Good morning to all of you. Thanks for participating to this conference call on our first quarter and first nine months results. As usual, I will just say a few words, then leave the floor to William, who will go through the figures more in detail. Of course, with our management team, we will then answer your questions. If I just go to the first slide, the key highlights. First of all, let me just say that overall, we have results exactly in line with our priorities and objectives. The first priority was obviously, and is, the capital. It was your concern beginning of this year. As you can see in this first quarter, as well as the previous quarters, very strong progress. Our CET1 ratio stands at 12.5%, up 45 basis points.
That includes the provisioning of the three-quarter of our cash dividend, EUR 2.2, so EUR 1.65 per share in cash is provisioned at the end of September. This level of capital reflects a series of action and disciplines. First, strong discipline in the risk-weighted asset consumption. The de-leveraging in CRD, which is actually completed nine months ahead of our initial timeframe. Effectively, we have met the EUR 8 billion risk-weighted asset target that we had for the capital market activities. We have also, and we will go through this more in detail with William, but effectively, we are getting the benefit of the securitization that we have put in place. William will explain more in detail. We also benefit from the closure of some of the disposals, which were announced around a little bit less than 10 basis points. This 12.5% is significantly above our MDA by 250 basis points.
Let me just highlight that all the other ratios, in particular leverage ratio, total capital, are up and strong, as well as, of course, the fact that we are one of the very few banks already compliant with MREL. Second, regarding the businesses. We are pursuing the adaptation of our businesses. We will go through that in detail. All retail activities and financial services are delivering very well and in line with our guidance. Regarding the GBIS, I would like to highlight that, again, the restructuring is being implemented smoothly, in line or even ahead of the timeframe. I'm very positive on the effects of this restructuring. We have a more focused business model.
At this stage, of course, we are losing the revenues of the activities which we have decided to close. We do not have yet the benefit of the savings which have been decided, but that we have effectively in practice secured. Things are going in the right direction. During, you will see that the financing activities, the structured finance, and the cash management activities are going very well. The third element is that, of course, beyond, we are also benefiting from a solid risk profile. The cost of risk is stable at 26 basis points, 24 basis points for the first nine months, well into our guidance. The strong balance sheet is also reflected by the level of NPL, which is going down. Let me just highlight that we have completed the funding program for this year.
If I just turn to the second slide, which is around climate action. I think this is something very important for banks in Europe. Let's face it is in Europe that this issue is more sensitive, more important, more than in the U.S. or even Asia. In Europe, it's very important, and I think it's an opportunity of business beyond fundamental responsibility issue. I'm proud that we have been ranked number one bank in the world by RobecoSAM regarding our environment strategy, and beyond, if I look at all the ESG criteria, very well in the top 10, top decile among European banks, number six in Europe. This is an important element. It is big amount of money that we commit, in particular to the climate transition, and energy transition with EUR 100 billion between 2016 and 2020.
We are ahead of this objective. We have recently renewed a new objective for 2019 and 2023 of EUR 120 billion, which is a mix of balance sheet financing and bonds. We are, I think, pioneer. It's part of the DNA of this company to innovate. Let me just highlight that we were the only bank to structure the sustainable development goal swap. It's a cross-currency swap which was attached, if I may say, linked to the bond issue made by NL, the EUR 1.5 billion SDG bond issue very recently. Again, it's part of the innovation process. Let me just highlight also that my equity research will, from 1 of January 2020, systematically include a significant element of ESG in the assessment of the companies. I will turn the floor to William to enter more in detail in our different activity.
Good morning, everyone. Thank you for joining this call. Let me start with a snapshot in the group performance. This quarter, as Frederic highlighted, the group underlying net income stands at EUR 855 million. The nine months underlying net income stands at EUR 3.2 billion, that translates into a Q3 return on tangible equity of 6.1%. Over the nine months, the return tangible equity is at 8.1%. This is consistent with stable business revenues.
If you would adjust, and we will come back on that, to the impact of runoff activities, as well as de-leveraging in CIB, and looking at the numbers at constant foreign exchange and perimeter, business revenues are down 0.5% only in Q3 relative to the same period of last year, and are flat over nine months, with costs are going down on an underlying basis, both Q3 versus Q3, nine months versus nine months, they are both at around -1.3%. Looking at the key division that composes the company, it is fair to say that out of five key divisions we look at, four of them are already on target with the stated return or results that we've guided you through for 2020 and 2019 for the corporate center.
French retail shows a very solid profitability at 12% in Q3, 11.7% for the nine months of 2019, which is to be compared with our guidance by 2020 of 11.5%-12.5% return. This is on the back of stable revenues, plus 0.2% in Q3, -0.3% over the nine months. This is very consistent with what we've guided in terms of revenues for the year, i.e., 0.2%, -1%. Costs are up year-on-year 1.3% in Q3, 0.2% for the first nine months. Again, very consistent and below what we have given as a guidance for the year. International Retail and Insurance and Financial Services all together have a return on normative equity of 18.2%, which is above the 17%-18% commitment we have by 2020.
More in details, as we recommend, International Retail Banking has a satisfactory profitability of 16.4%, both on Q3 and on the nine months, combined with respectively roughly 5% growth at constant change in perimeter, and 7% growth on the nine months basis. This is also consistent with positive jaws. Insurance and financial services Return on Normative Equity stands at 20.9%, both in Q3 and for the nine months, again, combined with a 3% growth for the first nine months of the year, again, adjusted across the scope and perimeter. Global Banking and Investor Solutions, we obviously have a different story. We're not at target in terms of our RONE. Our RONE stands at 7.7 for the first nine months of the year, 5.1 in Q3.
As already said by Frederic, we are in the midst of a restructuring with some impact on the revenue stemming from the restructuring we put in place and not all the impact on the cost. If you would adjust for this restructuring, revenues will be down only 3% roughly in Q3, 2% over the past nine months, and cost will still be down 4.2% versus the same period of last year.
Corporate center is in line with guidance in terms of negative contribution to cost operating income. This is EUR -66 for the quarter, EUR -141 for the first nine months. We have incurred a loss according to IFRS 5 linked to the closings of some disposals for EUR 13 million. Going more in details for the core tier one, although you have already been told the main elements, core tier one stands at 12.5% at the end of Q3 2019.
As said by Frederic, please note that we have adjusted our provision for dividend this quarter based on the full year cash dividend of 2.2 shares. It means three quarter of it being EUR 1.65 per share. This means basically, given the catch-up we did on the provisioning of the dividends for Q1 and Q2, that you would find in this ratio that on the same methodology as the previous quarters, the quarter one is still at 12.6. We are managing this capital buildup based on four key levers. Number one, organic capital. We continue to produce organic capital this quarter. If you would adjust for the catchup effect that I just mentioned, that is equivalent to 10 basis points, you would easily find what is the organic capital generation for the quarter.
Number two, deleveraging in CIB activities is well on track, actually better than what we had committed ourselves to for 2019. Remember, we had said approximately EUR 10 billion in total, of which EUR 8 billion in market activities. We already managed to do the EUR 10 billion, respectively, more than EUR 8 billion in the market activities and more than EUR 2 billion in the other activities, with EUR 3 billion particular additional deleveraging in global markets RWA. Third, securitization, which partly reflects some of the EUR 2 billion additional I mentioned.
We've completed three large synthetic securitization this quarter. I leave it for the questions should you have any of them. Some of this transaction has been completed with some interesting innovative features, including with regard to ESG commitment we have, with four in last closing on three disposals, Serbia, Moldova, and Montenegro translate into 10 basis points this quarter.
The other ratios, as Frederic said, are up and strong. Tier 1 ratio stands at 15.2%, up roughly 50 basis points, more precisely 46. Total capital ratio stands at 18.5%. TLAC is already fully, is up and totally fully in general, relative to regulatory expectations, MREL is compliant, I would like to stress another increase of the leverage ratio this quarter by 20 basis points. Liquidity ratios are strong. The liquidity buffer increases again this quarter and stands at EUR 193 billion. If you look, which is on the next page, to the perspectives through 2020, you'll find that there are evidences that we can be confident we should be fulfilling our target, which is 200 basis points above MDA at any point in time under Basel III or Basel IV. 2020 will be obviously under Basel III, which is translated into the 12% target we have set.
As you can see, first organic capital, we already managed to create 28 basis points organic capital post dividends at 2020. As I said, we ship 56% of the 260 basis points target and 112% of the yearly target of 35 basis points organic capital creation. Reduction of RWA related to global markets I've already mentioned, totally done. That's why you have the box colored in pink for total fulfillment. We had said, you may remember, that we committed ourselves to execute 75% of it in 2019. We have executed 100% in nine months. Other RWA reductions, if you wish, you would find three securitization I alluded to, for the equivalent of 15 basis points on top of other responsible measures we had already benefited from in Q1 and Q2. We had said 10-20 basis points, we've done 17.
One can say we are above the middle of the range as far as dispos were concerned. We are very well on track. Remember, this is only nine months for a plan that should span over two years. Three, we should still expect a negative impact in the quarters to come. Nothing to change on our side with regards to the overall number. The next page reflects where we stand in terms of commercial cost of risk. As you can see, the nine months commercial cost of risk, expressed in terms of basis points, is 24 basis points, which is to be compared with our guidance of the cost of risk to be between 25 and 30 basis points by the end of the year. We feel quite confident again that we will be within the guidance.
The non-performing loan ratio decreases relative to the same period of last year by a healthy 40 basis points, and that is consistent with the still relatively well in comparison to many peers. Coverage ratio, coverage rate of 55%. The next page I won't comment in detail, just to make sure that when you look at your numbers, and as Frederic mentioned, there are some elements to remember that create some perturbation in the quarter for the comparison. Last year, we have incurred a capital gain of EUR 271 million related to our shares in Europaea. That is about EUR 200 million net income, i.e., post-tax, which is to be considered as a base effect for 2018, both in Q3 and for the nine months. This year, we have the IFRS impact. This is down in the P&L just before the net income.
I would like also to be more precise on the impact on the GBIS. We consider we have, in Q3, a EUR 95 million negative impact stemming from the restructuring of our activities, i.e., the execution of the planned runoff and deleveraging for Q3 and for the first nine months, this number is EUR 151 million. That reconciles with what I've said before, if you want to recalculate the revenues and net income perspective for businesses. Looking at the various pillars, starting with French Retail Banking, and as usual, on the franchises.
I'd like to stress mainly two points. First, we continue to win clients in our core franchises. You can see, whether this is companies, wealthy and mass affluent clients, which are target clients for our traditional network, they are both up again, and we have another record month of acquisition of clients by Boursorama, with 126,000 clients joining Boursorama.
Boursorama is already, again, above its target of 2 million clients by the end of 2019, which had been reached already a few weeks ago. Société Générale was also voted for the seventh time in a row, best bank customer service in France. Second element, volumes are up. That obviously explains some of the performance, especially on the net interest margin year-on-year. Medium-term corporate loans has been dynamic, with outstanding up 7% this quarter. Individual clients' loan outstanding are up 5% year-on-year, despite strong selectivity again, especially on the mortgage loans. We allocate 90% of those mortgages to what we qualify as our target/premium clients. Life insurance is up. Life insurance outstanding stand at EUR 95 billion, and net inflows are up 9%. P&C premium are up again this quarter. Private banking net inflows are up EUR 1.1 billion.
That is consistent with a good execution of digitization of the network, as well as the execution of 72% of branch closures relative to the 2020 targets. I leave it to you to ask questions, if you want to have more details in that respect. In a nutshell, when you look at the results, which are the next page, French Retail Banking posts, again, a very good profitability at 12%, and very much in line with the target of 11.5%-12.5%, which we have set. Net income is at EUR 311 million. Adjusted for Pennant impact, the revenues are globally stable on the back of Net Interest Income increasing by 2.9% relative to the same period of last year, and this is +0.4% for the first nine months. Fees are decreasing by 2.3% for the first nine months and roughly 4% in Q3.
We stated for Yellow Jacket measures, set trade perimeter impact. You may remember we had sold that subsidiary last year, also the fact that we account for the acquisition cost of clients in Boursorama as fees. Fees are only down -1.5% versus Q3 2018, roughly stable at -0.2% for the first nine months of the year. Costs are increasing 1.3% respectively at 0.2%, I've already mentioned. Cost of risk is down. Let me mention that you'll find a capital gain on the sale of real estate property we have. This is part of the rollout of our real estate program, of course, which is consistent with the transformation plan. We plan to continue to optimize our physical footprint during the next quarters, we should continue to get from this positive impact on our results going forward.
Turning to International Retail, this is a picture that is very similar and positive, similar to what we have shown in the previous quarters. It shows strength in volume production. You can see loan outstanding and deposit outstanding growing across all regions, including sometimes double-digit in certain jurisdiction, Eastern Europe, Russia, Africa, which we continue to have some good momentum in certain areas in the conditions. All in all, you can see revenues are up across the International Bank in aggregate by about 4%-5%, Q3 relative to Q3, and by about 7% over the first nine months, obviously at constant scope and foreign exchange, with Return on Normative Equity stands at the high 16.4%. You will find more detail on the page. Turning to insurance and financial services. This is again, a story of Commercial France.
You can see life insurance outstanding up 5%, Protection Card up 9%, ALD Fleet plus 7%, SG equipment finance, loan, and lease outstanding up 4%. The revenues are up at constant scope and change by 3% for these businesses altogether over the first nine months, and the normative equity rises further relative to the same point last year, stands now at 20.9%. Let me highlight, as ALD released their results today, those results were very positive. Net income is up 7%, as you can see, the market reaction for those who also follow the share of ALD is very positive. We're very pleased with that equity vehicle. Altogether, International Retail Banking and Financial Services results, which you can find on the page next, are up.
IBFS delivered significant contribution to the group net income, again, at EUR 1.5 million roughly for the first nine months of 2019, which is up 1.7% year-to- date at constant scope and foreign exchange. Return on normative equity is 18.2%, again, to be compared with the objective to be between 17% and 18% by 2020. We are ahead. Overall revenues are up, both Q3 and nine months. We are positive too. It is important to know when you look at the nine months perspective, to remember that we had incurred a restructuring provision in Q2 for the headquarters of International Retail. In fact, the operating expenses are only up 4.5%, adjusted for perimeter and change effect.
As far as IBFS is concerned, and let me remind you of the fact that on the 20th of November, we will held together with Frederic, Philippe, and the whole crew of those businesses, deep dive in London. Turning now to GBIS activities. What we would like to do is start first with what we are trying to implement and what makes us confident that on that division, again, we will be able to converge with the stated guidance in terms of return. We are in the midst of a fundamental restructuring work. Number one, as you can see, we have managed to decrease very significantly the capital allocated to the division.
Over the past nine months, we have been able to decrease the RWA allocated to Global Banking and Investor Solutions by EUR 20 billion or 14%, which is consistent and actually even better to what we had indicated to you, and certainly in advance to the plan in terms of execution. That obviously has some impact, especially on business revenues, but impact which I would like to highlight are very consistent with our own expectations with regards to revenue loss. Remember, Cedric de Band had mentioned to you, particularly a potential EUR 300 million revenue loss for the full year in market activities, and we are very much in this ballpark. So again, as I mentioned, in Q3 2019, you have roughly an impact of EUR 95 million stemming from runoff and deleveraging, as well as the Belgium disposal.
If you would adjust the number for this EUR 95 million, revenue would be down only 3.2% year-on-year. For the nine months, the same number is EUR 151 million, so revenues would be only down 2% and very much again, in line with what we had expected. Costs are done very much in accordance with our guidance, despite the fact, as Frederic mentioned, that we don't have the full effect of our cost reduction program. Costs are down 4.1% this quarter. To comment on the little boxes you have here, you can see a reduction of cost, about EUR 100 million, of which EUR 70 million is due to the program, and EUR 30 million is normal cost reduction that we do beyond the program.
EMC integration cost represents EUR 30 million for this quarter, so that it should help you to run these numbers accordingly. If you go to the next page, which is the effective results, having made some comments on what explains some of the performance. Starting with financing and advisory, I would like to stress that for this core franchise, we continue to see strength. We look at it more on the nine months basis. Now, remember, this is not a business that you look at on quarterly basis. We continue to see revenues up 5% for the first nine months of the year. They are down, adjusted for the restructuring, 2% in Q3. Remember that we had also a base effect in 2018 linked to a strong number of big deals we had done, especially in the TMT space in Q3 2018.
When you look at it more fundamentally, in Q3, structured finance, very core franchise, revenues are up 6%, including the impact of deliverables. When you look at transaction banking, revenues are up 10%. Obviously, we have some more negative impact, stemming from delivering I've already mentioned, and also more discipline in corporate lending, but that is not necessarily the most profitable part of the business. Turning to global markets, revenues are down 9% in this quarter. When you adjust for the business closures, especially the CTI closure, revenues are only down 4%. If you look more in detail, you can see that FIC is up only 1%, but adjusting for what I've just mentioned in terms of business closures, FIC is up 15%, which is much more consistent with the market. As well in equities, revenues are down 20%.
Remember, we are more geared towards the structured products, and obviously, in equities, cash products were benefited more in Q3 than structured products. The number we'd like to look at, again, taking some perspective, the number over the first nine months of 2019, equities revenues were down 9%, which is slightly better, we think, than the pool and the market. In a nutshell, the numbers, as I said, Return on Normative Equity for the first nine months is 7.7%. Underlying Normative Equity for Q3 is 5.1%. This is obviously not consistent with the target that we have set for 2020. Again, very consistent with the impact of the adjustment we are making. I won't make more comments on the revenues. I've already mentioned that. Operating expenses are down, as I said, 4.2% in Q3, and actually 4.7% control scope and foreign exchange. Corporate and down.
I said this is one of the divisions which, in a sense, is also consistent with the guidance. You can see that for the first nine months, gross operating income is EUR 141 million, which is to be compared with the guidance of about minus EUR 500 for a full year. We have here the losses from other assets, which are already mentioned, stemming from our disposals. I turn the microphone back to Frederic for the conclusion.
Thank you very much, William. Let me just conclude, first of all, by really saying the full management team is absolutely focused on delivery. Number one priority is capital, and I think we are providing with this first quarter a convincing answer. Second, on the businesses regarding retail and financial services, let me highlight the good and resilient performance of the French Retail, which is probably the most profitable French retail business compared to our peers, and the focus is on profitability. I think we have definitely an edge with all our International Retail activities and financial services because they are fundamentally in a different environment in terms of rate or immune from the low rate environment. This is our growth driver, and of course, as William reminded you, we are going on the 24 of November to enter more into the detail.
Regarding the GBIS, I think there's really very good progress on the restructuring of this business. You should look at 2019 as the transition year. We will have in 2020 the full benefit of all the efforts this year. I'm very confident in the management team to effectively take advantage of this refocusing. As you can see, yes, the environment remains challenging. We all know that European banks face a series of challenges, regulatory, interest rate, et cetera. I think really we are moving on the right track, on the right direction. Really the determination is there to deliver. That's what I wanted to say. Now we are open to your questions. Let me just remind you the good rule, which is two questions per head. The floor is yours.
Thank you. Ladies and gentlemen, if you wish to ask a question, please press star one on your telephone keypad. The first question comes from the line of Stefan Michael Stalmann. Please ask your question.
Good morning, gentlemen. Thanks for taking my questions. The first one with regards to the French mortgage market, please. It seems as if prudential regulators are taking an increased interest in the market and there's a consultation going on. Could you maybe outline what your recommendation would be and what the banks should do to address this market and the prudential concerns? Maybe also comment on what you think the prudential authorities will do to address their concerns. Second, regarding your numbers and your results, I noticed that if I look at the GBIS credit risk-weighted assets, they are down about 17% year-over-year. I guess if I back out the securitizations this quarter, it would be about minus 12% year-over-year. Your gross loan book is flat. Could you add a little bit of color on where this disconnect is coming from?
Are there mixed effects? Are there additional risk transfer mechanisms to keep in mind? That would be very helpful. Thank you very much.
Yes, Stefan, good morning. I will give the floor to Philippe Heim to comment in detail on the mortgage market as we see it, and regarding your question on GBIS to Cedric Cavane. Philippe, what can we say on the potential evolution on the mortgage?
Yes, as you say, there is a work in progress, discussion with the regulators on that. We are supposed to provide efforts within the coming days. What I can tell you is that, yes, the mortgage market remains dynamic. We do consider that it's still very sound, especially for SG. We have maintained a selective origination policy. I can share with you that 90% of our production, it's with our prime clients. I also can share with you that, yes, the duration of the mortgages has increased, but it's still quite reasonable. Maybe an additional comment regarding renegotiation or anticipated prepayments. Anticipated prepayments will remain stable, basically at 6.7%. Regarding renegotiation, they are still very low. At this stage for us it's 4.8%. I remind you that in 2017, we went up to 20%.
In a nutshell, a strong market, which is of course very important for clients, stricter origination policy on our side, and we are making sure that outside this high business, these products is profitable for us.
If I may add, Stefan, from my perspective, the kind of initiative of the authorities go in the right direction. What I mean by this, some players probably play the card of volume to limit the erosion of interest margin, but if we see more discipline in terms of pricing, that will be good. Stefan, the GBIS question of Stefan.
Yeah, the question, Stefan, is regarding the credit risk-weighted asset evolution. Managing our risk-weighted assets by using all the tools that we can have in our hands. Amongst the tools you have synthetic securitization, you have insurance risk transfer, or you have credit risk transfers through CDS. All those three lines that are not impacting the balance sheet, they are just impacting the risk transfer. The main explanation of the gap we saw between the outstanding and the risk-weighted asset evolution is due to this type of tools we are using to reduce our capital needs.
Thank you.
Okay, thank you very much.
Next question.
Thank you. The next question comes from the line of Matt Clark from Mediobanca. Please ask your question.
Hi, everybody. Two questions. Firstly, on the EMC contribution, you gave us the EUR 30 million of restructuring cost this quarter. Could you also give us the revenue contribution and the total costs that EMC contributed this quarter? Secondly, on liquidity, your liquidity buffers have gone up again this quarter and are up year-to-date, and your LCR looks pretty high still. I'm just wondering, why do you feel you need to keep adding to liquidity buffers, and why is this the right level of LCR to be running at? Because it looks higher than some of your peers. Thank you.
Matthew, good morning. I would turn the floor to Jean-François Grégoire, Head of Global Capital Markets, to answer your first question on EMC contribution.
Thanks. Good morning. On EMC for the quarter, we have cost of EUR 28 million, and that's nine months of EUR 57 million. Actually, in the EMC acquisition, there are really two different, for market activities, I mean, two different type of portfolios. The first one are the structured products that we just currently integrated. The second one are the one, the digital product, the one business, DTX, that we will integrate in mid-February next year. It happens that from the start, we knew that the first portfolio, structured product, is not representing a lot of value for us, because we already had a significant book, and we want to be present in the growth of this book for risk reason. That is to say that the revenues linked to the integration of this book this year are minimal, and this is what's expected.
This is not what we are chasing. The most part will be February next year with this one business in Germany, where we expect some nice revenues.
Okay.
Just to follow up on the cost, that EUR 28 million, presumably that is underlying cost, and the restructuring is on top of that. Is that the right way to think about this?
In our accounting, it is not labeled as a restructuring charge. It is in the underlying. That's why I mentioned it clearly, so that you can adjust on yourself, but it is in the underlying number.
I would say some of it is probably some integration costs, which will then disappear.
Nine of them.
The migration, if I may say.
Yeah. Nine of them are integration.
Something like 10 of them are one-off.
Okay. Thank you.
Okay. I will turn to William on liquidity.
Thank you. That gives me the opportunity to stress the fact that we feel pretty good about the fact that we should have a strong balance sheet. As you can see, generally speaking, in the industry, there is also a structural element to be considered in the increase of capital buffers and LCR, because LCR is a short-term indicator. With most of the indicators we follow and we target are on a longer maturity. NSFR is one. All the liquidity and the stress metrics that we follow and speak to have a six-month horizon, at least. All that combined is an element of explanation to the LCR being where it is. On top of it, you may have seen that we have, as Frederic highlighted, we have completed our funding program ahead of schedule, and that also explain and continue to collect quite strongly deposits.
That's also part of the explanation.
Okay. Thank you.
Next question.
The next question comes on the line of Azzurra Guelfi from Citigroup. Please ask your question.
Hi. Good morning. Two questions. One on capital and one on revenue for next year. Capital, you're clearly done very well and now you're at 12.5. The question is on TRIM. Is the guided impact of regulation between 30- 50 basis points coming all in four quarters? Can we assume that? The second one is on revenue, I kind of cheekily split it in two. One on the retail and the CIB. Retail revenue, especially on the NII, your margins are better and more resilient than peers. Can you give us some indication on the main reason behind it and the outlook for next year? Volume seems to be pretty similar to the main peer.
In the CIB, am I understanding well that next year you will have more or less EUR 100 million additional decrease from the restructuring plan compared to where you finished 2019? Thank you.
Azzurra, I will leave Sylvain commenting on your GBIS. Philippe and Rik on the perspective of the net interest margin for next year. Let me just highlight that I'm absolutely convinced that in this market, we are more disciplined in terms of credit origination and pricing than our peers. Philippe will explain further. Regarding the TRIM, I will turn to Johnny. We'll again, explain yes, the boat should come, but again, there is uncertainty. Let's face it does not depend on us and it depends on the supervisors. Johnny perhaps, can you elaborate on this?
Yeah. Good morning. As Frederic just said, we don't control the timing. What we have already explained is that we had most of the decisions related to high default portfolios, meaning retail and mortgages, which was not material. We had a few twin reviews on the low default portfolios, meaning large corporate markets, et cetera, and we are still expecting the decisions. The missions on these portfolios have ended. We keep our estimate that the range of overall is 30-50 basis points, and we expect the bulk of it in Q4, maybe some would slip in next year. That's our best estimate now.
If I may, to a certain extent, you should be relatively indifferent on the timing. What is clear is that we have the perfect absorb, and I think you have the roadmap towards end of 2020, which is pretty detailed. Philippe
Can you remind us to the guidance for next year?
Yeah. First, regarding the evolution of the net interest income, I should remind you that this increase this year comes after a significant decline last year. That's true that we work very hard to stabilize our revenues, as promised. What we have done, as mentioned by Frederic and William, is a strict credit origination. We always speak a lot about mortgages, but I would like to also insist on the very good performance on consumer loans and even more important on corporate loans. I have to remind you that 50% of our NII is coming from corporate and professionals. That's very important to us.
We also work quite hard, we continue to do that on the repricing of the term deposits, on making sure that we have the right mix between the deposits, making sure that we have the right allocation, both for the clients and for the bank. This is all these kind of things that we have done and that we continue to do, to improve, to maintain the net interest income. Regarding the guidance on the revenues, what we have said is that for this year we'll be in the range of 0%, - 1%, basically in the same trend for next year.
Thank you. Serge, can you answer as well as Frederic, please?
Yes. As you saw, this third quarter is the first quarter where we had the full impact in term of NPI laws after the decision taken regarding the secure principle and take-up trading. It's fair to say that we will have the full EUR 1 million impact on the NII this year. You're right. Next year you will have less than EUR 1 million, I would say, in term of negative impact because the first quarter will have the full impact at the third quarter also. Having said that, we have also growing activities. You will not see that in the NII, of course, because all the rest is growing. You will have, as mentioned by Jean-François, the EMC impact on the listed products, which give us additional revenue in the next year.
Our growing franchise like asset finance or growing public banking and all the other business as well. You're right to say that the full impact is not visible this year.
Thank you.
Thank you.
Next question.
The next question comes from the line of Jon Peace from Credit Suisse. Please ask your question.
Thank you. Two questions, please. Number one on the corporate center, you continue to exceed your guidance. I just wondered if there's any update on that for the full year and maybe also into next year, and the reason for the beat to the guidance. The second question is just on Basel IV. Do you have any update, please, on your expectations around timing? Also, you gave us a number once before, how has that number evolved? Thank you.
Hello. I will turn the floor just to William on the corporate center. On the corporate center, you're right to point out that you're obviously much below in nine months relative to the guidance we had set forth. I'd like to say that we don't like to change guidance in the course of the year because we are beating the guidance. It's fair to say that the five year is probably on the conservative side.
Yeah. Probably. William, on Basel IV.
We have a great update. Let me just remind you, our impact just in the second quarter on Basel IV. Nothing to change.
There's nothing new in the debate that makes us to change the perspective nor in the composition of the business model. As you remember, it's about 110 basis points in 2020, which probably is the conservative assumption as well, given the pace at which the discussions would evolve. We've also given some indication that the output floor will not die before 2027. It will be a smaller part than for many people who have good numbers. We still expect the FRTB somewhat, if that happens, between 2023 and 2024. All that I can say is that there's no reason for us to change the way we steer the capital. We feel confident that with the level that we should reach by the end of 2020, combined with the organic capital generation I mentioned earlier, we should be in a position to absorb that level. Thank you.
Next question.
Thank you. The next question comes from the line of Lorraine Quoirez from UBS. Please ask your question.
Hi. Hello. Just a few questions for me on French Retail. The first one will be: how long, in your view, will it take before the deposit margin stops being under pressure? How many years? My second question will be on the guidance for next year. What is the assumption that you made for fee growth, with guiding for revenue flat to minus 1%? Thank you.
Lorraine, hi. We do not give this level of detail. I think we are already the first to give a guidance for the revenues for 2020. We will give you maybe more, but later, and certainly not now. You have again a clear, good visibility for the revenues for 2020 overall. On your second question on the erosion of the deposit margin, I'm not sure that we are also thinking we can give so much ahead. Philippe?
No, it will remain under pressure. What we are doing, as I said, it's making sure that we have the right allocation, both for the clients and for the banks, of the savings. Between, of course, accounts, savings in the balance sheet, long-term deposit, of course, life insurance, financial products. I think that's the key topic for us, for all the banks in the coming months, in the coming years, just making sure that we are proactive and we adjust to this new equation.
Thank you. Next question.
Thank you. The next question comes from the line of Tarik El Mejjad from Bank of America. Please ask your question.
Hi. Good morning. I have only one question, actually. You saw, I think, the headlines this morning about the German finance minister, who finally opened up for an EDIS, and put things in motion for banking union, and the French finance minister as well said, apparently, it will be in the third Eurogroup meeting, will be discussed, the banking union. Can you probably comment on how you think things will evolve from here? Obviously, there's conditions, apparently, about sovereign risk weight and about NPLs and so on. Do you see, really, potentially banking union being implemented or put in place quite rapidly? For you, specifically at Soc Gen, how would that benefit you in terms of better balance sheet optimization and potentially ambition to do cross-border M&A? Thank you.
Tarik, good morning. First, let me say it's very good news, and I would highlight, because to see a German finance minister taking care of this topic confirms the view, at least, that I have and that the French government have, that it should be part of one of the top priorities of the agenda of the new commission. Completing a more efficient, more robust overall financial sector with the banking union and the capital markets, which are two elements of the same play. It's very good. Second, beyond completing the banking union, I think it probably reflects also the growing awareness that our public authorities need to pay attention to, of course, creating a better environment for banks. I'm not surprised. I think I had the opportunity to mention that already.
I had the feeling that there was more attention by the German government in the last few months, and to a certain extent, it is a confirmation. More practically speaking, as you said yourself, it is probably more a kind of roadmap which is being proposed with some complex topics. The one you mentioned in particular is the issue of sovereign debt. We know that the sovereign debt issue is a preliminary condition, probably, for the German government to move forward on EDIS. Knowing that the structure which is proposed is very similar to the one we had in mind, actually. A three-tier level and not creating a single fund, but having a kind of reinsurance system. If there's a capacity to move forward, I think it's probably around this kind of option on the EDIS.
Again, there's a need to think, to find a solution on the sovereign debt, and it might take some time. Again, what I find very positive is that it confirms that there will be further discussions. From that perspective, 2020 is probably the crucial year. Not to deal with everything, but at least to have clear roadmaps, and for us to highlight what is at stake beyond EDIS, because EDIS is important, but there are other elements, to have a more consistent and more strategic approach of the financial sector in Europe. This is a positive move, even if, of course, the devil is in the detail, and it might take some time on certain topics. In terms of impact for us, I don't think there's an immediate short-term benefit.
Again, we'll have to wait for 2020, but it means also Basel IV implementation might be something that governments will look at closely, and the European Commission. 2020 should still be, in my view, a year of confirmation of the regulatory framework. Then, global banks and ourselves will see probably more towards 2021, whether or not there are new opportunities. I don't think it's premature, and for us, it's great to have, anyway, a year to further complete our roadmap, our business model adaptation. We'll see what it means. At least, I think it goes in the right direction.
Very clear. Thank you. Thanks for the comments.
Thank you, Tarik. Next question.
Thank you. The next question comes from the line of Jean-François Neuez from Goldman Sachs. Please ask your question.
Hi. Good morning. Thanks for the call. The question that I have remaining is that, in the month, I think towards the end of December or beginning of September, there were a few press articles which were mentioning the potential for Soc Gen to remedy what has been essentially impact from deleveraging, which were expected also by additional cost cuts, in particular in the central functions, which were amounting, at least according to the press, to a significant amount. In view of the deleveraging revenues which have been lost, and the ROE where the bank is today, I guess this seems to many market participants as the main avenue to regain capital generation potential above what is currently the case.
I just wanted to understand whether there was anything to it, and what is your key lever from here to get the ROE, the ROTE, back at or close to cost of capital.
Hello, Jean-François. Good afternoon. Let me just first of all highlight that on GBIS, as we've said, the EUR 500 million savings fundamentally are mostly there. In the restructuring, people have raised their hands. We know who is going to leave or might have left end of September, or is going to leave in fourth quarter, but we have already the costs. First, a very important lever there. Beyond, let me just say, we are of course, going to carry on focusing on costs. You have my own dedication and commitment on this, so it's not the end of the story.
My second question would be, have you got an absolute cost number you are ready to share, or cost cap which you would be ready to share with us for next year?
No, not yet.
Not yet, okay.
Not yet. Don't forget, we have a EUR 1.6 billion of savings that we are implementing in a very disciplined way, including EUR 500 on GBIS. This is currently the target, as I've said, the story will not stop end of 2020.
We can't be more precise than what we've been. We've already committed to an absolute cost base for GBIS decreasing to EUR 6.8 billion. This is consistent with the EUR 500 million net cost reduction that Frederic reiterated, of which we give you today the portion that has been already executed, that is the 70/ 100 I mentioned in Q3. Basically, I think we have normally most of the numbers. We also gave you some clarification with regard to impact on deleveraging, as well as stressing the fact that there's no deviation to what we had anticipated for full year effect. Hopefully that would clarify on your modeling.
Next question.
Thank you very much.
You're welcome. Next question.
The next question comes from the line of Amit Goel from Barclays. Please ask your question.
Hi, good morning. Just two questions for you. Firstly, have you made any changes recently to the allocation of swaps in your deposit reinvestment? For example, in terms of duration. I recall in the past you'd said you had EUR 30 billion of deposits or so being invested short-term, out of the total EUR 200 billion. For new deposits, as you update your macro hedging, what stops you from simply not entering into new unprofitable swaps? Would there be regulatory considerations, i.e., the regulator would think you had more interest rate risk and that would play into your SREP? The second question, just on asset quality, can you update us on your thoughts there? NPLs continue to come down slightly, but like everyone else, cost of risk is ticking up due to an absence of write-backs and a few files in CIB.
I guess you're still comfortable with the group level target of 35, 40 basis points next year for cost of risk. In particular, if you have any thoughts on the consumer credit in Africa cost of risk, that would be interesting in International Retail. Thank you.
Okay, on your first question, let me say we pursue a permanent policy in terms of NII. There was no recent change and nothing more to comment. Perhaps, Jodie, what can you say on the cost of risk? I don't know why consumer credit in Africa, to be frank, it's relatively limited. I don't think there's anything on that specific topic, but more globally, Jodie.
Yes. Globally, cost of risk remains low. 26 basis points for the quarter, 24 for nine months. Well within our guidance for this year, 25-30 basis points. Very strong risk profile across the board. We have indeed guided to progressive normalization of cost of risk for 2020. Taking into account also the fact that we have benefited the last quarters from write-backs of provisions, in particular in International Retail Banking in Europe. This leads us to think that we are going to see this progressive normalization. The guidance, 35-40 basis points for next year, still remains our guidance. Again, solid risk profile. We continue to see the reduction of NPLs, both through improvement of portfolio, but also active management of NPLs and sales. We will continue to see this trend.
Perhaps a word from Philippe on consumer credit beyond Africa.
Just to mention that the cost of risk, as we see today on the asset side, is pretty low. The kind of consumer finance we have, to be understood, is we are talking of consumer finance mainly in West and Central, mainly in car loan. This is the type of consumer finance, which is, let's say, very secure by nature. We have an on-site bank, we have a partnership with Otto Insurance. That's because the risk is very limited.
Got it. Sorry, just a quick follow-up. Just on the first question, I understand that nothing's changed for your existing hedging, but just to understand, for new deposits, if you did want to change your hedging policy, is there something that stops you from a regulatory perspective from?
No
doing that?
No, there's nothing of that. We have not to change for regulatory purposes, our ALM, and it's more based on an economic approach of models, which are very traditional, if I may say. There was nothing about regulatory changes.
Okay. Thanks a lot.
Next questions.
Thank you. The next question comes from the line of Anke Reingen from RBC Capital Markets. Please ask your question.
Yeah, thank you very much. I just wanted to ask about the costs in French Retail Banking and your guidance of the cost increase of 1%- 2% this year. Would you characterize that as a conservative guidance given the trends in the first nine months, or would you consider, or should we basically keep the old guidance? I'm not quite sure if I understood your comments correctly. You were saying there's positive developments and the guidance is obviously 2020 decline. Would that be beyond the investments of 2019 dropping out as you take more actions on costs and in your network? Thank you very much.
Anke, on the cost of retail, first of all, we stick to the guidance. Let me just remind you that we have said, in the previous conference, that it might include a limited restructuring provision, given what we've just announced two weeks ago. 1%- 2% is the good guidance given that perspective. For next year, we don't enter into, again, more detail than saying a decline of cost. Same thing, we are the, I think, only bank in France which is giving this kind of guidance. We will update you into cost, but the idea is to say, yes, we have spent quite a lot in the restructuring. This restructuring will be pursued. At some point, we are able then to get the benefit of all the investment, that's why we say a decline of the cost next year.
We can't give you more detail than this.
Okay. Thank you. Just to ask, you said a few times now, you can't update us now. With full year results, should we expect an update of your ROTE 2020 target? Thank you.
Well, yeah. As usual, the end of the year is a way to look at the year and, of course, give you information on the running year, if I may say, 2020. Again, you have guidances, which are pretty precise already on the French Retail GPAS, as we've said during the call.
Okay. Thank you.
Next one.
Thank you. The next question.
You are welcome. Yep.
from Kiri Vijayarajah from HSBC. Please ask your question.
Yes. Hi there, guys. A couple of questions from my side. Firstly, on capital in slide nine, and specifically your securitization risk transfer bucket, where you've only earmarked another three bits to do. I compare that to one of your peers that view securitization more as a kind of ongoing tool for RWA optimization. Really just curious your thought process there, why you think you can't do more. Specifically, are there any kind of regulatory constraints from being maybe too aggressive with things like synthetic securitizations coming from the regulator? Secondly, just follow up on the Commerzbank EMC business. Thanks for the cost numbers you gave us. Earlier, I think you gave us a GOI target of EUR 150 million per annum from the EMC business.
Just wondering, is that still valid, or given the market environment, that feels a little bit of a challenge for that business now. Thank you.
Okay, Kiri. I will turn to William for your first question, and then to Sylvain for the question on EMC. William, on the securitization techniques.
First of all, thanks for the question, because that gives me an opportunity to state that most of it effectively, you could add to the organic capital generation. That is an important factor. It is true that most of our peers report the benefit from this type of securitization into the organic capital generation, as it is very much a way to work on your own balance sheet and RWA. The reason why we decided to put it here is because you may remember in SHD, we had said we want to implement a de-leveraging of about EUR 10 billion, equivalent to about EUR 10 billion of RWA, of which eight in the market and two elsewhere. Basically the two you would find through this securitization or risk transfer, this is equivalent to 7 bps of core Tier 1.
Effectively, it would be easy to add back at the very least 10 basis points to the organic capital generation, which would then stand at 38 relative to the 50 objective completed in the first nine months. We will continue to do this type of securitization going forward as a way to have our balance sheet breathe. There is no particular problem on the regulatory side. As you know, all these securitizations have to be submitted to the ECB. There's a very formal process for it. All of the transactions we have submitted to the ECB have been accepted as they were shaped. I don't expect that there should be any problem. I think there's more and more convergence towards some standard features, so that we can collectively in the industry do more. Last comment, you mentioned that we have three to do.
Listen, this is a 10-20 basis point objective, so I consider we have already fulfilled the objective, but we may do three and maybe above.
Thank you. Séverin?
Yes, we are still confirming that we stick to the EUR 150 million gross operating income generation after the EMC integration. This will be visible fully into 2021. Very important to have that in mind. The transfer has been done partially this year. Of course, I will make a comment on the rest to be transferred. The cost synergies, which is one part of this GOI generation, will not be completely delivered next year. You have to have that in mind for more, toward 2021.
Great. Thanks everyone.
You're welcome. Next question.
Thank you. The next question comes from the line of Pierre Chedeville from CM-CIC Securities. Please ask your question.
Yes, good morning. One question regarding M&A. I remember that you were quite ambitious regarding this activity. Today we see that this business is decelerating everywhere in the world. Are you still very ambitious, whatever the result of this quarter in this activity? Could you give us a little update regarding your setup in this activity, teams, figures, anything interesting to see that? My second question is, how would you qualify, I would say, the ambience in your group, regarding the fact that we have the impression that you have made a lot of efforts for shareholders, to pay them a good dividend, and also to avoid them a capital increase, and the market is applauding that. What about your salaries now?
Don't you think that it's time for them now to give them, I would say, a new story, because as people say in France, you can die, French, and what would be the next step? Thank you.
Pierre, good afternoon. I will leave the floor to Séverin, but perhaps answer your question. I think, first of all, I'm very lucky to have people in this bank who are very engaged, who are attached to the company. It's the result of story. I must say, including in areas which are under restructuring moves, unlike in any banks, let's face it, I don't think there's a paradise somewhere in Europe, but in the French Retail or the GBIS. We are now passing the most difficult moment, the moments of the announcement, of restructuring, et cetera, and I'm very confident in the different management team precisely. I must say, everybody is encouraged by the progress made in the last nine months, after the difficult beginning of the year. Everybody, on the contrary, is encouraged to pursue the trajectory.
We want to complete the job at the horizon of 2020, because in itself, there are plenty of things which are being done, plenty of very positive things, the development of activities, investment in technology. We are taking advantage of differentiating presence in geographies and businesses. Philippe mentioned the fleet management. I could mention Boursorama, Africa as a territory of growth, et cetera. I'm very convinced that, yes, everybody is aligned, motivated, engaged in delivering further. In due course, we will prepare, I would say, the next financial and strategic plan, the 2021 to 2023, 2024. I think we need to do that to have more clarity on 2020. As I've mentioned, on banking union, Basel IV, blah, blah, it could be good to have more visibility.
There's no urgency, you will see, as I said, and I think my message at the end of this presentation was a message of confidence in the capacity of the teams in this bank to carry on moving forward. Let me just remind you that there's a significant number of people who are also shareholders. When they see the share increase, it's not just for outside shareholders, it's for all of us. It gives good morale. Now, I will turn the floor to Sylvian on your question on the advisory services.
The answer to your question is yes. Yes, we are still committed to this part of our investment banking offerings, clearly. M&A is a fee-based activity and very much related to the quality of the senior relationship you can have with your clients, even corporate or financial institutional clients. It's fair to say that we are not legitimate in all geographies or sectors, clearly, but we are very much and highly considered in some sectors and in some geographies, and I will continue really to commit and to invest in that direction. More generally speaking, I think that when the balance sheet is at stake, when the bank is providing some scarce resources to its clients, there is also more and possibility to really deal on pure advisory.
My view is we will have to push further advisory fees in the CIB world, and Société Générale has, in my view, a lot of capability to do that. Not only on M&A, we have also, as you know, in project finance, we have a lot of other advisory capability, but M&A is part of those, and we will be still committed on that on the sectors and geographies where we are legitimate.
Thank you. Next question.
Thank you. The next question comes from the line of Flora Bocahut. Please ask your question.
Good afternoon. The first question I'd like to ask is regarding the revenues in the financing and advisory business this quarter. You had a very strong performance the past three quarters with a much higher run rate than you just printed here in Q3. I understand you know that you had quite some impact this quarter from the RWA optimization you are doing there. The question is whether Q3 is a new normal run rate given all the RWA optimization you have done, or we should consider that Q3 is a bit of a one-off, and you continue to see good growth in that business. The second question is regarding French Retail Banking. I understand you don't want to provide more details on the 2020 outlook yet. Maybe can I ask it a bit differently?
You're guiding for revenues to be down between zero and 1%, and a slight decrease in cost. Do you think you can achieve positive growth in that business next year? Thank you.
Flora, I will turn to Serge on your first question, Philippe Heim on the second. Serge.
Yeah. This third quarter result, as you mentioned, Flora, is impacted slightly by the deleveraging. The real underlying analysis we have made is, this quarter has been weak in two folds, in investment banking activity and in our corporate banking. In our pure commercial banking activity, the deleveraging had an impact on the revenue. Of course, we have less exposure. The good news in this number, which as mentioned by William, is that our asset finance capability, I mean our structured finance capability and our transaction banking are still on a positive growth dynamic today. We are really focusing, as I said earlier, on the strength of the company, and those areas are still growing. We have been impacted slightly by the deleveraging on the commercial banking activity and by a weak market on investment bank.
Well, it will be up to you to see what will be the revenues in the investment bank next year, as difficult market condition could change. The real point is our structural trend in terms of asset-backed finance, in terms of structural finance, and in terms of financing banking are still positive this quarter.
Thank you. Philippe?
Of course we are in the middle of the budget process, we are still running the numbers. Yes, of course, we do confirm again the guidance of reduction of cost base in actual terms. The guidance on revenues between zero and - 1, and positive growth, it's a good ambition, and we are working on it.
Thank you.
Next question, sorry.
Thank you. The next question comes from the line of Gregoire Delanoue from Morgan Stanley. Please ask your question.
Yeah. Hi. Hello. Two question on my side. The first one, on disposal, you still have 40 basis points of non-core disposal to complete by 2020. Given that the deadline to reach this target is relatively close now, with 12 months to go, I guess you should have a relatively good visibility on the asset you are looking to sell. Could you just please confirm the kind of assets you're looking to dispose, like the key criteria that you will look at? Secondly, on money laundering, Banque de France has recently issued an AML assessment report in which it strongly requests some banking players in France to strengthen their KYC and compliance systems. Could you please just tell us how comfortable you are with your current level of spending to support your compliance function and your internal control environment? Thank you.
Gregoire, good afternoon. I will take briefly the two questions. First, let me highlight, what I can say is that there are currently further processes which are going forward, in terms of disposal. Clearly, I will not say more on more specific assets, but typically, these are assets that we have identified, which, in our view, are more nice to have, but not core strategic assets in terms in particular of the amount of synergies. What we will never do is jeopardize the core franchises, which fundamentally work for common client base. I'm confident with the assets that we have identified, as we've done in the past. I think the IBFS performance from that point of view illustrates that we've been able to maintain in absolute term, despite the disposal, and further improve the profitability of the business.
It's exactly in line with that, and I think it makes sense. Second, on your question, it just highlights that we are spending a lot actually on different remediation programs. As you know, we settled some litigations with U.S. and French authorities. As part of it, there are remediation program which are currently up and running. We invest a lot. We will not compromise on the investment there, because I must say it would be easy to make savings, but if it's at the cost of our reputation and with big fines, I think it's a very short-term calculation. I would say probably for the next two years, 2020, 2021, in practice, as you know, we have signed litigation mid-2018, typically it's a three-year program. We will have this kind of cost, and we are not compromising.
I think we remain, on one hand, very humble, because the level of requirements are always increasing. We are often find needles in a haystack. As we all know, there's nothing specific from that perspective for Société Générale and other banks. Let's say, the idea is certainly to further develop strong control functions, but you have already that, I would say fundamentally in the cost base, and it will be like this for the next two years. Next question.
Thank you. This question will be our last question. Guillaume Tiberghien from Exane, please ask your question.
Yes, good morning. I have two questions. The first one is on capital and the second one on GBIS. The first one on capital, can you, number one, remind us whether there's going to be an impact from the EBA guidelines and from calendar provisioning? The second sub-question on capital relates to Basel IV. I want to challenge you a little bit on your EUR 36 billion guidance, because it only refers to standardized credit risk and operational risk, but your model on operational risk doesn't seem particularly aggressive. That leaves a lot for credit risk, and you're going to have about EUR 8 billion of RWA increase from TRIM. In total, that seems quite a big number. The second question relates to the GBIS. Based on your current capital allocated, if I want 11% ROE, that means I need to have about EUR 2.2 billion pre-tax.
If I add back the EUR 6.8 billion of cost, I need basically EUR 9 billion of revenues. I ignore provision, and I ignore the EMC business for simplicity. They one offset the other. EUR 9 billion of revenues, your current run rate in Q3 is EUR 8 billion. Where is this EUR 1 billion going to come from? Thank you.
Hello, Guillaume. I will pass the floor to William on your first question and to Steven on your second one.
Thank you.
Hello, Guillaume. There were actually three questions in your first question. EBA guidelines, I understand the backstop question on NPL and the Basel IV assumption we've taken. On the first one, if we don't make any particular comment, it is because this has not particularly a major impact on us. Overall, when we have disclosed the TRIM and other regulatory impacts, that encompasses everything. Be it pre-Basel IV that we anticipate in our capital trajectory to happen in the next years, maybe in certain areas, others are very different. Usually what we see is that our practices are already quite in line, whether I take expect the plus minus provisions or certain default accounting. With regards to the backstop, I don't think it will have a major impact.
It will have some impact, but it is in the trajectory, and then you have the supervisory guidance that each of us has received from the ECB. As you know, this will be part of the SREP discussion, so it will not necessarily translate to the extent there would be some findings into a provision. If that should change, we obviously would update you, but actually so far, we think it's manageable. On the 36 we've given, that encompasses all assumptions we make, be it on credit, including
Castilla, and of risk, based on the interpretation we have of the text as it stands.
There's no reason for us to think that we are either too conservative or too rosy relative to the stated knowledge we have. We don't provide the details behind the 36. That's a basket, which I can reassure you encompasses every bit, again, credit risk, op risk, and CVA.
Knowing, Guillaume, that I think that in terms of current density of operational risk, we are significantly higher than a lot of our peers. Our starting point in operational risk is relatively high in terms of density. The gap might be also a little bit lower.
Frederic, sorry, that was my point, which is, I think your EUR 36 billion is actually quite conservative.
This is the reason, Guillaume, thank you for this comment. I mentioned that at this stage, we have no reason to think that it's either too conservative or too rosy.
Okay.
We don't want to change it.
Yeah. Sylvain?
Yes. Thank you, Guillaume, for your question. I do not consider that the third quarter is a running quarter because you are right to say that EUR 2 billion as revenue for the third quarter, which is by 4.8. As you know very well, the third quarter has always been historically the lowest quarter for us in terms of revenue. We cannot consider that as the running level today. On the other hand, we will continue to have growth in San Maria, and we continue to allocate our capital on the right position to deliver this growth next year, even if we reduce the growth on businesses where we consider the growth rate is too low. We are committed to continue to focus on our cost management also.
The way we will deliver this target for next year is working along the line, that continue to work on all the line. We want the full benefit of the cost-reduction plan next year, which is not visible yet in your P&L. We have one point in term of revenue is not, in my view, to multiply by four the EUR 2 billion of this quarter, as we will have more benefit on the cost next year.
Okay, thank you.
Thank you. Any more questions?
We have no further questions. Speakers, please go ahead.
Okay. Well, listen, thank you very much for your time, and have a nice afternoon. Thank you very much. Bye-bye.