Good morning to all. Thank you very much for taking the time to attend this session. Indeed, you've seen a few clients, very diversified clients from the activities we are going to talk about. And I think these sessions are very important because we are going to talk about figures.
But I mean, at the end of the day, these figures are generated, 1st of all, by people, people. And it's a great opportunity for you to meet with also our teams on these activities. You will see the I think they're very well balanced mixed with long term employees of Societe Generale, also newcomers and effectively people all dedicated to the firm and effectively to serving these clients in a very integrated way. And it's also the opportunity precisely to talk a little bit more about the flesh of these activities and again, not just about figures, looking also at the medium and long term. I will leave the floor in a minute to Philippe, who will enter more in detail.
I just would like to tell
you a
few introductory comments. And first of all, When we talk about this pillar, which we see really as a growth driver, a profitable growth driver, a long term profitable growth driver, just would like to come back to what we have achieved in the last few years. We really worked very hard to adapt in the last year these businesses to make them precisely this growth driver. If I just Take the profitability. In 2012, these activities were making €600,000,000 of net profit.
In 2018, they delivered EUR 2,100,000,000 of net income We've, as you probably have noticed, a profitability above our 2020 targets for the last 7 quarters. We have worked very hard, in particular, to refocus the activities. So just after the euro crisis in 2012. We, in particular, refocused the credit consumer consumer credit business, exiting, I would say small activities, small franchises and concentrating where we could really compete with leadership presence. In 2017, we announced a second, if I may say, wave of refocusing, having sold the Balkans and Poland.
And we have been able to sell them with a very good price in very good conditions to industrial players. Also because of the hard work we achieved on these banks, improving their profitability, cleaning the balance sheet. So there were banks which were attractive to these industrial players. Meanwhile, we also worked very hard, For example, for a country in Romania and across the board in the risk, Romania suffered till 2010 from a growth which was too quick. We were able to adjust the setup, improve very much The risk overall, the cost of risk has been divided by 5.
It's 5x lower today than it was in 2012 and it's even 7 times for Romania. We also work very much On all the liquidity setup, ensuring that these activities, we are not relying on any group funding, but of course, having a very good balance sheet also from a liquidity perspective. And we worked also on productivity. You will see that during the different presentation made by our activities businesses. Let me just mention that, for example, in We were able to increase the NBI per FTE by 50% since 2014.
So again, you will have I will not enter into the detail. You will have more illustration of the work which has been done. But It's not just a coincidence that these activities are now delivering such good results. So where do we stand now? We think we have really a relevant and differentiated business model.
And when I say this, When I think in the next 5 to 10 years about the banking services, a lot will change. We spend, to a certain extent, today more time to discuss about the impact of the low rate environment on on eurozone retail activities. May I say that we are here we have a presence here in countries, in geographies, By contrast, which, first of all, I think will never enter negative rates, have overall better growth prospects, Have banking markets which are much less mature, which offers much more growth than any mature eurozone retail activity. We will also discuss, of course, different ways of doing businesses. We don't talk very often of that when we present our quarterly results.
But we will talk about bank as a platform and bank as a service. I mean, how we can also offer our services in partnership where it's not just the traditional relationship which is at stake. It's true for insurance. It's true for ALD. It's true for consumer credit.
And when I think personally the next 5 to 10 years, I have to think about these kind of activities and partnerships. You know that and you will see that it's a very important feature of the way we develop these activities. They work very much in sync with the rest of the group. These clients that you saw, the Chinese guy who mentioned Africa, it's about synergies. It's about connection.
These activities are not developed independently. The people that you will see have had career development, which makes them understand very well what we want to achieve globally. It's not just a series of businesses alongside. And that explains that a lot of the synergies we develop in this integrated group comes also from this pillar. And you will see again that we are able, I think, to leverage on long term growth trends, for example, on the mobility sector.
And let me just conclude, and again, I will leave the floor immediately To Philippe, who will enter more in detail. When I think again about banking and how to differentiate, In the coming years, it will be through geographies. Geographies will be a key differentiating factor. It will be again also about the way to do business and digital technologies are at the forefront of that, which means the capacity to deliver the businesses differently. And from that perspective, when I look at our setup, Now that we have achieved completed the geographical refocusing, I'm very confident in the capacity of the businesses to grow.
The first item, as I've said, is bank as a platform. The nature the way the services will be, Again, developed and channeled through the clients will change. And I think here, you will see that we have a long history of very robust partnerships. You've seen some people also mentioning that OTO Group. OTO is a very large retailer in Germany.
We have developed for the long term a bank to serve their clients. That's just one example. 2nd, mobility and leasing. A lot of people try to think about what they can do outside the banking business, going in directions, which sometimes are a bit theoretical. Here, we have something with ALD, which is real around mobility, around the way people will change their usage of cars.
ALD is in a formidable position as a mobility leader to take advantage of these trends. And it is just the beginning. It is just the beginning. When you look at the next 10 years, a lot will happen there. I don't even talk about autonomous vehicles here.
I'm just talking about, For example, the fact that individual clients will look more and more for usage and not just ownership. And here, we are developing Beyond, of course, the structural growth of our corporate activity, the car fleet for corporate, we are developing very well. Same thing in partnerships also, the usage of cars for individuals, long term leasing. And We will mention things also that we developed, for example, with Amazon, with clearly a recognition of ALD, which is, as you know, the number 2 in the world as an extraordinary high quality innovator in the way to develop also their services. And then when I come to geography, Africa, a lot of people say that when you think about the next 20, 30 years, the continent to look at is Africa.
This is the only continent with a strong demography. Let me just remind you that Nigeria had €39,000,000 in EBITDA in 1950, €190,000,000 today and more than EUR 400,000,000 in 2,050. Africa is, of course, a continent which needs political stability. But the sustainable economic growth of Africa is maybe With climate change, the number 2 core issue of the world, because if we don't ensure sustainable growth in Africa, we, the developed countries. The pressure on migration will be untenable.
That's why we have a conviction that Not only companies are looking at Africa as new areas of growth, to start with effectively China. But beyond, all the governments, all the national multilateral development Agencies are going to put more money at stake. And at a time where all the international players with a small presence Are we drawing because it is the same that elsewhere? People have to choose their battle. And in Africa, where you have Regional Economic Integration, you need to be not just in 2 countries, you need to have scale.
We are here a formidable differentiating factor. And so we want to take advantage of this, again, in a very responsible way in terms of Monitoring, so it means we will not jump from one quarter to the other. But my role as the CEO is not just to think about the next quarter. It's also to think about the next 5 to 10 years. And here, we have, in particular, a formidable differentiating angle.
That's what I wanted to say in a nutshell. But now I will leave the floor to Philippe, who will feed you with much more information, figures and other things. Thank you.
So good morning, everyone. A pleasure to be with you this morning. I see a lot of familiar faces. So the objective of this morning is to share with you conviction that this pillar, IBFS, is a major growth driver for the group. So we'll do that during this morning.
So a general presentation I will make. And then we'll have specific workshops with my colleagues. You will have 1 on Russia led by IBR, 1 on Czech Republic with Jan Kalkar, 1 on Africa with Laurent, then one on Azure with Philippe Perret, 1 on ALDI with Mike and then one on Consumer Finance Jan, you can compare. So to consumer finance. So to start with just to start with, just General convictions that are structuring, let's say, the presentations and the point I want to develop.
We are leader in attractive markets, And I will explain to you why. We have a track record of successful growth, and I will explain. We constantly work on efficiency. This is a point of permanent attention to the management. We have high standards in risk management.
When we operate in emerging countries, of course, it's a point of attention. I will tell you how we are working on that. As already mentioned by Frederic, We have actively managed our capital allocation to work on our footprint and hence we have raised the profitability of the mix. And then also mentioned by Frederic, let's say, as a banker and as a large Bank, we have a responsibility to accompany positive transformation, and I will mention that as, let's say, also a driving force in our projects. So first, starting with we are leader in attractive markets.
So to simplify, To present IBSS, the most simple way for me is to say, okay, we have the vertical lines. We are on 3 continents of universal or diversified banks, take the wording you prefer, of banks In Russia, Eastern Europe and Africa, we serve all kind of clients in those Geographies, retail, wholesale, in private banking, in insurance, ID, you would see. We are number 3 in Czech Republic, number 3 in Romania. We are the 1st international bank in Russia by asset. We are the 1st internal bank in Africa by our footprint.
We are in the 20 countries. Then the point is We have businesses bringing synergies to those platforms, 1st in consumer finance and then in insurance. We'll have a focus on Car Loan. We are number 1 non captive in France, number 2 non captive in Germany, number 3 in Italy. We are a large Life platform in France, but we are developing and turning the mix, and I will elaborate on this.
And then we are worldwide leader In Mobility and Leasing, as you know, we are number 10 to 1 for Mobility and for Equipment Finance. So globally speaking, all those things together, As United, as you know, a top line of €8,000,000 net income of €2,100,000 and profitability of 18.1%. Okay. Then the presentation will be very simple, very simple, top line, operational efficiency, with management and then footprint. So first, starting with the top line.
Of course, we have tailwinds. Of course, yes, we are based on very solid microeconomic fundamentals. And here, I will mention some mega trends. First obvious one is the macro. So you see that the story around Chemie and BRD, this is one of Productivity catch up, alignment on the standards of EU.
This is a story of to better consume structural funds provided by Brussels. As mentioned by Frederic, we are also benefiting from normalized interest environments. In Russia, currently, we are below the long term potential of the country. But let's mention it, this is a country with an amazing Growth potential. Just bear in mind, as Westerner, that the public debt in Russia is roughly at 15% of GDP.
In terms of monetary policy, we have, let's say, very talented Central Bank of Russia Having managed the weight of 2015, the inflation stand currently at 4%. Let's bear in mind that the employment rate in Moscow and septarsborg is nil. Okay. Africa, this is also a story of catch up supported by the demographic transition. So the population in Africa will go out by 1,100,000 inhabitants.
So this is pretty impressive. And then, of course, The challenge for all of us, for those 500 young Africans coming to job markets, what are the prospects? This is something we have to keep in mind with Western North. So the first of our growth is macro. The second is banking penetration, which is still very low.
You know that topic by heart. The banking penetration in Africa is at 25%. Another aspect, credit to GDP in Russia is at 50%. You know that in France, it's at 100% and it's far above in China. There is another megatrend I didn't mention on that slide, but let's keep it in mind.
The shift of Paradigm, the shift towards usage. We see that in insurance. We see that in mobility. So this is a mega trend supporting the development as mobility as a service. And the development and Philippe will arrive on that Also contextual insurance, so the small tickets for small moments in your life, you buy air tickets, You do, let's say, purchase Internet and you need to have an insurance for that.
Okay. So There I've described the tailwinds. Now I want to focus on this very important slide. Where I think we are very good at It's to build synergies and partnerships, so synergies. And then I will leverage on what was said by Fredrik.
When we onboard a client in France or in China and Africa, where we are good at is to serve that client locally with our retail banks, but also more globally with our CIB business. So globally speaking, for example, in France, We are generating €2,000,000,000 revenues of synergies with our various businesses, insurance, IB, consumer finance. In CIB, the fact that we are serving our commercial corporate clients with the GTV solutions, So transaction banking, trade finance, cash management. The fact that we're also accompanying our clients with market platforms in Abidjan, Casablanca, Prague, in Moscow. And also in Structural Finance, and there is a project that would be explained by Laurent and Katie Lawson, for example, the project in Cameroon.
So we have capacity to take the best of our local presence and our global expertise. So broadly speaking, in a nutshell, IBSS is generating €3,900,000,000 of synergies. So it represents Half of the group synergies, and it is increasing at a fast pace. So, so much for synergies. Then coming to partnership.
Partnership is simply to team up with a third party to improve the client experience to shape new business model. Bear in mind and Mike will explain that lately. The very essence of the success of 5D is about partnership with OEMs, with car manufacturers. Our leadership in car loans, where we are a leader clearly in Western Europe, It's the fact that we are the partner of choice of dealers. And I can mention also for Assu, The point is not just to saturate the existing retail network, it's also to find new partners, wealth managers We need to distribute our products.
So first kind of partnership. Then commercial partnership, obviously, in countries or areas where we are not. You know that we serve adequately our clients in Western Africa. You will see that with George and with Katya and Laurent later on, but we team up with ABSA to extend our reach in English speaking Africa. And another example, what we did with OTP when we decided to exit the back end part to continue to serve our clients.
Then, Open Banking, another kind of partnership to shape, to design New business models. And I'll give you there two examples. What we do with Amazon to distribute cars through the platform of Amazon, and this is very successful and opening, let's say, large revenues. And another one, which is the partnership with the With the TactPay Fintech that allow us to build our mobile Payments and mobile banking solution called YUP. And here, this point is key.
YUP could be described as a massive We point of client acquisitions. During yesterday, we mentioned that our objective was to get 1,000,000 clients in 2020, And we are pleased to announce that as of today, we are already at 1.2. And then if I look forward And if we keep this pace, we'll be within quarters or within 2 to 3 years, we'll be at €3,000,000,000 So we have acquired Throughout as many clients as we did as with our existing retail banking in one country of present In Africa, so this is very meaningful. So building new business models with partnership. Okay.
So what about revenue growth? I think figures are pretty easy to read. We are talking of this is our traffic order. So What we have delivered over the past 3 years was a cumulative average growth of 6.8%, okay. This is the result of what you've seen before, our leadership positions, capacity to extract revenues, Building Partnership.
You see that it was based on the growth of our loan book and the growth It's across the board in all kind of businesses and geographies. So, so much for the top line. Now let's explore operational efficiency and cost income topic. First element to there to mention is how The digital transformation can support this ambition to be more efficient. So we had last year with Hi, Eric and Philippe Mitch, my colleague, already a session, digital day on all kind of initiatives we are supporting.
There, I just want to pick and choose some elements, Just some elements to highlight, let's say, what we are doing. Here, I come again with Joep. Joep described just previously as a weapon of massive client acquisition, but Joep more fundamentally It's a way for us to solve a problem we have in Africa. In Africa, it may be provocative. The main issue we have, we have too many clients in our branches.
We have clients queuing to withdraw small ticket of cash. So this is a paramount importance, Let's say, to process all daily banking activities through the mobile. And you'll sense we have the same strategy as in France is to refocus the branch on added value operations. So this is one example of new models to be more efficient. I can mention that we brief what we do with KB, the fact we can digitally onboard a client within 15 minutes.
I can also in the field of client interface With Eylea, the fact that the time to cash for cash loan in Russia is within 7 minutes. I can mention that with Audi, we distribute 60% of used cars online with the Audi car market and so on and so on. On Therateach, the team, Jean Luca will explain that we have a soft production system, which is very efficient using AI. Okay, so much for this first level. Okay, so now moving to half stuff, What we are doing fundamentally in 3 areas, upgrade branches.
So this is like in France, the point is to optimize to high size the footprint of our branches And it's pretty efficient to see what we've done in Russia and we have a number of branches. Same direction in KB in BRD. At the same time, we upgrade the kind of service we deliver in the remaining branches. Another area is about Mutualization and creation of ups is the fact, for example, that we decided to merge Rosebank and Delta to have 1 single instead of 2. The fact that in Africa, we decided to relocate our supervision and to pull scarce and expensive resources in finance, in REIT, in compliance, in transformation, in Abidjan and Induila and Georges Regard will be there to George to explain what we are doing there.
The whole story of ILD also is around hubs. So there are 2 centers of expertise, one for new form of mobility, one for the B2C experience. And The network of 43 countries is structured through 7 ups. So now moving to nearshoring and offshoring. It's very simple.
First element, this world is awful on the Moscowization, but let's explain it. Maybe Moscow is one of the few cities of the world more expensive than London, okay? So we decided in the past years relocate 25% of our staff from Moscow to 3 regional hubs, 1 in Tamara, 1 in Yuzhny Novgorod and the other one for Far We decided also to relocate our digital factory from Paris de France to Caisse Blanca and in that movement to add up the cost of development, okay? So it was The move we decided last year, same movement in Aloe. Aloe is in Eastern Germany, and we have the same Monday cost in Allet and in Bucharest, and this is a hub for the German speaking countries for gas.
And maybe around Allet We'll go move forward. At the same time, we decided to right size the holding functions using a 0 based budgeting approach. We do the staff in Paris by 40%. So you see that we are mobilizing all kind of levers on branches, on hubs, mutualization and nurturing to work on our costs. Then the point is not to, let's say, to develop Everybody alone bespoke solutions is to combine the best of breed to combine, Let's say what we find in the at the group level and what can be developed locally to share best practices, to align ourselves on high standards and to work on culture and conducts.
So here, I will be very brief. Funding, as a matter of principle, we are very, let's say, consistent on this over the past 10 years. Our retail banks are self funding by principle, but we fund our consumer finance platform, Get an ID through the group, not entirely, but a large part. We have also aligned vertically The control functions. In IT, the point is to leverage on group infrastructure, but at the same time to use KB and Jan Ucalka will explain it, our expertise known in Europe in the agile area.
So KB is our center of expertise. And then HR It's the fact to grow a new generation of local manager. And if it's too theoretical, I will give you some figures. We have replaced over the past 5 years 75% 75% of managers, out of which 70% our new CEOs. And in Africa, out of our 100 key positions, 90 are local managers.
So the point for us is to design dynamic career paths between geographies and functions so that those managers are able then to evolve in the group. I'm very, very proud on that. Okay. So what's the benefit of that Ultimately, finishing detection on the partial efficiency. So you see that we have improved over the past 3 years when we compare The CAGR revenues OpEx over the past 3 years, we improved our Oportional Efficiency, we have positive jaws in Europe, Russia and Africa.
And let me share it Very bluntly, it was not abuse when you have inflation, high inflation rate in those countries, when you have pressure competition for talents, When you have inflation of salaries, which is very significant, to be able to extract residuals is a challenge that we are committed to that. The story of insurance is a completely different one that you are familiar with. We accept to, let's say, to Here to have negative jaws, but it's the flip side of a structural change of the business towards more Protection incentive activities, consuming less capital And end of the day being more profitable, as you delivered a profitability of 20% last year and the 1st 9 months was 25%. Mobility positive jaws, of course, we as you know, we have neutralized the effect of CAR TET results and down the road with the exception of insurance that we are committed to deliver positive jaws. Okay.
So now moving a new section, section on, Let's say, cost of risk and then compliance. So you see the improvement of the cost of risk over the period of 10 years. So we are here at a very low level of 30 bps into 2018. On 1st 9 months, we have 42. This is, let's say, we are not just surfing on the macro or low interest rate Because this explanation is only relevant in Eurozone.
We are starting on a selective origination quality, the fact that 60% of our exposure is made of corporate, financial institutions and sovereign. And within retail, 60% Our exposure is made of mortgage and car loans. And then we have a very selective adaptive origination policy. And at the end of the day, even if we are evolving in emerging countries, you see that operating losses are below 0.5%. Moving now to compliance, maybe one of the most important topic.
Here, the point for us, there is here a strong alignment of the management team of the heads of local banks and the teams. We intend to apply the best stand ups throughout the group. This is a very important topic because when you are in emerging countries, what we are talking out Talking about is our license to operate. So simply, we apply global standards. So that are For the group, let's say, you may be in the U.
S, in Europe, in Russia, in Africa, we have global standards set by our companion department. We have completely reshaped our governance and other sites With the directing reporting lines, so each and single compliance officer in each single entity is reporting to the headquarter. We have increased FTE. We are 2,500 people. We invest in training, we invest in expertise And we invest also in IT.
You know, because most of you are working in banks, those processes are cumbersome, are complex, Also, incentive in people, the most advanced IML tool in the industry, you may be in the U. S. Or Europe, You have roughly 98%, 99% of false alerts when you filter operations. So that's why everybody in the industry, we are working and ourselves, we are working on AI solutions to improve our filtering tools. Okay.
So all in all, here our commitment is to, let's say, apply various standards and to target to be the best interest. So refocusing here, I will be very short and was covered largely by Frederic. Over the past 10 years, we applied simple, let's say, strategic criteria. So if you want to stay in a country simply, we want to deliver added value to our clients. We want to have leadership positions.
Of course, we want to be profitable. And of course, we have a level of stickiness to be synergistic with the group. So we conducted More than 60 operations since 2012. You are familiar with Our exit of Greece and Egypt in the aftermath of the eurozone crisis. Frederic mentioned The wind down of our consumer finance platform in small countries, we accelerate this movement with Transform to Grow in the back end areas.
But at the same time, At the same time, we keep investing out here, notably in ID or the insurance business. Okay. This is a slide I like very much. This is, let's say, the summary of the transformation journey of IBSS. What we let's say, our focus on the top line, to be in leadership positions, to create synergies, develop partnership, to work on operational efficiency and to monitor risk.
So basically, to summarize, we have 50% of our risk weighted assets delivering a return below 10%, Okay. Now we have 50% of risk weighted assets, above 17%. Okay. So simply what we did. And of course, we have we want we will continue to work on that.
And this is a point of constant attention to continue to improve, let's say, the quality of our operations. So maybe before concluding the remaining 4 minutes, as 1 of the largest international institution, financial institution in Europe. We are very aware of our responsibility. We need to participate to the positive transformation of the world. And we are aware that we can contribute to that Through our presence in Africa, let me blunt on doing good doing business in Africa It's good for Africa because we have the development and the stability of the continent.
And we have many areas of focus. We support African SMEs. We support infrastructure. We support financial inclusion and we support also agriculture. In Mobility of Mercedes, some examples you know, we do participate with ID to the development of alternative powertrain, Development of electric vehicles.
Lighting as a service also is something very interesting Jeff is working on. And then, of course, We participate to the development of positive impact finance instruments in line with the group and the other business lines. So to conclude, it will be my last slide. So I I want to share my conviction. We have strong foundations.
We have strong foundations. Once again, we have leadership positions. We have built and we continue to nurture Those synergistic, let's say, relationship, those also long term partnership with Softparties. At the same time, I think we have a good track record in operational efficiency in managing our risk. We delivered we have been for the group a strong profitability type of profitability and absolute conditions that we continue to So now maybe you can open the floor to your questions, and we'll respond with the team.
Yes. Okay. We have a mic for Tarik and for Stephane.
Hi, good morning. Tarek Bejal from Bank of America Merrill Lynch. Thank you for the presentation. Just two quick questions. First one, I mean, I can see Frederic and you, Philippe, are quite excited talking about this division, High profitability, much easier.
So where is the growth coming from beyond the organic growth? So would you like would you see can you see like in 5 or 6 years The mix in kind of capital allocation and earning generation more towards EPFS versus retail in France and CAB, Would you consider more kind of M and A there and more, I would say, stronger growth than just the organic and penetration And so you described. 2nd question is on the compliance and AML. I mean, you had very useful slide there about compliance and what you do and how you deal with it. But how you're comfortable to really take all the culture in terms of compliance and being very diligent through all your divisions, because there are many of them and also is Different standards and backgrounds.
So really, it's interesting to see how you feel comfortable about that being a very serious topic at the moment. Take the first one.
Perhaps, yes, I can take the first one. We are Open to look at opportunities in terms also of M and A, but I think the situation varies a lot across the businesses. If I look at international retail, if they had an opportunity, for example, in the Czech Republic or Romania, easy, Easy as long as it creates value, but no big deal. If I think about Russia or Africa, it's more complex. It's not at all obvious that you can see a bank which fits precisely also with your own culture, and you refer to compliance and Philippe will comment more, but we are really paying attention to that.
And It's less obvious also to find banks which would make sense for us. So in the short term, at least, I see no real opportunity, and I would We feel much more to grow organically. In insurance, We bought the minority stakes of Ontario's. I think it was a very good opportunity. Beyond this, I think there are very few issue in many activity in insurance, to be frank.
And we are not going to buy legacy life insurance Portfolios, it's not doing that makes sense. ALD, we've always said the purpose of the making of floating ALD was also to look at opportunities of acquisitions. And we are actually, we have made acquisitions. You will That's more than mid size, which are very accretive, because same thing, you will see that certain banks who are doing the business, They prefer to sell or we made the acquisition of Parco. It goes back a few years, which was also very successful, so open to that.
And leasing, not a lot to do there. So as you can see, yes, it's something where we can We are absolutely in certain geographies in business open to that. We already do a few things. But also in other activities, it's more complex.
Okay. So regarding your question on compliance, yes, this is A challenge to see difference of culture between different countries. And maybe let me, for example, give the example of Africa. There clearly, what we are doing in Africa, at some point, we have to raise awareness among our clients, among the stakeholders about what are the new rules of business. But let me put it that way.
When we say we want to be at the highest standard, brutally, we said to our team, we accept to stop the relationship with the clients. So if we don't have, for example, for the KYC, the justification, we accept not entering into a business opportunities. We are not comfortable. This is absolute, let's say, prerequisite of our presence in Africa. Then if you take You have a long term view.
What we see are you have some international competitors in Africa. You have some U. K. Banks, American banks. Yes, exactly the same standards.
We are, let's say, on the same page. And then our confidence is that progressively, There is a shift in the continent. There is a movement. So that's why we are evolving. And regarding ourselves, Once again, and not because we are on the remediation, but once again, we have, let's say, global standards Straight by our Chief Compliance Officer and being the resume and the synthesis of what we need to apply between U.
S, Europe And then it is applied vertically, then we have strict covenants of our site, and we have selected and we trained our people.
And perhaps on this, first of all, I think sometimes and we will perhaps elaborate in the different workshops. Our perception is a little bit different from the reality, including, for example, in Russia, and there was this recent mission by this international body, which is called FATF. They ranked the Russian System to fight against AML is very high, very well developed. So sometimes, even the reality is a little bit different from your perception. 2nd, what I would like to highlight really in terms of governance, I think it's fundamental because again, same thing, you might maybe have perceptions or intuition, which I'm not the right one.
When we are in the middle of a very significant remediation, we just signed with U. S. Authorities in 2018. So we have a series of projects governed at the central level with the support of our internal Level of Line of Defense number 2, which are, as we've said, fully integrated. And we review the progress across the world.
There is absolutely, if I may say, absolutely no difference in the way to approach how we remediate on the different categories of clients, These are all the KYC, the processes, the way we approach and the implementation is exactly the same. And I think, if you wish here, I remain very humble what I mean by this. We are in this remediation process. We are investing in CLLentUs, etcetera. But I would like to make you understand that there's no difference.
And it relies a lot also, again, on the people. That's where we pay so much attention in the way we appoint, develop and grow the people. The people that you will meet, as I said, you will see that they are committed to this topic also. And I think this is the whole thing. Of course, if we were just and personally, when I look at some of the events which I tend to think that probably there was a different governance at that time also.
I relate sometimes to previous things. When you think about what happened in the Baltic countries. But the idea is really to govern from the central. And there's no development Even business development, which we will not be very careful. So a lot of humility on this, A lot of dedication also to further improve, but I would say a governance which is very, very similar across the board.
Pierre, do you have a question? Maybe I might for Pierre. Guillaume Thierbergen at Exane. On the profitability target, You're already where you want to be next year. So do you have in mind that the pre provision profit improvement will be offset by rising cost of risk?
Or do you think you can exceed your target? I mean we don't provide new guidance. So and you have seen that originally our target was to be at 17%. So we decided to, let's say, to extend It's ambition to bracket between 17% to 18%. Nothing to mention to our cost of risk.
We said 70 basis points. It was 2 years ago, we had 42 on a 9 month basis. No comment on this. We stick to this level of ambition.
My question is I have 2 questions. First question is actually when we look at IBAFS globally, it's clear that It's a very beautiful setup. But we can see that the picture, and Guillaume said, This picture is based on the cost of risk, which is, I would say, abnormal, particularly in Romania with a lot of write backs, Very mature positions, but it will be difficult to be better even if the country is growing, it's very beautiful yet. So I would say that your growth will mainly come from Africa, I would say, in terms of NBI. And so my first question is, do you think that the ROE of IBSS is sustainable at this level if you grow in a part of the world, which is promising in terms of NBI.
But in terms of cycle, it's more complicated. First question. My second question, sorry for the name dropping, but I was discussing yesterday with Thomas Bubel of AXA and I was thinking that we'll assist tomorrow to presentation from you in Africa. And I said, why don't you go to Africa? And he told me Africa is very promising effectively.
And you told me that in Nigeria, for instance, that last year had 15% growth of turnover. But he said everything I win there is lost with foreign exchange decrease. And he said it's not possible to work in this continent because of foreign exchange. What is your view on that? Thank you.
Okay. So two questions. So the first answer is you challenge us on the capacity to grow the top line. So you see that on this side, what is growing is not just Africa. So we have also most of the businesses also are growing at the site space.
Normalization of cost of risk, yes, to be fair, the 30 points of last year was a very low point. We have the benefit of write back in Czech Republic. There's also the benefit of write back and insurance reimbursement in Romania. But all in all, you see the trends that, let's say, we are we have structural benefits of our policy over the past years. So that's why we are confident on the evolution of the cost risk.
Going to your other questions. And this is Thank you very much for your question because let me highlight one element. I didn't mention that our presence in Africa, we are principally located in 2 monetary zones with the PEG with Europe. And the benefit of the certification of our presence and the consistency That we are in 2 around 2 single monetary zones, free trade areas with high level of integration with a single rule book. And by the way, let me Highlight what some provocative elements.
In Western Africa, we have the capacity to use our excess deposits from one point to find another banks, okay? So it's possible in Western Africa, okay? So the consistency of the level of integration of those multi zones is, of course, it's a perfect environment to support development of our businesses. So and there, we don't have the steady effect mentioned by Thomas Parlock.
If I may just come back to the level of maturity of these countries, they are still very different. I think KB, Czech Republic, And I speak under the control of Jan, it's probably close to be as mature as any Eurozone country. When I say about this, Also the penetration of the development of products such as life insurance and things like that. There's not such a difference. The only difference, as you know, is that it's Probably a country from a macroeconomic perspective, which is much better than any eurozone, look at the public debt deficit.
And second, in terms of banking market, which is probably the best in terms of concentration. So If I could dream about an ending point for other euros and market, I could think about Czech Republic. When you look at Romania, Even Romania, as you said, which is doing well and also on the back of, yes, the cost of risk, we are still benefiting from Mailbag. The penetration and the sophistication of the market, there's still more to be done in terms of just saving products. So there is here, I would say, I think it's intermediary.
And even the banking penetration, I think, in terms of number of banking accounts per head, per population is not as developed as in Eurozone. And Russia, when we think about Russia, on the retail side, I would say it's a very still Nascent market, the mortgage the amount of mortgage loans versus GDP is what, 6% or 20%. So 20% versus 60%, 60%, something like this in euros, if I'm not wrong. So there is a lot to be done. The saving industry in Russia has still more a lot to do.
So I think that Even in these countries, and I put aside Africa, there's more maturity that we can benefit. And let me just highlight in Africa, As I said, you will see, I think, the you've seen all the French banks withdrawing. When you have just 3 present in 3 countries, With what is happening with the integration of Sub Saharan Africa with Middle Eastern Basin, with the local also banks, which are themselves taking advantage of integrated networks, Makes no sense. You've seen also BNP exiting Tunisia. I think you will see further move.
So beyond what we are doing, Let's say, the organic growth can also be fueled by the fact that effectively, we take advantage of the withdrawing of certain other banks.
Yes. Stefan?
Yes. Thank you very much for the presentation. First, I have two questions, please. The first one on growth capacity. I think last time when we met with William, it was mentioned that we have about EUR 5,000,000,000 to EUR 6,000,000,000 of organic risk weighted asset capacity To allocate to the businesses every year.
And if we allocate all of that to your division, that gives about 5% organic growth capacity, your revenue has been growing at 7% in the last couple of years. So do you think with that kind of capacity going forward, you can maintain this kind of revenue growth? Or do you have to slow down a bit given the capital situation of the group as a whole? And the second point on synergies. The numbers sound very impressive.
You have about SEK 4,000,000,000 of synergies in the revenue base of SEK 8,000,000,000 Can you help me Understand a little bit of how you define these synergies, how you think about synergies, what exactly generates these synergies, that would be very helpful. Thank you.
Okay. I will let you the second question on synergies. So on growth, It was mentioned by on the slide by Frederic, we have the capacity to develop our And we are in fact, the bulk of the equity asset growth to simplify and we are very lucky, by the way, and we'll be allocated to the division. So as we speak, I don't feel any constraint in our capacity to grow. Bearing in mind that We are also very mindful to protecting, let's say, the kind of margins we have in our businesses.
Let me explain. This is a growth not supported by volumes, but supported by the, let's say, The extreme attention to be profitable. Let's you will have, for example, discussion with Mike on IND. The competition is stressful and sometimes we prefer not, let's say, to position ourselves on a very large corporate bid where margins are so thin that, let's say, the profitability will be, let's say, Geopodize. You have seen, for example, GEF continuously in the financial communication in the past quarters, we have improved margins.
So it's about also to be selective. So the extension to our profitability is also Optimization of the usage of our capital. So we are very lucky globally to have, let's say, to benefit from this allocation. At the same time, our responsibility is to be also very selective. So going back to the synergies, for example, in France, we are mentioning €2,000,000,000 of synergies.
This is mainly coming from the insurance business we do in France. So the commission we serve to the French network And also the benefit of for insurance on the premium and on life insurance. And we can give you the details. We have a great analysis and how we construct and how we have an editorial of those elements. Pierre Canari?
Just a quick question
on how you see the capital requirements in every country evolving? Do you see a little bit more Can't just give you buffer done at local level, just speaking very globally and how that interferes with your plan and what you had in mind?
Thank you.
Very good question. Very good question. So capital requirements are Significant in Czech Republic and Romania with under your control, Yan, the countercyclical buffer in Czech Republic It's around 1.75%, okay? And locally, for example, BRD is a core Tier 1 Roughly between 19% 20%, okay? So we have the stack of the different levels of capital are very demanding.
Yes, of course, we apply normative return normative equity. So we have set the capital base to 11% to, let's To benchmark, of course, the businesses. Yes, please? Yes. Jean Pierre Lambert, KBW.
I have two questions. The first one is, Can you elaborate a little bit on the corporate side? We had the interviews in the film earlier with CEOs and so on. What's the corporate contribution? And how is it related to CIB as well?
The second question before, I think internally, you had Tier 1, Tier 2 in terms of autonomy of your units. Are you still following that? So what's the balance between centralized control and autonomy for your management in large Institutions. Okay. So the organization of the group is very simple.
So you have Key group clients, we that are served from Paris. So you have a banker in Paris, but we serve these key clients Globally speaking. So in my previous life, when I was a banker, I have a Specific clients who operates in many continents. So I was in contact with the corporate teams in Moscow, in New York, in Africa to accompany the clients with the respective team. And then you have Tier 1 clients on the respective Markets, which are not key group clients.
And the point is that we have platform of our CIB business located in the on some strategic spots, Moscow, Bucharest, Boudapest, then you have Paris. In Africa, it's organized around Casablanca, around Abidjan. And let me give you focus on Africa. We have a JV with our market operations, 2, 1 in Casablanca and 1 in Abidjan serving all the sub Saharan continents. And then we have a team in structure finance, very talented team to source deal all across South Africa.
And the point is to combine our global expertise and our local coverage. And during the The workshop in Africa, you have the opportunity to discuss with Katja. Katja L'Ossant is our Banker covering Africa. So she's coming from GBIS. So she's from the corporate side, but she's working closely with our team locally to accompany the teams and to show this.
And then yes?
Yes. And if I may, just also on this And again, I don't know what kind of ideas you might have again in the governance of all this. I'd like to insist We are governing, of course, the risk at a global level and looking at these regions, these sectors the way that the sectors are developing, industrial sectors, exactly in the same way than in any developed countries. 2nd, you mentioned Katya. It's interesting that you can discuss also with Jan Uckelka and Ilya Polyakov.
Jan is the Head of KB. I personally spent time to build this carrier. It's not an accident. He spent 5 years in also the head office in dealing with CIB with the large clients for the whole Central and Eastern Europe region. So he has also a perfect understanding of the way we look at things at a central level.
It's the same with Ilia. Ilya spent, what, 10, 15 years, 12, 12 in our head office in the CIB. So same thing, he's Head of Russia, but we have a background which is very robust in terms of understanding what we want to do in CIB. And I think it helps a lot in having a pretty consistent approach of the clients, the tiering, the strategy, etcetera. And I think it's
So you have to distinguish The autonomy of funding we want to have for each and every big subsidiary of the group, especially on the retail side, with the effective centralized management of the balance sheet. So we want to Make sure that most of the subsidiaries are not dependent upon group funding. And as Philippe said, it's been very successfully done in the past years, especially Russia has a case in point. But that doesn't mean that the funding strategy is Scattered in the group, it is very centralized. So when a subsidiary wants to issue, we obviously discuss about the instruments, the terms and conditions, obviously, bearing in mind areas where you have minorities, of course.
Now Technically speaking, as relates to Tier 1 and Tier 2, you have to be mindful of the fact that in certain jurisdictions, You don't have such instruments that can be raised. And so you have to go Via the mother company, should you have to comply with local TLAC rules, for example. That's obviously something We do from the center as an exception. Insurance is also a case in point to optimize the capital usage on the insurance side. You're going Sublimated instruments as opposed to core equity is just a way of improving returns.
But it is a centralized management to be Sure that you get this point.
Jean Francois, you have your question? Yes. Okay. Omar.
Omar Fall from Barclays. So Two questions. So firstly, on I understand the reasons for not being too interested in M and A in Africa. But what about buying out the minorities, which are quite sizable? Doesn't that make financial sense?
And then the second question is on Russia. And could you just update us on the strategic value Of keeping that asset, which is a question we've been asking, I guess, since Frederic's predecessor. But You're making a 12% RONI, which is maybe not very interesting in the context of the rest of the group. And it doesn't really fit the criteria that you had for keeping the other fee related assets, which is to have a high Market share domestically given that, yes, you're the number one international bank, but that's not the best benchmark given the size of the local players. Okay.
I would maybe let Frederic respond on the benefit of buying the MindGrid interest. On Russia, let me tell you that we are absolutely convinced of the support and flow of the country. And in the transformation journey of Russia, we are exactly where we intend to be. And We anticipate the point we will develop shortly with IBIA. We are convinced that our objective next year It's, let's say, to cover our cost of equity in Russia.
So according to the plan, we disclosed to the market. In Russia, where maybe I have to maybe to be very specific, we are, let's The critical mass in this large market, we are leader not just in retail but also on the corporate side. So on the retail, you know that we have a niche, Let's say, business mix. We are a leader in car loans with market share of roughly 13%. We are leader on the mortgage market.
We have upgraded considerably our platform. So And this is an element of pride of the team. And then on the corporate segment, maybe Ilya will elaborate with That's a bit on the DCM segment, on Citi loans, in structured finance, we have meaningful positions. And this is a country where Today, we see, thanks to the progress we made in the retail side, we can make progress and gain muscle on the Retail segment and capture double digit growth. So of course, what is key It's, let's say, to be where we intend to be in terms of return next year.
And there we are confident that starting next year we'll cover our cost
Yes. And perhaps let me further elaborate on Russia. I think that You cannot exactly see a market like Russia, like the small Balkans, small Balkans, 5,000,000, 10,000,000 inhabitants. We were on number 4, 5, 6, 7. Ahead of us, there were banks also more or less with the same business models.
In Russia. And again, you will discuss with Ilya probably more in detail. First of all, as Philippe said, You need to understand that market is dominated by 2 large governmental players with a clear willingness of the Central Bank to ensure competition, and you will see that. So There is here the specific nature of 1 or 2 animals, which are huge, but which leaves room for other players. 2nd, the market is largely a corporate loan market.
When you look at retail, You need to look at the 2 things. And in retail, you have at this stage, yes, the large 2 first two global banks, public banks, but we are, again, very well positioned in a still nascent market. So what is key for us is going forward, of course, to ensure that, Yes, we can have and we can maintain a position on this market on retail, which makes sense. But today, we have already a very good position, As Philippe mentioned, knowing that what is the percentage of loans in the corporate and the banking sector Overall, 70%. You have probably 70% of loans, which are corporate loans, When in developed Europe, it's the reverse.
In our balance sheet, it's more 60%, 65% in retail. So if I may say, there will be, in my view, a growing rebalancing. And that's where today looking at Our market share, just as one figure, does not make a lot of sense. Let me also say that we are selective on the COVID side for many reasons: Sanctions for certain counterparts, risky counterparts for others. So really, I think I cannot look at this Market share today and the projection exactly as I was looking at Bulgaria or Slovenia.
And of course, We will as we said, our commitment is based on the fact, yes, we will reach profitability in line with the cost of capital. And as we said, we are not yet there, but we are confident to go there. And next year will be a very from that perspective, very interesting year because we'll get the full benefit of Still a lot of restructuring, which are taking place. You will see that more in detail. If Ilya can elaborate on what is being done.
And of course, the benefit also of strong franchises to grow the MDI. Regarding minorities, let me say, Of course, there can always be opportunities. But on one hand, first, the focus on capital is also to meet the overall requirements of Basel IV, maintaining a dividend, etcetera. I think at this stage, and we I'm discussing a lot about capital and we might still discuss in the coming quarters. The priority is not necessary to do that.
But more fundamentally, more fundamentally, when we look at sometimes the way governments look at the banking sector, the ownership by foreigners, We tend to think that it's better to be able to say it's not the 100% ownership. There is effectively local shareholders which are benefiting. And again, same thing going forward, There may be there can be tension in certain countries. We know that in this world. And I think that it's a kind of protection to be able to say, Listen, it's not just foreign shareholders, dividends which go out.
It's also You have people here in this country which are benefiting. So strategically, I'm not sure that the 100% ownership makes that much sense from the perspective.
Maybe one last word on Russia. Conviction, maybe some passion in it, but conviction Being a frequent visitor of Russia over the past 10 years, actually it's amazing the progress we've made there in Russia. I mean, and there are some objective criteria to measure that. The fact that today, we are seen as Frequently, the most reliable bank in Russia. The fact that in terms of look and feel on the retail side, We are best in class on the Russian market.
The fact that now we are attracting talents and Natalia is 1. So we are attracting talents from Local and public banks, so this is very important. And then in terms of performance, yes, okay, 12% is we stick to our plans. We delivered our plan. It's not enough.
We're aware of that. Let me share with you one statistic. If you carve out bear in the Russian statistic, The profitability on the Russian market is currently at 10, okay? So just to see the kind of performance we are today delivering, But also we are committing to uplift that performance. Okay.
Maybe one direct question because now then we have to shift to workshops. Maybe Delphine?
Thank you. Delphine from JPMorgan. Just one last question for me. Just you've done a lot in terms of refocusing the international footprint. And clearly, profitability has improved quite a bit.
But When we look again at your operations, I mean, look, you still have quite a lot of a diversified Footprint, so just thinking a little bit of going forward, what else can be optimized again? I mean, in terms of Synergies, I mean, you obviously have very good a strong franchise with very good positioning. But in terms of synergies with the group, I mean, When we think about, I don't know whether it's consumer finance or insurance outside of France or Some areas of leasing. I mean, any other activities that you would say Could change in terms of the scope in all disposals in the next few years?
Thank you for the question. So a very short answer. I think we are done in terms of focusing on International Retail Banking. We are done. Then you are mentioning consumer finance, but let me stress one point.
Consumer finance business is the fastest growing one within Eurozone by far. And it is focused on car loans. And in the last vast consumer finance space It's the this is a risky business because we have the car, of course. So For me for us, there is no questions there. The insurance, our international operations is where we capture The fastest growth in Morocco, in Russia, in Romania, in Czech Republic.
So this is a strong level of developments, Progressive, but really meaningful in P and C.