CET1 Capital. In 2020, during the year, will you be accruing for 40% of your underlying profits or 50%? Thank you very much.
Yes, Stephane Philippe Emerick to answer about Capsule and then William on our accrual policy.
Yes. So Capsule, I mean, what it is exactly, It's a revamping at the offer for the mass market. It's not competing directly with Botswana because in the case of Botswana, it's 100% digital banking. In the case of Capsule, we are addressing clients who are also okay to pay to have an access for the branch and to an advisor. So basically, it was an offer which was which existed before.
We have just adjusted it. We have actually repriced it, including some fees depending on the level of of access to the branches. So it's not exactly the same clients we are addressing because in the case of capsule. These people still want an access to the branch or to an adviser at least by phone.
Thank you. William, on the provisioning?
Hello, Stefan. I think the simplest way for us would be to And then maybe adjust in the Q4 or whichever is the number according to the share buyback. I think it's also better because Then there will be a better consistency between the Prudential reporting and the partial reporting as far as dividend
Thank you. And the next question comes from the line of Jean Muas from Goldman Sachs. Please ask your question. Your line is now open.
Hi, there. A lot of the questions have been answered, but just one last is, just wanted to understand in CIB, just generally describing the revenue environment and the opportunity set and how you feel about so a lot of the industry has had a better, Let's say second half of the year and even in the second quarter. Just wanted you to describe what you believe the opportunity set is like right now, how Maybe January compares and how normal you believe that the latest flurry of results have been versus Depressed last year, essentially trying to give us a sense of how repeatable the performance which is currently showing in the numbers for the last couple of quarters is versus what has been in other times because we know it's very cyclical and it's difficult for us to understand what market conditions are like. Thank you very much.
We will not comment on every month, but perhaps again, Severin, could you recap the way we see perspective on a yearly basis, I would say, on a structural basis maybe?
Yes. If you look at the recent and the last quarter. Dynamic of the market, I put aside the global market and Francois already commented on that. But the other franchise we are dynamic today are mainly the asset Finance franchise, restricted finance franchise and the asset backed product activities and the transaction banking activities. So having said that, we don't feel today, to question what would we share, we don't feel that the pipeline on those different activities is just decreasing.
While have deleveraging we have been deleveraging our balance sheet during the year, which impacted the NBI as we saw, limited part. But Globally speaking, the market dynamic is still positive. And we have really of course, you have some seasonality. And the last quarter of 2018 was Very good quarter for our asset finance activity. This last quarter was also good, but at the same level, not better than most.
But The general trend determined as natural resource finance, infrastructure finance, real estate finance I mean structured finance. And all that For the time being, it is still positive.
Thank you. Next question. Thank you
very much.
Thank you. And the next question comes from the line of Ram Dibadjane from Exane BNP Paribas. Please go ahead. Your line is now open.
Yes, good afternoon. I have two questions. The first one is on the AT1 coupon, Which I think were quite high at €750,000,000 Do we assume that this stays at this level? Or is there anything you can do on that front. And the second one is, again, on the tax rate.
You're assuming broad stability from the new calculation, But what about the macro cut rate? When are you can you remind us when that should or what impact that should have on you maybe in 2020 And even more so in 2021. Thank you.
Sorry, Guillaume, you mentioned The reduction in corporate tax? Okay, okay. Sorry, yes.
Yes. Well, I guess This one is for me. So the first one, I think you should assume around €700,000,000 Sure. On coupons, I mean, this was 500, pretty stable up until there was exchange in the computation. We don't change we will not change materially the stock of hybrids over time, certainly not in the reason of projection that we're talking about here 2020 and even a few years after.
So I think that's pretty much ballpark. On the tax rate, you're right. But we you have to take into account Many things and the tax rate in France effectively will start to decrease gradually. Then you have to take into consideration the geographical mix. There are areas, obviously, where the taxation is less.
There are areas It's more depending upon the region. And in the U. S, as you know, There is less tax deductibility of the intercompany flow. So all in all, that's what made me think that should you do your computation, pretty much the same ballpark?
It will decrease a little bit. I mean It will decrease a little bit. I think if I remember well, it's 33% in 20 19. 41%, I think there's already a slight decrease in 2020. And I think the end game is 25% for 2022.
I don't remember, to be frank, what is the tax rate in 2021, But I think it's the middle. So that will be that will help to a certain extent.
Thank you.
Again, not a big change. Okay?
Thank you. Thank you.
Thank you, Dion. Okay. No more question? I just want to Thank you. Okay, still.
Yes. Yes. ST1.
Thank you. And the next question comes from the line of Flora Bena Kun from Deutsche Bank. Please ask your question. Your line is now open.
Yes, thank you and good afternoon. I have two questions on CIB revenues, please. The first is regarding EMC. I think you stated the last time after the Q3 call that you expect to see the real start, The kickoff of the consolidation of revenues from EMC in February. So the first question is, do you Stick to that like are we going to see an uptick in equities revenues with the consolidation from EMC from Q1 2020 onwards?
And the second question is on the deleveraging. Just to check a few numbers with you, I think the deleveraging impact In Q3, it was around €70,000,000 which is consistent with the full year guidance of €300,000,000 and it was a bit less in Q4. So just wanted to ask How I should think about the deleveraging impact from here? Thank you.
On EMC, what I told you, Florent, at the end of the Q3, that in the 2019, the revenue impact was very limited. What we What we transfer mainly was the ETF part on LIXOR. And we had, On the other side, the cost impact. And this year, 2019, and I remind you something which has been mentioned earlier that there is a risk So integration costs, which is non recurring costs in our cost metric, not included in EUR 268,000,000 which has been disclosed With respect to Intelsco's also GBIS in 2019 linked to IXR integration. For 2020, we are still in the process to integrate Bulk part of what we have to do on the Q1, clearly.
We don't have to have any impact in the Q1. If it's your question, The first part of revenue is good, but we would start to see the revenue back on the E and C integration. Starting on the second one, We are still in that road map. And what we confirm what we said that we didn't guide on the revenue impact on the events integration, we guided on the gross operating impact from 2021, and we confirm that figure, you know, Probably, it was around €150,000,000 in terms of gross operating income, not this year, it's from 2021. And regarding the leveraging, your question is around the NBI, in fact?
Yes.
The NBI in the 4th quarter, which was a little bit lower, apparently.
I don't so the impact from the 4th quarter was And what we
can expect fundamentally, Severin, what we can expect in 2020, I think, is
the look.
Maybe we misunderstood, but Effectively, I mean, there is a small impact of finalization of additional deleveraging in CIB, but We have already exceeded by far the targets that we had set forth for 2020. So You should expect there is no more. Now we are going back to the normal consumption of CIB. And as we said, RWA growth for CIB will be very muted. I mean, it's been already articulated at the beginning of the year in the deep dive of CIB.
Yes. One point to add on to this is the main impact on the NBR was the closure of our commodities activity. And it's fair to say that we had in 2019 only 3 quarters impacted because the Q1, we were already there. So Roughly speaking, there was still a negative impact on the Q1 of 2020 compared to 20 29, which is the full impact of the Commodities activity and deleverage.
Okay, thank you.
Okay. No more questions on the line. Well, thank you. We will close this conference call. Thank you very much for your time, sir.
Thank you. Bye bye.