Ladies and gentlemen, welcome to the Société Générale fourth quarter and full year 2019 presentation. Frédéric Oudéa, Chief Executive Officer, and William Kadouch-Chassaing, 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 fourth quarter 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 who will 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&A. Please, let's go immediately to the slides, and the slide four. 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. In particular, if I refer to the financial objective in this slide, first of all, obviously on the capital, which was the core priority.
Let's remember the beginning of the year, the question marks, I think we have answered. We end the year with a 12.7% Core Tier 1 ratio. You will see the detail, it's even 12.8% from the disposal of our Norwegian Equipment Finance, which is not yet closed. It's, again, a strong increase in the fourth quarter. Knowing that, of course, it takes into account the payments of a EUR 2.2 per share dividend, cash dividend as committed. I don't enter into the detail, you know it's the results of strong organic capital generation. A very successful disposal program, which has been achieved for 70% of it. Of course, the successful also restructuring of the GBIS with a strong decrease of risk-weighted assets. Beyond this, we have, I think, worked very much on the profitability. 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 in IT, investing in compliance remediation program. I think that shows the discipline we've had. When you look at each business in terms of profitability, the French retail did pretty well with a return on normative equity, which is basically flat, which is quite an achievement, with the IBFS, International Retail Financial Services, which deliver exactly in line, in the high range of the profitability target between 17% and 18%, and with the GBIS, which is working on its profitability. As I said, we've already the some benefits of the savings, but everything is now secured. 44% was accounted this year in 2019. We get the full benefit of our savings next year.
Last thing that we'd like to mention, the cost of risk, 25 basis point for the full year. The lower level of the range, 25-30 basis point. NPL are going down. We are providing the comparison according to the EBA in the appendix. You will see that with the standard calculation, we have a lower than average NPL ratio, and with also very good coverage ratio. That means we enter into 2020 with a pretty robust balance sheet and credit 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 Société Générale is at the forefront of that. You have on this slide a few rankings, a few acknowledgement of where we stand.
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. We will see, we will propose to discuss that during the year with a specific session. 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 how we implementing digital technologies and the change in the IT architecture in French retail. We are making also further progress in the development of new business model, Boursorama, obviously, but recently we launched a new startup for the kind of Boursorama for the very small and midsize corporates. I think being entrepreneurial in this domain is also important and part of the right culture going forward. The next slide, and I will finish then, and turn to William to enter much more into detail. 2020 outlook. In terms of capital, we will maintain the same discipline. We have the same target, 12% Tier 1 target. Happy to talk about 2020, because I think it might be the turning point for the European banking system.
I must say, I'm more positive now than I was six months ago. I think there are pieces of the jigsaw which are being put. I think we'll have clarity earlier. Happy to discuss about this. We will, for the time being, maintain, of course, the same policy with a buffer above this target, which is probably now a conservative one. Let's wait. We will monitor the group at a high level. Regarding profitability, what we can say is the commitment to, first of all, deliver a growth of revenues. Fourth quarter is obviously very promising from that perspective. Beyond, for the full 2020 year, it's important to show that. Second, positive growth across all the businesses, in particular in the French retail, we confirm, also, of course, in GBIS.
We are just lowering our range of core cost of risk. You know we had the range from 35-4 0 basis points. Actually, looking at the full year of 2019, the perspective of the portfolio, we are lowering the range between 30 and 35 basis points, so 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 EPS and the net asset per share, let me mention, we are adjusting our dividend policy. We will base our policy on a payout ratio, 50% payout ratio, I think it's more or less the standard, the norm for European banks. On underlying results, 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. Knowing that within this 50%, we are going to include up to a fifth, so 10% of the net profit, of share buybacks. You know, we had a lot of discussions with the market, our shareholders, we think that at least with this current valuation, it makes sense to do that. 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 enter more into the details
Thank you, Frederic. Good afternoon, everyone. I'll start as usual, commenting the highlights for the fourth quarter of 2019, as well as the full-year results, as it relates to the key pillars of the groups, 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%, minus 0.7%. It means positive yields, a decrease in costs to income by four points, adjusted for scope and foreign exchange, and an operating income that increases by 33% over year-on-year.
The group net income stands at EUR 875 million in underlying terms, which is 8.7% up relative to the same period of last year. RoTE is at 6.2% for the quarter. For the year, the group net income stands at nearly EUR 4.1 billion. RoTE ends at 7.6%. I would like also to stress the fact that the net tangible book value is up 5.6% year-on-year. Turning to the key elements on the businesses, more looking at the annual performance. French retail banking end the year with the resilient profitability we've been talking for about a few quarters, at 11.1% 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 PEL/CEL 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, plus 0.3%. We had said costs would go up between 1% and 2%. Costs are actually up 1.3%, adjusted for EUR 55 million 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. Combined with strong profitability at 16%. Same for insurance and financial services. Their growth is nearly 3%, combined with an increase in the profitability to nearly 21%, 20.8% 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 Solutions. I'll come back to it. Profitability is still at the unsatisfactory level of 7.4%.
There is still more work to be done. Revenues for the year, adjusted for the run-off of activities and deleveraging impact, are up 1% year-on-year, with costs have decreased, adjusted for restructuring costs, by 2.5%. This is positive news. As far as the quarter is concerned, adjusted for the one-off, revenues are up 11% in CIB and costs are down 2%. Corporate Center, I guess, the gross operating income can be considered as better than guidance at EUR 246. What I would like to point you to is obviously there are two elements of one-off here. One was known by you largely, which is the impact of IFRS 5 related to our disposals, EUR 137 million. 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 Société Générale Liban, which we wrote off completely this quarter. I'd like to turn to the next page, just to summarize it 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 this year, minus 1% for the year. I already said minus 0.7% on Q4. For the quarter, positive news, quite significantly, plus 4.8% revenues, minus 0.7% on cost. 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 EUR 1.1 billion 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 EUR 500 million 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 Frédéric already largely commented. Cost of risk, we end up the year at 25 basis point, which is at the very low end of the range we had announced, 25-30 basis points. As Frédéric said, we see an increase next year to 30-35 basis points. 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, 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%. Frédéric 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. We also fare very well in terms of boost coverage ratio. Capital. I guess you're starting to getting 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 forma of 12.8. This is 270 basis points above MDA to be compared with our target of 200 basis points. That includes EUR 2.20 per share, fully provisioned as for the dividend. 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. This is a very strong, I consider, 12.8. Some of you, I know, are a bit nostalgic of, because we had that comment, of the capital walk page. Referring to it, I'd like to stress that on organic capital, we had announced for the period of '19 to '20, 50 basis points.
We've completed 41 basis points organically, up 30 basis points solely in the fourth quarter. For year to date is 41. On global market RWA reduction, we had said 25 basis points, we've done the 25 basis points. We had said other RWA reduction between 10 and 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. We had said, unfortunately, we will have some headwinds on the regulatory side, 30 to 50. We only had two 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 than the 30 that you have to consider.
All in all, I think we can make the computation and, put in perspective what Frédéric 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%, TLAC and MREL, we are compliant. We have increased our liquidity buffer in the year by EUR 18 billion. We end up with EUR 119 billion. I don't comment the next page usually, which is just a 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. You have a base effect for the group because you may remember last year we had the revaluation of the Euro Actions in Euroclear, which creates a base effect. French Retail. 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, wealthy, and patrimonial clients. As far as Boursorama is concerned, fully digital clients. In a sense, you have 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 540k clients acquired this year. Production, number two, continues to be very strong. 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.
Outstanding are up, and unit linked are up as well. Personal protection is progressing towards a ratio close to 22% penetration. Private banking at record net inflows at EUR 4.2 billion. Third, we continue to adapt network. You have here a statistic on Société Générale network. Should you add Société Générale and Crédit du Nord, we've completed nearly 85% of the program of branch closures we had set in 2015 for 2020. We are very confident we're going to go there. 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. 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 EUR 55 million. The 0.4% 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, which is that we see some pressure on revenue. Probably we see again that we could end up in the red zero zone, 0% to -1%, given what has happened, particularly on the rate side and the macro. We strive for a decrease in the cost base and positive yields in French Retail in 2020. 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 in 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 at 10% this year.
As you know, the average profitability of that business is close to 17%. Very strong. What we wanted to stress particularly is also the fact that we work on efficiency in these areas. When you look at these numbers of branch closures, to pick some data on the page, this is quite significant. 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 one year. 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, I think 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.
Obviously, we will strive to convert the group toward that level and increase it. Next page is on insurance and financial services. A strong dynamic combined with a high ROI of 20.8%, as I mentioned. Insurance outstanding, life insurance are up 8%. Protected premium up 8%. P&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 has been announced. Fleet, including some bolt-on acquisition, is up 6% and now is very close to the world leader at 1.8 million. Very good profitability as well, guidance achieved. Equipment finance outstanding up 2.5%. Let me stress the fact that the net income of SGEF, our equipment finance business, number two in Europe, is up by 30%.
In a nutshell, a very good year for international retail and financial services. Nearly EUR 2 billion 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 Frédéric 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. What we can say is that, for us at least, the fourth quarter indicates that the franchises are in good health after this focusing exercise and this cost reduction.
Starting with market activities, Global Markets activities, revenues are up 13%, they are up 18% excluding activities in runoff. That is mainly the CTD activities in the FICC. That means FICC revenues are up 41% year-on-year in Q4. Equities are up 9% year-on-year. I'd like to insist on that because this is 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 on average better, specifically in equities, than the rest of the sector. We don't have the same base effect, at least not to the same order of magnitude. Again, this 9% compares quite very well to the pooled numbers. I'll let you check the numbers, it's quite ahead. Third, 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 first quarter that people were very happy with cash equities, much less so about equity derivatives. We consider we gained share in the very core 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 first quarter. We had a very good first quarter 2018 in terms of production, 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 two years ago. Revenues were up 9% year-on-year in that division, the return is 15% for that division. Wealth and Asset Management is back on growth.
Revenues were up 8% year-on-year in the first quarter. When you turn to what we have been trying to do, I maintain some dynamic in the franchise with doing a heavy lifting on the restructuring. What you have on this page is 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%-30% of that EUR 500. I've already said we completed EUR 220, which is 44%. We had said we would incur EUR 250 million-EUR 300 million restructuring costs. The actual number is EUR 268, we're very much in the ballpark of what we had said to you. We had said, unfortunately, there will be some consequences on the revenues, -EUR 300.
What I can say is for nine months, it's not a full year, it's about EUR 190. We're quite confident we won't exceed that number. 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. Obviously, we don't want it to be the first and only year where we decrease costs. As you know, we are embarked into that intention to decrease costs in absolute term to around the EUR 6.8 billion cost base in CIB. In a nutshell, which is what you have on the next page, revenues are up, as I said, 11% adjusted in the first quarter, plus one. I don't comment more on the other numbers. We've already said net income is up 61% Q4 on Q4.
The RONE again is 7.4. As Frédéric 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 Frédéric 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. You have the two one-offs and this type, the overperformance relative to guidance. I turn to Frédéric again for the conclusions.
Yeah. Thank you very much, William. Just a few words of conclusion. After this successful 2019, we want to pursue, first of all, in 2020, according to the same kind of directions, disciplines on 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 heavy restructuring behind us. We will also prepare for the next phase, 2021-2025. We will pursue the transformation. Transformation will not stop in 2020. We have three 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 on and also having the post-remediation phase. In our costs, we are embarking still heavy cost of remediation.
In the next two, three years, it will go. Beyond, as I said, with the benefit of investment we are currently making in our new systems. Third, sustainability. It's very important. Climate, as I said, it's just a start. It's not just about financing renewable, it's rethinking the portfolios on credit, on investment, but it's also on the retail side. We want really to think about what it can mean. It's beyond climate. It's around also social responsibility regarding the staff, the transformation, and also Africa, as you know, which is specific to us, but very important. What we would like to propose to you is, in this year, perhaps a first session in the first half around sustainability, just to show how we think about it.
It's in second half, around efficiency and digital, how we combine the two to make our business in a more efficient way. 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. That's what we wanted to say, to present. Again, we are ready for your questions.
On the screen.
on the screen.
Can you hear us, Philippe?
Yes, definitely.
Okay, great. Well, Yes. Okay, here you are. Thank you very much. We'll start. Tarik and then Jacques. Okay.
Ladies first.
Ladies first. Okay. Ladies first. Yes.
It's okay.
Yes.
No, we're still French.
Ladies first. Sorry, gentlemen.
Sorry, guys.
You will have your turn. Yes.
The quantity.
Yeah.
A question on the target. You haven't confirmed the target for 2020. I guess that probably the difference is mainly coming from lower expectations on the CIB side.
For me.
CIB was actually better than expected.
Excuse me, could you use the mic because we don't hear you from Paris?
Yes.
Because otherwise they don't.
Flora Bocahut, Citi.
Yeah.
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 the CIB actually was better. Can you explain us a little bit what's the work on the revenue and 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 pockets with different category of capital. Would you consider starting the buyback earlier than when you announce 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 Séverin can comment more specifically on GBIS. Can I just also mention, first of all, on the day, we maintain the 9% target this year. Let me just mention, this year we will monitor the bank, as I said, above a 12% target. Of course, that in fact it means some capital will not be deployed this year. Effectively, it's more on the GBIS as the prudence still on the GBIS, but again, Séverin 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. 2020 might be a crucial year to get visibility.
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 roughly. I think we'll have a good idea of the end game, not the final one. Maybe there's a dialogue with the Council, but still, it will give us more clarity. Beyond that, and beyond the fact that, of course, maybe in certain portfolios, I have in mind, for example, the large corporates, the banks, the loss given default, which will increase just because there's not enough losses. Behind the density, you will have many steps. First, the SSM is going to have achieved its TRIM exercise. Fundamentally, we'll be able to say to the market, "I'm done. I'm happy. It's harmonized. I'm happy." Second, the stress test.
It's likely that the results, after two years of additional capital, less NPL, et cetera, will be back. Which will be also a way to say, fundamentally, no need to put more capital in the system. It means that even if you have a density which will vary, you will have then the benefit of the new CRD V, for example, on the composition of the P2R. 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. 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 this year. Again, at this stage, we keep the same target, the same capital monitoring.
It's fair to say the perspective today is better than it was, with more uncertainty nine 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 been, of course, presented. Now it's just also a question of process. Perhaps, Séverin, on GBIS, the outlook, what we want to achieve.
Yes. Thank you. For this year, we expect revenue for GBIS higher than what we delivered in 2019. Thanks to good momentum we have still today, and we observed last year, despite the delivery chain on financing advisory first, and transaction banking second. We have also an expectation to have better revenue on global markets thanks to the EMC integration, which was the impact on revenue last year was limited. All that, meaning that we are expecting revenue higher than this year, last year, sorry. As just said by Frédéric, we are also prudent, and the level of certainty 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, if it has very short-term impact, will be limited, but we don't know how long it will last.
It's just a sign of prudence in my mind.
Tarik?
Yes.
Thank you. Tarik El Mejjad from Bank of America Securities. It's the new name.
Okay.
Just a question back on capital. If we do quickly math, your range is 12.6-12.9. If we take the mid-range by end of this year, this will be 12.7. You have an impact of Basel IV of 130 basis points, or take all that, if we take the output floor as well. If you use the Pillar 2 requirements relief, for you, it's around 80 basis points. You already overshoot in AT1 and tier 2, so it will cost you nothing in terms of EPS. Basically, you will be compliant Basel IV in pro forma basis by year-end.
First question, does TRIM overlap with Basel IV, or is it something extra? Second question, how would be your thinking then about capital and dividend? Some of the banks were very excited quickly and start to talk about free capital or special dividends. Do you think for you it would be more an opportunity to actually restructure deeper the business, because you'll have some money to do it, and without hurting necessarily a capital allocation on other divisions? I'm thinking here about CIB, can you go deeper into the restructuring? My second question is on consolidation. Every day there'll be some comments or some speech from ECB or local authorities saying that this is something that has to happen. How fast do you think the banking union or EDIS will progress?
I think you said you want to play a role in that, so how do you see you playing this role? In what sense?
Perhaps I will let Diony Lebot to answer more specifically your question. The overlap, yes, there is some. Diony 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. You know the refocusing program has gone well. We will complete it. It's one or two assets, it will be done. We think that on the GBIS, Séverin 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 profitability will not end 2020. As I said, in each, the retail in France, we will not stop end of 2020. It's not the benefit of the usage of digital.
We'll carry on. Boursorama, which is conquering clients, will turn from still a negative figure to something very positive in the coming three years. We will benefit further in the corporate center of the disappearance of the legacy funding cost. What I mean by this, I don't even put the full going forward. What I'm just saying, at this stage, the idea is that we have done a lot, and that this model should further deliver growth and profitability. 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. 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. Perhaps, Diony, on the TRIM and the interface with or the connection with Basel.
Yes. TRIM and the decisions we are expecting in the coming weeks and months will be indeed, mostly on what we call the low default portfolios, large corporates, banks, markets. That's where we expect also the bulk of the impact in Basel IV. 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 will be under Basel IV, the rule and the foundation applicable in terms of LGD on banks and corporates. Indeed, we can say that part of TRIM is front-loading a Basel IV impact. At this stage in our estimate, we have kept the initial estimate of Basel IV, so the 110 basis points. Part of it is indeed overlapping. At this stage, we maintain a conservative assumption.
Perhaps again, Séverin, could you just come back to GBIS and the refocusing? We've done that just to reiterate that we are confident that this business model makes sense as it stands now. I can tell you the perspective of the management team is that it is today stronger and more consistent. Can you elaborate a little bit on this, Séverin?
Yes, of course. I have with me Jean-François Grégoire, just on my left. Perhaps Jean-François could be more specific on the global market. Very clearly today, we have refocused and adjust our capital allocation to the area where we have the leading position. It's visible, if I may say, already through 2019. Just speaking about global and financing and advisory and global banking advisory. This year, we made the deleveraging, and you saw that the deleveraging is around EUR 7 billion uniquely in this division among the EUR 25 billion risk-weighted assets decreased. Despite this deleveraging, we have made a slight increase in term of revenue, as mentioned by William earlier. Just to demonstrate to you that we have real leading capability in some area where we are refocusing our asset allocation.
That's the first point, and we see still positive momentum for the next period of time on this front. We have also done significant, focusing on our global transaction banking activity. As mentioned earlier, we have invested a lot during the last three years, and now we are benefiting from that. Clearly last year, as mentioned already, we have a 9% growth, but more importantly on that, the return on equity on that activity has been double last year, around 15%. We have still area of improvement. This is for us, also a lever where we are now good at, and we have lever to increase in that way, the return of GBIS. Of course, I can let Jean-François now comment on what we did on the global market.
We're focusing on three main activities, investment solution, financing solution, and specific flow activities where we are differentiating factor. Doing that, we are also reallocating the capital within Global Markets on the area where we can deliver higher return. Now we have done the job. We're focusing, exiting from activities where we are not so good at, and keeping the leading position or the leadership position where in the market. The good news for me, as in 2019, we have maintained our capability to gain market share on the area where we are leading position. 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.
We have gained market share in 2019 in a moment where we are deeply restructuring the global market activity. Something which is not so easy to deliver, but I would say that the fourth quarter is just the first demonstration what we had in mind to do.
And-
Yes. Hello, Jean-François.
Jean-François, yeah.
Maybe just a few more words. As we explained, 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 by Risk Magazine in terms of structured product. That's quite remarkable in a year of transformation. The 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 EMC integration. On the financing part, this is an area that is the most profitable part, where we increase 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 less capital, this was a very good outcome as well.
Lastly, on the flow business, equity derivatives, we say that we still secured our top positions on this franchise, very important for us. On the flow business in the FIC, 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. It's very satisfying to see that we are back on track.
Perhaps, Tarik, on your question on consolidation, I think there's more clarity going forward on capital. I'm a little bit more prudent on the banking unit, because here you see still trends towards fragmentation, still inconsistency between the different supervisors, et cetera. We'll see what happens in 2020. The jury's out really on this. It's not for tomorrow, it's 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, a more integrated market. The fact is, we see still 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 deliver, I don't know. It's a lot. It's part of the agenda. It's clear.
I think no more. 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 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. Then we will see. As I already said, you don't have so many banks which will be able to participate. You need to have synergy. If you put just two retail banks aside from one country to the other, zero synergy for the next five years. It's around more global businesses. At the same time, with limits on balance sheet, you will not have EUR 3 trillion or EUR 4 trillion. It does not exist.
There will 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. On our side, we are building also a strategy which makes sense absolutely on a standalone basis. Jacques-Henri?
Thank you. I have three questions.
Yeah.
I'll make them quick. First one, can you remind us, you probably gave the number, I'm very sorry, the ingrained restructuring costs that remain to be booked for 2020? The sense of the question is linking to dividend, which is a little bit headachey this morning for the payout policy in 2020.
If I look, because you're going to do a buyback as well, at 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 returned to shareholder. Is it something that you view as a little bit too conservative, or do you think you can actually deliver that to return the same amount of money? It's a way to actually ask if you're going to cut this total amount returned, okay. I think it's actually quite clear you can at least give a little bit of guidance on that. Third question, great to have a deep dive on sustainability in H1.
Are you going to be able to give some clarity or a 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? Every bank seems to have a different definition of what they mean by green and sustainable development funding. Thank you.
I will let William talk about the dividend and the amount of restructuring. Perhaps Diony. Diony Lebot is also in the general management team, more in charge specifically on the issues of climate change, risk approach, et cetera. William.
Essentially, when you sum up what we incurred in terms of restructuring cost 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 a few weeks ago, you end up with EUR 268 plus EUR 55 plus EUR 34. 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. As we said, we're in the ballpark of what we have announced. Coming to the dividend, the way we think is that we need to offer predictability on the dividend for shareholders. This is the very reason why we move to a payout on underlying.
We think that you can project the underlying net income. What you can't project, obviously, is should there be a capital gain or a loss or a restructuring charge, should there be some in the next year. 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, you calculate the DPS on 50%. If it is 10% share buyback, it's easy to get it.
When I look at the future, based on what Frédéric has 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 share buyback.
Diony, perhaps on the climate.
Yes. 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 a factor of credit risk, and that's the main area where we see exposure related to a transition. We have integrated in our risk assessment and the credit assessment of clients and sectors, the risk associated to transition, taking into account scenarios, and common methodologies, in particular scenario related to transition, allowing alignment with Paris Agreement. 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 clients, and we will be able to give more information on that.
Second part of our strategy and analysis is the transition and how we align progressively our portfolio and our risk to the various scenarios, in particular to a two-degree scenario. There we have already communicated commitments and precise commitments, such as being totally off coal by 2030 or 2040, depending on the regions, and reducing our exposure progressively to the fossil fuels. In parallel, we have also taken a quite important commitment in financing the transition, and we are committed to finance up to EUR 120 billion of financing either through a direct financing of renewables or by arranging bonds which are compatible with sustainable development goals. It's twofold, reducing our exposure and analyzing risks and accompanying the transition. Second, accompanying the transition by increasing our exposure and financing to renewable and sustainable financing.
It's a strategy which is twofold, 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 JP Morgan. Just two questions. First of all, to come back on capital. You had an increase in P2R, as of first of January, 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 delevering program, or what are the key milestones you have to achieve to get that relief even without using Article 104?
Related to that, 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 feel comfortable running at? Do you look at it in an absolute level? What kind of buffer or where, PA? If you could give us a little bit of color, that would be helpful. The second question is just going back to your ROTE target, which now, you're not committing to 9%-10% for 2020. What has changed in the environment? It's just mostly rates or is there anything else that you want to flag? You've revised your French retail guidance already last year, so I'm just wondering, the past couple of quarters, what has changed to lead to this sort of change? Thank you.
Yeah. William?
Okay. Starting with capital and P2R. Effectively, we're working towards reducing again, the P2R. As you know, first of all, the 1.75 is pretty well compared relative to the average, huh. 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 ECB already recognizes that we've made progress, or we're still very well run on liquidity and risk. This is what they had already mentioned. On the qualitative assessment, it revolves around governance, some remediations, including on data quality, be it liquidity or risk. It revolves around the permanent control framework, which Diony is spearheading. I think they recognize we also have made quite significant progress in these areas.
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. The qualitative element of it, i.e., the speed at which you provide the data, the quality of what you provide, et cetera, is part of general assessment. We are working fundamentally towards having a better rating, and going back to where we were, but we can't commit on it. 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.
As Frédéric stated, maybe we are a bit conservative relative to others, but it happens that we don't count on a reduction of P2R. 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 software. It's also in discussions. Obviously, there could be also change in the requirements for P2G, going forward. What we want to do in our assumption is take reasonably conservative assumption, and that's how we steer capital so far. At any point in time, it's 200 basis points above MDA, which is EUR 7.5 billion 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 we'll adapt.
You will
Profitability.
Can I just. Again, we don't want to speculate on that. Fundamentally, if you think about capital having to absorb a loss in a 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. Fundamentally, maybe the 200 basis points might, at some point, become, give a silly figure, 150 basis points, because it's based on also a bigger risk-weighted asset amount. Again, behind all the reasoning, I think of the SSM, there is everything around this. I think it's a little bit premature to change already our capital management policy while we don't have all this clarity.
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 may say. The computing and the calculation at this stage, I think it's a little premature. Clearly, in the last six months, there has been a series of announcements, speeches, which I think is changing the perspective. Let's wait. For 2020, we'll manage, including with the buffer, which is one of the explanations behind also a lower return on tangible and beyond, effectively.
I'd say there are three components to your second question. One is effectively rates, because when we talked about nine to 10, it was before the to-come decision of the ECB. Remember that with Philippe Aymerich , 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 zero year, so zero minus." If you take 1% revenue growth for French retail, that's about EUR 80 million to EUR 90 million. If you take minus one, it's EUR 90 million as well. Add a plus one, minus one, it's probably not far away from the difference as far as this is concerned. Capital base. Between 12 and 12.7, it's a good EUR 2 billion difference.
You need to have EUR 200 million net income to make it work at 10%. I want to repeat what Séverin has said. We see some growth in CIB next year. 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 than hope on revenue outlook. 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 pretty much there.
Yes.
Hi, Omar from Barclays. Just three questions. 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% 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. The second question is just on international retail and the top-line trends there this quarter. If we look at slide 56 and 57, pretty much every division this quarter has seen a slower rate of growth in revenues compared to the full year. Is there something specific to call out, some additional margin pressure, something like that? The last question is just to help us with our modeling on the expenses.
Basically you had EUR 17.7 billion of expenses, and then we remove the EUR 300 million of restructuring costs this year. You have another EUR 300 million of cost savings from CIB, and then EUR 300 million or so from the EUR 1.1 billion old cost savings plan. We're at like EUR 16.8 billion-ish. Is it as simple as just applying what we think wage inflation for the group is, 2%-3%? Are there some other factors that we need to think about over and above that?
Okay. I will let William answer on the cost and Philippe answer-
We need to answer on the share buyback.
Yeah, I was about to. Philippe answer on the international retail. I will take the share buyback. There was absolutely no constraint from the SSM. In this subtle balance, you have different profiles, different shareholders, some which still prefer a cash dividend, et cetera. With 10%, if you think that you do it at least for something like two years, roughly, you then take out the dilution coming from the script dividend. For us, was not a stupid figure. To try to match also the expectation of our shareholders. Nothing more in that balance. About Philippe, on the trends in international retail.
Yes. Good afternoon, everybody. On the trend 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. This is quite an achievement. This is underlying our trend is that on a full year basis and at constant perimeter, we increased by 5% the revenues. You may have noticed a kind of slowdown in Q4. It's fair to say that we have two elements there to mention. First, in insurance, in spite of a very good commercial activity, and let me highlight that premiums in P&C are up by 8%, that we ended up with EUR 125 billion of AUM. In spite of a very good commercial activity, we had more claims in Q4. That's why for the first time, we had declining revenues in insurance in Q4.
Excuse me. Second 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 also the effect in Czech Republic of an inverse 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. Having said that, the trend for, and it is confirmed today by Jan Mikulka, at the same call organized today with investors in Czech Republic. We have a positive outlook for Czech Republic. Down the road, firmly what I can say is that we have a pretty good sense of the trends in revenues for international retail.
Thank you. 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. Because I do think we will have plenty of things to model, but maybe I'll guide you through it. We've said CIB towards 6.8. We've said French Retail, the cost base of French Retail is about 5.7, will decrease in absolute terms. Okay? You can assume, because you know us, that we charge the vast bulk of the corporate functions into the businesses. There's no mystery of cost that could increase as well. Apart from some cost of remediations, which Frédéric has mentioned, but that will remain overall for corporate center in the ballpark of what you know and what you get used to.
You should expect some cost growth in International Retail and Financial Services, which is consistent with the fact that this is an area where we've been growing consistently at about 5% a year. I mean, taking also into consideration that in a country such as Czech Republic, where you have 2% unemployment rate, there is some wage inflation. As Philippe reiterated, we want to keep positive jaws there. 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 Financial Services. 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 group again next year, combined with positive jaws.
That's how I would say you have plenty of information.
Okay. Yes. Mike.
Thank you. Yeah. Kiri Vijayarajah , HSBC. Can I go back to the revenue growth you're targeting on GBIS? Is it fair to assume you're also targeting jaws between revenue growth and RWA growth, in GBIS? 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. That was kind of a useful tailwind in managing the RWAs down, obviously would have benefited GBIS. My question is, looking forward, is that kind of normalization on the market risk models now played out? 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.
We benefit from having both Séverin and Jean-François on the phone. The normalization of market risk is not just a question of smart modeling. It's first of all, normalization in the market conditions. We are back to 2013, 2014. What I will 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 normally should move a little, either because there's a bit of stress in a given quarter or because Jean-François's team produce 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-François will be able to get more in details. Fundamentally, this is due to the fact that things have normalized. To your point on the operating leverage, you're totally correct. What we had 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.
If listening to Séverin, 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, Jean-François, if you want to add something more on market risk or?
Yeah, you said it all, actually. The EUR 8 billion decrease that we got this year has been obtained through active deleveraging. A discussion, for example, 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 or business. 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. It happens that, yes, there could be some fluctuation if we enter into a crisis.
We are quite happy to have implemented a discipline that will be maintained through quite sophisticated schemes that are applying to all traders around the world with incentives on a day-to-day basis, really incentivize them at their level to optimize and track all unnecessary risk in their daily trading. This is something quite new, and we think that now we are at a very sophisticated level based on our experience of how we want to manage that going forward.
Thank you. Next question. We'll take the last question in the room and then enter the questions on the phone.
Gregory Wodassilwa from Morgan Stanley. Just one question on Boursorama. 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. Second, how do you assess the level of competition or the competitive pressure from banking players like Revolut and N26, which are gaining a lot of market share in France?
I will let Philippe Heim 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 model. Philippe?
Yes. Good afternoon to everybody. Yes, of course, we track the number of clients from Société Générale or Crédit du Nord who become clients of Boursorama, because, as you know, to become a client of Boursorama, actually, you need to have an existing bank account. It's quite easy to track. Basically, the market share of the new clients of Boursorama coming from Société Générale or Crédit du Nord, it's exactly the market share of Société Générale and Crédit du Nord. There is no cannibalization, especially. Regarding the competition from Revolut or N26, as Frédéric mentioned, Boursorama is a different kind of bank offering a very wide range of products and services. We are tracking very carefully many key KPI, especially, of course, the cost of acquisition. This year, again, 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. We still have very good momentum there. The third 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 operational risk, and this one is also under control.
Thank you. Perhaps we can go to the people on the phone.
Thank you. Ladies and gentlemen, if you wish to ask a question, please press star and one on your telephone keypad. The first question comes from the line of Lorraine Quoirez 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, I think a few years ago when you IPO Amundi, you did disclose what was the ROE impact of, actually disposal of Amundi. I was wondering whether you could actually quantify the ROE impact of the disposals that you have made so far. 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, Lorraine. William, do we have disclosed 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 basis points, let's call it 60 basis points. It's around EUR 10 billion, sorry, 60 basis points divided by three. You can make your own computation on terms of RWA and enhanced capital. That's what we create with the disposal we've announced. We have an impact of about EUR 220 million-EUR 230 million of net income. We have, on the other side, the acquisition of EMC, which we've told you would cost about 10 basis points, and would represent around EUR 100 million post-tax of earnings. When you sum it up, knowing that EUR 100 million of net income is about 22 basis points of ROTE, you can square the equation.
Another way maybe to answer your question, and then we will answer to the tax rate. When you look at the international retail banking and financial services, you see that the Return on Normative Equity has remained absolutely similar. 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, William?
Well, I think it's very consistent with what we had in the past years, except that for the adjustment, you have to make on the implementation of the new accounting rules IAS 12 for the coupons. We end up the year, if I'm not mistaken, at 23.7% tax rate, group level. You add roughly 400 basis points, and you come back to the range that we've guided to back in November 2007. For the next years, you should expect something very similar.
Thank you. Next question?
Sorry. Excuse me. The target, the tax rate for next year is between 26% and 28%?
No.
Is that correct?
No. The tax rate for this year is 23.7%. Okay?
Yeah
the impact of the new accounting of coupons for you to be able to compare with the previous guidance that we had set forth in 2017. 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.
Thank you. The next question comes from the line of Pierre Chedeville from CM-CIC Securities. Please ask your question. Your line is now open.
Hello, good afternoon. One question regarding the P&C. You mentioned in your slide that you had an increase in your P&C claims this quarter. Could you give more color on that increase? Regarding globally the 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 your franchise in insurance, in France and in Europe? Regarding Lyxor, as far as I understand, you develop 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? If it's the case, how do you see this active management development within Lyxor, in the framework of your partnership or future new partnership, I would say, with Amundi?
What are you doing exactly in this area? As I am in France, I'm not invited in the different 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.
Pierre, hi. I will let Philippe Heim answer on your question on insurance and perhaps Séverin elaborate on Lyxor and the development of the collection. Philippe Aymerich will answer specifically on Société Générale. Can I just answer your question on mortgage with my hat of chairman of the French Banking Federation, just to mention that you know that there are some development in the market, in particular with some recommendations of the committee, Haut Conseil de stabilité financière, which has recommended effectively to avoid at least going further into longer maturity, being careful on the taux de défaut, what's the name in English, the percentage of salary you can dedicate to the reimbursement and also on the margin. I think these recommendations fundamentally go in the right direction from our perspective to have a little bit more discipline on the market.
Perhaps Philippe, I'm first on insurance, P&C, first of all, the high impacts and more generally with the SMEs. I guess you'll talk maybe about retirement schemes, things like this, banks. Philippe?
Yes, sure. Thank you, Pierre. Some more color regarding what happened in Q4. Yes, we had more claims. Let me highlight that on the commercial side, we have premiums up by 8%, with the majority growth abroad. Regarding claims, this is a phenomenon, but the part was widely shared by other players in France as well, related to climate events, namely droughts we have end of this summer, and also some specific individual cases. I would say that this is a statistical event. 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 computation and the allocated capital of 25%, so a very good performance. From a stat standpoint, we cover, let's say, many 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 Aymerich in the French network. The point is to cover the needs, for example, of our clients with Crédit du Nord and Société Générale. This is clearly an element of development because, as you know, we want to increase the command rate of our clients, and it is supporting our strategy in the long run to increase our commissions in the network.
Séverin, Lyxor, can you elaborate perhaps on the collection of new assets under management?
Yes. As you know, Lyxor has two businesses, and this is not new. Lyxor has historically built an ETF franchise and have also developed an active asset management activity for a while. Lyxor had a good year this year in terms of active asset management, thanks to good commercial performance and a good collection of new money. The total asset under management at the end of last year is EUR 149 billion for Lyxor. Among this, you have EUR 70 billion on the active part, on the active asset management. We had this year a better year on active asset management than on ETF. The reason is market of ETF in 2019 was mainly driven by fixed income underlying ETF, as you know. Historically, and still today, Lyxor is more geared on equity-based ETF and many European equity-based ETF.
We are developing today and enlarging the mixed product and the offering of Lyxor ETF on fixed income. 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, Aymerich, on market trend mortgage.
You know that for us, what is critical is our market share on mortgages, on our core clients or core targets. In 2019, I think we really had the good mix between volume. You have seen that our mortgages, our upstandings have increased by more than 7%. A good mix between volumes, pricings, because we have been able to increase our margin and risk policy. Maybe overall, there is a slight decrease in our market share, but not on our market share regarding our key clients. I think regarding the measures which have been announced, I think they will have no major impact to us. For example, now in France, it's not possible any longer to underwrite mortgages above 25 years, and we didn't do that before. There is no change for us.
Thank you. Next question.
Thank you. The next question comes from the line of Stefan Stalmann, Autonomous Research. Please ask your question. Your line is now open.
Yes, good afternoon. Thanks for taking my questions. I have two, 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 Kapsul. 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. 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, Stefan. Philippe Aymerich to answer about Kapsul, and then William on our accrual policy.
Yes. Kapsul, what it is exactly, it's a revamping at the offer for the mass market. It's not competing directly with Boursorama, because in the case of Boursorama, it's 100% digital banking. In the case of Kapsul, we are addressing clients who are also okay to pay to have an access to the branch and to an advisor. Basically, it was an offer which existed before. We have just adjusted it. We have actually repriced it, including some fees, depending on the level of activity of access to the branches. It's not exactly the same clients we are addressing, because in the case of Kapsul, these people still want an access to the branch or to an advisor, at least by phone.
Thank you. William, on the provisioning.
Hello, Stefan. I think the simplest way for us would be to provision 50% and then maybe adjust in the first quarter for 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 financial reporting as far as dividend is concerned, capital is concerned.
Thank you. Next question.
Thank you very much.
Thank you. The next question comes from the line of Jean Neuez 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. Just wanted to understand, in CIB, just generally describing the revenue environment and the opportunity set. 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 or 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.
Jean-François, hello. We will not comment on every month, perhaps again, Séverin, could you recap the way we see our perspective on a yearly basis? I would say almost structural basis, maybe.
If you look at the recent and the last quarter's dynamic of the market, I put aside the global bracket, François already commented on that. The other franchise we are dynamic today are mainly the asset finance franchise, the structured finance franchise, and the asset-backed product activities and the transaction banking activities. Having said that, we don't feel today, to your question, Jean, what do we feel? We don't feel that the pipeline on those different activities is just decreasing. While we have the deleveraging, we have been deleveraging our balance sheet during the year, which impacted the NBI as so, limited part. Globally speaking, the market dynamic is still positive, and 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, at the same level, not better than last one. The general trend determined as natural resource finance, infrastructure finance, real estate finance, I mean structured finance, and all that, for the time being, is still positive feeling.
Thank you. Next question.
Thank you very much.
Thank you. The next question comes from the line of Guillaume Tiberghien 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 EUR 750 million. Do we assume that this stays at this level, or is there anything you can do on that front? The second one is, again, on the tax rate. You're assuming broad stability from the new calculation, what about the Macron cut rate? Can you remind us what impact that should have on you, maybe in 2020, and even more so in 2021? Thank you.
Sorry, Guillaume, you mentioned the what?
The reduction in the-
Of the tax? Of the tax.
Okay. Sorry.
Yeah.
I guess these ones are for me. The first one, I think we should assume around EUR 700 million deduction on coupons. This was EUR 500, pretty stable, up until there was this change in the computation. We will not change materially the stock of hybrids over time. Certainly not in the reasonable projection that we're talking about here, 2020 and even a few years after. I think that's pretty much a ballpark. On the tax rate, you're right. You have to take into account many things, the tax rate in France effectively will start to decrease gradually. 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. In the U.S., as you know, there is less tax deductibility of the intercompany flow.
All in all, that's what make me think that should you do your computation, it's pretty much the same ballpark.
It will decrease a little bit.
It will decrease a little bit.
I think if I remember well, it's 33 in 2019, 31, I think there's already a slight decrease in 2020. 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 in the middle. That will help to a certain extent.
Thank you.
Again, not a big change. Okay?
Thank you.
Thank you, Guillaume. Okay. No more question? Just one. Okay, still. Yeah. There's still one.
Thank you. The next question comes from the line of Flora Bocahut from Deutsche Bank. Please ask your question. Your line is now open.
Yes, thank you. 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. The first question is, do you stick to that? Are we going to see an uptick in equities revenues with the consolidation from EMC from Q1 2020 onwards? The second question is on the deleveraging, just to check a few numbers with you. I think the deleveraging impact in Q3 was around EUR 70 million, which is consistent with the full-year guidance of EUR 300 million, and it was a bit less in Q4. Just wanted to ask how I should think about the deleveraging impact from here. Thank you.
Flora, good afternoon. Séverin, and Jean-François Grégoire. Could you answer, please, these two questions?
On EMC, what I told you, Flora, at the end of the third quarter, that in 2019, the revenue impact was very limited. What we transferred mainly was the ETF part on Lyxor. We had on the other side, the cost impact. This year, 2019. I remind you something which has been mentioned earlier, that there is a restoring integration cost, which is a non-recurring cost in our cost base, not included in the EUR 268 million, which has been disclosed, risk-related costs for SGPS in 2019, linked to Lyxor integrations. For 2020, we are still in the process to integrate the bulk part of what we have to do on the first quarter, clearly. We don't have to have any impact on the first quarter, if this is your question. The first quarter revenue is too early.
We would start to see the revenue impact on the EMC integration starting on the second quarter. We are still in that roadmap. What we confirm what we said, that we didn't guide on the revenue impact on the EMC integration. We guided on the gross operating impact from 2021. We confirm that figure, probably it was around EUR 150 million. In terms of gross operating income, not this year, but from 2021.
Regarding the deleveraging, your question is around the NBI, in fact.
Yeah, the NBI in the fourth quarter, which was a little bit lower, apparently. I don't know where-
The impact from the fourth quarter of the deleveraging.
What we can expect fundamentally, Séverin, what we can expect in 2020.
No, what we have to say-
Maybe we misunderstood. Effectively, there is a small impact of finalization of additional deleveraging in CIB, but we have already exceeded by far the target that we had set for us for 2020. You should expect there is no more. Now we are going back to the normal consumption of CIB. As we said, RWA growth for CIB will be very muted. It's been already articulated at the beginning of the year in the deep dive of CIB.
Yeah. One point to add on to this is the main impact on the NBI was the closure of our commodities activity. It's fair to say that we had in 2019 only three quarters impact, because the first quarter we were already there. Roughly speaking, there was still a negative impact on the first quarter of 2020 compared to 2019, which is a full impact of those commodities activity 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.
Thank you. Bye-bye.
Thank you. Bye-bye.