Related to the presentation of our second quarter and first half results. As usual, we'll try to be as short as possible with William Kadouch-Chassaing, our CFO, to present the figures, and then enter into a Q&A session with all our management team. Let me just start saying a few words before leaving the floor to William. I will start page four with the main highlights of the first half and second quarter. Clearly, the first thing I would like to highlight is that we are fully on track to deliver on our capital trajectory. You see that our Core Tier 1 stands at 12%. It's up 52 basis points in the second quarter, reflecting, of course, the benefit of our earnings in line with expectations, a strong discipline in risk-weighted asset consumption, the de-leveraging in CIB, and of course, further progress in our refocusing program.
We'll come back to that more in detail in the presentation. The second element that our underlying net income for the quarter is solid at EUR 1.2 billion, with business revenue stable at constant perimeter and with a resilient profitability of 9.7% return on tangible equity. The third thing is that the risk profile of our group remains strong. The commercial net cost of risk remains low, 25 basis points for the quarter, 23 basis points for the first half. As you can see, there's a further decrease of the NPL at 3.4%. Overall, the market, the rates also remain under constraint, and the balance sheet is very solid as you will see later on.
Let me turn to page five just to highlight that beyond all the financial figures we are going to comment and focus on, I would like to emphasize that we are moving forward to accompany our clients in their fundamental transformation. I think it's important to anticipate. Clearly, on this slide, we show that on the climate, we are moving forward with, first of all, a very strong delivery regarding our commitment to finance renewable. We have this EUR 100 billion target between 2016 and 2020. Let me just say that in this second quarter, we had senior mandate on 14 green and sustainable bonds accompanying our clients everywhere in the world. I will highlight in particular, the first-ever green bond issue in euro by Chile in the Americas. We are also developing innovative solutions.
For example, we have issued a EUR 1 billion positive social impact bond to finance home loans for carbon-efficient buildings. We have a strategy to exit coal finance by 2030 for the clients which have assets in Europe and OECD countries, and by 2040 of the other regions. Beyond everything which is done on the climate, I could also highlight what we are going to do with the shipping industry, where we are promoters, and we have signed the so-called Poseidon Principles to reduce the emission of the different container ships. We are also engaged in Africa.
As you know, the recognition of us being the best bank for corporate responsibility with different dimensions, SME financing, microfinance, women entrepreneurship, and staff diversity is also aligned with our strategy, as well as to get ready to take the opportunity of new business activities in advisory and financing regarding the establishment of smart cities in the world. Now, I will turn the floor to William so that we enter into more detail on our results.
Good morning to all. Thank you, Frédéric. I invite you to go straight to page seven, where we highlight, as we do now every quarter, the key performance of the five main divisions of the group, including corporate center. Starting with the group headline numbers, the group underlying net income stands at EUR 1,247 million, which is consistent with a 9.7% ROTE, to be compared with our target of 9%-10% ROTE by the end of 2020. The published number is EUR 1,054 million or 8.3% ROTE. Looking at the divisions, what is key in French Retail Banking is, number one, revenue are up this quarter, year-on-year, 2.1%. Costs are very well contained. They are, in fact, decreasing by 1% year-on-year this quarter. Although we continue to implement our transformation plan and, as you know, invest in the development of our fully digital bank, Boursorama.
All in all, our French Retail Banking division exhibits one of the very best return on capital in the country with 12.6% return on normative equity. Turning to International Retail Banking, another very strong quarter. Revenues adjusted for foreign exchange and perimeter effect are up 7% year-over-year, 7.5% in the first half relative to the same period of last year. This is a combination of volume growth and pricing. We have positive jaws in International Retail Banking, and we continue to deliver very solid profitability at 7.1%. Same with insurance and financial services.
Financial services encompassing, as you know, ALD fleet management as well as SG Equipment Finance. The return on normative equity is up close to 200 basis points to a very good number of 21.3%. Revenues are up 3%. In Global Banking and Investor Solutions, we are in the midst of executing a restructuring plan.
I think what is key to highlight is the fact that in this context, we managed to get a double-digit return on normative equity, on an underlying basis of about 10%, thanks particularly to very good cost control. I will come back to that later. The underlying cost of CIB are down 5% relative to Q2 2018 this quarter. Finally, on the corporate center, we have a gross operating income of EUR 38 million. For the first half, it's a negative minus EUR 75. Allow me to address here the key one-offs we have in the quarter.
You should take into account on the negative side, given the provision for restructuring in CIB as well as IBFS and the cost of integration of Commerzbank activities, a negative impact of about EUR 280, which is EUR 227 plus EUR 29 plus EUR 21, which we have on the other side, on the OpEx line as well, a positive impact, which is a reversal provision for operating taxes of about EUR 241 million in the corporate center. You see the negatives are a little higher than the positives. We wanted, which is highlighted on page eight, to come back to the fundamentals of our business model and the split of our activities in the context of the low-for-long rate environment debate. We are convinced, and this is already part of our trajectory, that the rates will stay low for a certain period of time.
It is clear that the key assumptions that many operators make is that they will be there for a very long time. In that context, we wanted to remember everyone that the proportion of our revenues that is directly impacted by the rate environment in the Eurozone is about 10% of the total of our EUR 25 billion in revenues. Namely, as you would expect, this is a margin on deposits. This affects, logically, mostly our French Retail activities. We've already given you, by the way, as you know, some sensitivities around the rate development and what it translates into in terms of revenues. All the other revenues of the bank are either not impacted or very indirectly impacted. This is notably the 55% of our revenues at group level that derives from non-interest income.
This is the 37% of the net income, net interest margin that is generated outside of the Eurozone, which is 16% of group revenues. Generally speaking, the margin on loans, be it in financial services, be it in structured finance or in French Retail Banking or International Banking, as the case may be, is not very sensitive. It's more sensitive to the competition and margins, and our margins, we can say, are steady. That being said, we are aware of the pressure of the environment, be it rate or macro, and we work further on cost, which is what we highlight on page nine. You may remember we had announced at the end of 2017 an efficiency plan equivalent to 1.1 billion gross reduction in OpEx. We have already achieved 50% of that 1.1 billion efficiency plan to date.
We have added at the end of the fourth quarter 2018, another layer of EUR 500 million revolving around the CIB OG. We are starting the execution. So far it goes according to plan, we are very confident that EUR 1.6 billion will be delivered by the end of 2020. As you could see, we already have very positive dynamics on the cost containment in French Retail as well as CIB, on top of still having positive jaws in IBFS. I would like to say a word on cost of risk. We remain with a very muted cost of risk, actually one of the very best in the industry in Europe and certainly in France. The cost of risk, commercial risk in the first half of 2019 is at 23 basis points, 25 basis points for the quarter.
It is very consistent, actually lower than our guidance for the year of 25 to 30 basis points, despite the fact that, as you can see in French Retail Banking, we have some specific files. Some of it being very shared in France by all the banks. Otherwise, it's very contained, including in International Retail Banking and financial services, where it is pretty flat. The non-performing loan ratio continues to decrease this quarter, again, stands at 3.4. That, combined with a gross coverage rate of 55%, which is one of the very best in the European industry. One of the key objectives we have is quarter one, and one of the key highlights of the quarter is logically the fact that we managed to increase, again, the quarter one ratio this quarter by a significant 52 basis points.
In total, in the first half, we will have increased the quarter one by 106 basis points. This is equivalent to date to a 213 basis point over MDA. You remember that our target is to be at any point in time at around running the company with a capital ratio that is consistent with around a 200 basis point buffer over MDA. We are above this quarter. In addition, you can consider that we will have for sure in the next quarters to come, 20 basis point more, stemming from especially the refocusing and the disposals. The pro forma ratio is at 12.2%. As far as the other ratios are concerned, they are all up and strong. Leverage ratio is up at 4.3%. TLAC ratio is up again at 25.8%.
Let me remind you that the requested capital TLAC ratio is 19.8% in 2019 and should be 21.8% in 2022. It means that we fulfill the ratio by far. Only in June of date, we are already well compliant, as you know. The liquidity ratios have all improved. Our liquidity buffer is up EUR 11 billion at EUR 188 billion, and we've already achieved close to 70% of our funding program, actually, the vanilla program is done 75%. Which leads me to the next page, which you will remember refers to the page we had shown you in Q4 2018, and is a page that describes where we stand in terms of building the capital towards having a significant buffer above 12% in 2020. This capital book we had shown you in Q4, obviously, a lot was to be done.
What you would find on this chart in pink color is what we have already achieved. You can see that we have already achieved 28 basis points out of the 50 basis points of organic capital to be generated. We have already achieved 15 basis point out of the 25 basis point of global market RWA reduction. Let me give you a number. We've managed to execute close to EUR 5 billion of the EUR 8 billion global market RWA deleveraging. EUR 8 billion is due by 2020, we're already EUR 5 billion in H1 2018. We have already started other type of optimization. Refocusing program is very well on track with 47 basis point out of the 80 to 90 that you know, and we expect on the headwind side, the notification of the bulk of the treatment pack towards the end of the year.
That leads us to a 12.4, 12.8 estimated quarter one by 2020, which is up from what we had shown in Q4. This was 12.3 to 12.7. Let me stress for the avoidance of doubt that this is consistent with the payment of the cash dividend based on a 50% payout ratio through the period. Allow me not to spend too much time on the next page 13. We will leave it to question. You will have noticed that this is the first time that we implement the amendment to the IFRS 12 accounting regulation, which doesn't change anything with regards to the way you can look at the key ratio, ROE, ROTE or EPS. Happy to answer to any question. I would like now to turn to the business performance, starting with French retail and the commercial performance of French retail.
We continue to see very positive commercial development in that area. Starting with individual clients, we give you some figures. The loan outstanding are up 3% year-over-year, as we continue to have still good production, particularly in consumer credit, and also home loans. Bank assurance makes further progress this quarter. Life insurance outstanding are up 1.5%. The P&C, property and casualty premiums, are up 7% in the quarter. You know this is a key element of our strategy to catch up in protection and property and casualty in terms of penetration of our client base. Private Banking activity is very solid again, with net inflows up EUR 1.1 billion, and generally speaking, the wealthy and mass affluent client base is again up this quarter by 2%. Boursorama had another record month. We took 127,000 new clients for Boursorama, which brings Boursorama to a 1.9 million client base.
Let me remind you that the objective that we had set forth for Boursorama was 2 million by 2019, so we are very confident we will over-deliver. On professional and corporate clients, there again, core client base we target as far as Société Générale networks are concerned, we make good progress. The medium-term corporate loans outstanding are up 8% year-on-year, and we are done with the set-up. Let me say a word on the transformation beyond the commercial activities. I'd like to come back to what we have committed to in terms of closure of branches. From 2015 to 2020, we have committed ourselves to execute the closure of close to 18% of the number of branches. We have done it. We have achieved 13.4% closure from 2015. We are mid-2019. We still have one year and a half, so we are very much in line, on track with plan.
On the French results, I won't be too long. What you can see is a good EUR 356 million net income for the quarter, combined with a 12.6% return on normative equity, which is a context I would qualify as reasonably healthy, given, again, the fact that we still invest in Boursorama. That means that the return on normative equity of the traditional networks is higher by definition. Revenue are up 2.1%. Very positive spot on the net interest income, which increased 1.7% this quarter relative to the past year. This is the second sequential increase in the NIM in the French retail networks, the first that we've seen in a few quarters year-on-year. Fees are less high in this quarter, particularly given the impact of the so-called Yellow Vest measures. We have talked to you about this obviously impact the service fees.
The cost decreased by 1%, I already mentioned, which is a good performance. Turning to the performance of International Retail Banking, there is a new information we provide here to you, which is on top of the production that leads to the increase of the net interest income. You see here very good figures, +6%, +7%, +4%, depending upon the region. We provide you some numbers as to the progress we make in terms of generating commission and fees in those regions where we start with, obviously, a lower base, and then commissions tend to increase when the market matures, provided that you have the right commercial set-up. You can see an increase of 6%, corrected for perimeter and change effect in Europe, +22% in Russia, +7% in Africa, which obviously is a good sign for the future.
Overall, net income is EUR 297 million for that division, and the return is high at 17.1%. We give also some key data on insurance as well as financial services. Life insurance outstanding are up 4%, protection premia are up 12%, revenues up 4%, and given the numbers I've given you for the French market, that means that in other jurisdictions, in other countries where we have commercial banks, we're able to have double-digit increase across the board. ALD fleet is up 7%. I refer you also to the publication of ALD results today. Its GEFF had a very good quarter again, plus 3% in the lease outstanding, plus 11% in revenues. Overall, revenues are up 3% in the quarter for those businesses. Group net income contribution is EUR 237, which means a return on normative equity up 200 basis points, roughly, at 21.3%.
Overall, what you can see is still that IBFS is a key growth driver for the group and a key profitability contributor. For the first half of the year, IBFS contributed a good EUR 979 million. Let's call it close to EUR 1 billion to the net income of the group. The return on normative equity is 18.6%, which is very consistent with the ambition to be between 17% and 18%. As you can see, this is above. Sorry, the underlying is 18.9%, the headline is 18.6%, it's still above 17% to 18%. One thing I would like to point you to, you will see on these numbers that apparently operating expenses grow more than net banking income. You have to adjust this number of OpEx for the provision for structuration we take from the headquarters of the IBFS activities, which is EUR 29 million.
Should you make that adjustment, you would find that in Q2, revenues are up 7.7%, OpEx 4%, in H1, respectively, 6.1% and 5.1%. I reiterate that we still have positive jaws, and we will continue to have positive jaws in that area. A strong financing advisory, resilient global market, as you can see on the type form, this is another month where we have this contrasted performance with some improvement, including on the market side. Financing and advisory is evidently strong. We had +10% revenue growth in the first half relative to the previous for the same period last year, and +3% year-on-year in the quarter. You can see that beyond the traditional strength of structured finance, we also have very good performance in transaction banking, with revenues up 19% this quarter, year-on-year. On the market side, this is obviously more contrasted.
This is very much in line with broadly the market, -9% for Global Market and Investor Services revenues. We have here FICC revenues -10%, sequentially +16%. Equities revenues are -7%, which is better, we think, than most of the peers and consistent with our strategy in terms of focus and products, revenues are +4% sequentially. We may come back on that with Séverin should you have questions. We are very much on track as regards to the integration of Commerzbank activities. We wanted, as we are in the midst of it, to update you on where we are on the restructuring. I've already mentioned the provision. We obviously are in the process of closing our portfolios in commodities as well as prop trading and some of the client adjustments in the private brokerage, et cetera, that we have announced.
Nothing to mention particularly there. It goes on track. The cost plan has been launched in every jurisdiction applicable, and the process has started. We have no reason to doubt that it will bear the fruits as expected. The provision I already talked about. The deleveraging as well. We executed EUR 4.9 billion out of the EUR 8 billion that we have committed to by 2020, which makes us confident we will be there probably earlier, by the way, than 2020.
As a result, in a nutshell, you can see, and we start with this, that even in the context of still muted market environment and still a decrease in the revenues of markets, even in the context of being in the midst of restructuring, we have an underlying return that goes back to double-digit figure at 10% for the quarter, which is okay in the context, yet not being on target with what we want. Particularly, I'd like to point you to the operating expenses. You have here on the page -3.5% based on the adjustment for the restructuring provision.
Should you, in fact, take into consideration also beyond the accounting provision, the expenses due to the cost to achieve on our plan of restructuring and add the EUR 21 million of integration cost of Commerzbank, the total would be rather in the area of EUR 260 million to be deducted, which means that the underlying cost base of GBIS is effectively - 5%. It's a good sign about our commitment to work hard on cost. Finally, and rapidly on the corporate center, we have a EUR 38 million gross operating income. It's a plus. For the first half, a minus EUR 75 million. I've already alluded to it. It's impacted positively by an adjustment in operating charges due to operating taxes, and it is negatively impacted at the net income level by EUR 84 million, given the IFRS five impact on the refocusing program.
I think most of it you know, as Delphine and her team disclosed it as they came. Thank you very much.
Thank you, William. Let me just conclude with the last slide, just to emphasize that we are very confident to further deliver in the coming quarters on this trajectory with a lot of discipline on the execution on the different items. William has highlighted the dynamic of the businesses. We will get other benefits of the different initiatives in terms of cost, in particular, the adjustment of the setup in GBIS in the coming quarters. On the refocusing, I can already add two basis points on the disposal of Théma, which was signed in July. It is not in the 47 basis points, beyond, other processes have been launched. Of course, as I said on the responsibility, we think it's very important in our long term to keep the confidence of our clients and our stakeholders of all kinds.
We are also here very successful, and we see that the business opportunities beyond, of course, providing added value to our society. We are delivering, and I just would like to conclude by saying that we will propose to you a deep dive on our International Retail Banking businesses and financial services, which I consider as a core asset, in particular, in light of the development in the Eurozone on the interest rate, which is doing as we have been discussing. All Eurozone retail activities having the benefit of this presence in geographies with much more normal, if I may say, interest rates, good economic prospects, less mature banking markets, and with a very significant presence, sometimes leading country risk, will lead us, I think, to success and should give you confidence in the coming quarters on also that front. The presentation is completed.
Now, let's turn to the Q&A session. Let me just remind you, of course, and I know you are very good in that, complying with the discipline, just if possible, two questions per people. The floor is yours.
Thank you, ladies and gentlemen. If you wish to ask a question, please press star one on your telephone keypad. Your first question comes from the line of Stefan Stalmann at Autonomous. Please go ahead. Your line is now open.
Good morning, gentlemen. I have two questions, please. The first one on your rate sensitivity. That's a very helpful disclosure that you gave, 10% of group revenue, which is about EUR 2.5 billion of revenue. You have about EUR 200 billion of deposits in French Retail, and let's say you have a couple more elsewhere. That means you're still generating a margin on your Eurozone deposits of about 1% to 1.5%. My question is, how conceptually do you calculate this margin? Related to this, how sustainable do you think this margin is, given where risk rates are pretty much across the curve in many countries in the Eurozone? The second question regarding the EMC transfer. Thank you as well on the guidance here.
Is it fair to assume that you have transferred roughly EUR 1 billion of risk-weighted assets and roughly EUR 50 billion of notional balance sheets so far? Thank you.
Hello, Stefan. Good afternoon. I will leave the floor to Stéphane again to confirm the impact of the beginning of the integration of the EMC. On your first question, let me again just reiterate the sensitivity of our revenues towards the movements of interest rates. If you have a decrease of the curve by 10 basis point, it is roughly EUR 60 million, and actually 80% of that is in the French retail. After this, again, well, the definition of the interest margin on deposits and credit, it's part of the ALM and through the modeling. I think that what you should look at is the sensitivity.
What is clear this quarter, as William said, is that with this positive evolution of the net interest margin, still with an erosion of the interest margin on deposits, but at lower rates, and positive contribution of the credit, I think reflects what we have said in the past, progressively less impact, and you have the sensitivity. Stéphane, can you comment on the EMC, please?
Yes. Thank you for this question. As you know, the EMC business is comprising four activities, and the process of integration has just started during this second quarter, importantly. As you know, the four businesses were first what we called investment product, meaning structured products, which are really in line with our core franchise. Second, we have these listed products, warrants and certificates, which are mainly in Europe and in Germany, as you know. We have the market-making activities and the asset management. What we did during this quarter is mainly on the investment product transfer and on the ETFs for the asset management part. The impact of this, it has been done over the quarter. At the end of the quarter, the impact in the risk-weighted asset is EUR 1 billion. I am not sure, Stefan, what you had in mind.
You mentioned on the total size of the balance sheet impact of EUR 50. I don't understand this figure, Stefan.
Yeah. Basically just looking at the evolution of your fair value assets during the quarter. It seems there's maybe a bump of around EUR 50 billion that might be attributable to EMC.
No.
Maybe that's wrong.
No, it's much lower than that. I have to confirm this figure, but my mind is between EUR 5 billion and EUR 10 billion in terms of total asset impact on this transfer of the portfolio of the structured product of EMC.
All right. Okay.
Second impact you see is on the ETF side, and you have in terms of ETF asset under management evolution, EUR 12 billion increase, which is related to the EMC transfer. In terms of P&L, the impact on the NBI is very limited on the second quarter, and you have, on the other hand, the cost of integration which has been mentioned. Negative impact on the P&L of this quarter.
Great. Thank you.
Next question.
Your next question comes from the line of Giulia Miotto at Morgan Stanley. Please go ahead. Your line is now open.
Yes. Hi. Good morning. Thank you for taking my questions. I have two. The first one is on slide 12, which is very useful. The capital impacts are very clear. Can you just please remind us what the associated P&L impact are of the disposal of global markets and the refocusing program? What is already in the numbers and what we should be expecting? The sensitivity on NIM that you provided is very helpful, the EUR 60 million for 10 basis points. I was just curious, you mentioned that in France, corporate margins are actually going up on slide seven, when I look at the public disclosure from central banks, it looks like the front book is well below the back book. How is it possible that margins are actually seeing a good trend when it comes to corporate? Thank you.
Giulia, I will turn the floor to Stéphane on your first question, and Philippe, in charge of the French Retail. It's fair to say, again, things are improving a little bit on the corporate side. What I'd like to highlight in particular, just as an introduction to the answer of your question, you see really the kind of policy we are pursuing, being selective in the mortgage, trying to really originate mortgage for clients, which in our view will provide going forward to other side business, in particular on the saving. As you know, my conception of the evolution of the market, it would be at the heart of the relationship. We are more dynamic, of course, on the corporate side, where we see less disruption going forward.
Of course, with fundamentally a shorter term loans or capacity to reprice, typically, with midterm loans, which are between three and five years, in an economy where I would like to highlight the dynamism of the investment by corporates, which was confirmed in the second quarter. I think it's really a good policy, which helps to maintain this profitability. Now, Stéphane on the overall impact of our restructuring, and then Philippe to comment a little bit on the markets.
On the revenue side, because as you know, William made a comment on the cost side. As you saw in term of the averaging, we delivered during this quarter, during the first half, sorry, nearly EUR 5 billion. Roughly EUR 5 billion, EUR 4.9 billion in term of risk-weighted assets, delivering in the global market activity. We had also a delivery in our financial and advisory activity. Globally, the impact is mainly driven by the CTY, the principal stock exit we started this quarter, and the stop our prop trading activity. Globally speaking, the impact is not significant in term of revenue, but it's down. The good news is in our part of our delivery is coming from our front services, risk-related asset consumption, with a very limited impact on revenue.
There is also some impact on the financial and advisory, the financing advisory division, because we have reduced our corporate lending and capital allocation, which have an impact on the top line. Globally speaking, the impact is some tens of million EUR this quarter compared to last year.
Thank you. Philippe, on the margins in France.
Yeah.
And sorry, if I can-
Yeah. Go ahead.
Can I just follow up on that? Looking forward, when we think about the disposals that are yet to come, not just in global markets, but also part of the refocusing program, what's the profitability impact of those?
Listen, William will comment on the existing, already signed transactions. Generally speaking for the coming transactions, the further disposal, let me just highlight, fundamentally, the idea is to improve the profitability. No deterioration of profitability to be expected from these further disposal and the capacity, on the contrary, to concentrate our resources on more profitable business. I think that the figures of International Retail Banking and Financial Services reflect that. You know that some businesses have been sold, some Balkans, Bulgaria, and Poland, it does not, of course, on the contrary, benefits to the results. Perhaps more granular information William can comment.
We had given you some impact in the previous quarter, what we had announced at the time, we said would be equivalent to EUR 125 million net income loss. We only took net income, so that's easier for you to deduct. With all what we have announced, i.e., the close to 50 basis points out of the 80 to 90, we're expecting an impact of about EUR 190 million total net income. We have already taken this impact in our numbers, because if you look at what we closed already, this is equivalent of EUR 70 million, which are already in our numbers. Gradually, basically, this falls into the numbers. EUR 190, out of which EUR 70 are already in the numbers.
Perfect. Thank you.
Philippe? On, again, what we see on the French market in terms of margins.
Yeah. First, coming back now on the deposits, it is also very important to mention that we are closely monitoring the volumes, making sure that we are taking deposits with key clients. Also to mention that we have adjusted our pricing, I mean, interest paid to the client, notably for corporates and for financial institutions on term deposits. It contributes also positively. Regarding the loans, we continue with our origination strategy for focusing both for individuals and for professionals and for corporates on our targeted clients. The volumes have been quite good in the quarter, as explained by William. Also we have been able to closely monitor the margin and there is still a significant pressure from competition. We are, again, monitoring very closely all of that.
Again, coming back to the deposit margin, I think the importance also to mention that we have an increase compared to the first quarter by 1.4%, which means that we consider that we are definitely on the right track.
Thank you. Next question, please.
Your next question comes from the line of Jean-François Neuez at Goldman Sachs. Please go ahead. Your line is now open.
Hi. Good morning. I just wanted to come back on the interest rate sensitivity as a first question. If I mechanically apply EUR 60 million to the assumption which you had provided at the time you had 30 basis points for your IBOR in 2020 and 1.8 for the OAT at the stage, this was already consistent with the reduction of revenues group wide of EUR 500 million. The futures are now at minus 50 basis points for your IBOR. Is it okay to just multiply the EUR 60 million by the 70 basis points or so difference that we can see in rates, or is this not working, is this not linear?
Jean-François, hello. It's not necessarily that linear. It probably gives a certain order of magnitude. William?
That's not as linear, because you have to look into more in details as to which part of the portfolio is being renewed. That being said, this is not a bad approach. This is why we gave the sensitivity. Effectively for the year 2020, we had said we would be in average, in aggregate, it's about +20 basis points for the short-term rate through the year. Clearly, if you were to take the forwards today, and you take the difference between the 20 and the level where the forwards are, multiplied by the sensitivity, you probably get a gross number, which is not absurd. It's obviously pre-tax. That does obviously not assume other things we made. Let me remind you that this is pretty much in our sensitivity.
The reason why we had given the range is precisely because we allow ourself around the central scenario to have some sensitivities, including some negative sensitivities. That's why Frédéric comments on the fact that this is not linear. Beyond the technicalities, some of it is already somewhat encompassed into the low end of the range we've given you in terms of profitability for the business.
Let me just highlight, Jean-François, also that I see as a positive development the recent comments of the ECB on the idea maybe of a kind of tiering, et cetera. I think there is a growing understanding of the impact on profitability of European banks by the ECB of this situation, which might last longer than expected. Perhaps 18 months ago, everybody had in mind an increase of rate. We'll see what kind of development we could have, but I think it's something positive that a few lines have been written and said on the recent press release and communication.
Okay. My second question was on the cost in CIB. I just wanted to understand of the EUR 500 million of cost saves. Already there has been a decline in the underlying run rate of cost this quarter. Just wanted to try to understand how many of the staff you thought you'd, let's say, let go, you've let go so far, just to try to understand what's left of the savings going forward, because it's only said that you've only started in outside of France. There is still France to go and so on. I get the feeling there might be some legs to this.
Yeah. Absolutely, Jean-François. The bulk is not yet in our figures. Stéphane, can you give some kind of estimate?
What I would do, if I may, Jean-François, to come back to the commitment we took to be below EUR 6.8 million next year. Up to now, the plan has been implemented, not in France, as you know, which is roughly 50% of the CET1 position is in France, and we have not done anything in France because we have started only in July. What we delivered up to now is a part of the 50% which are out of France.
The real point is we are on track to deliver the commitment we took next year, and it's the important point to have in mind.
Okay, great. Thanks a lot.
Next question.
Your next question comes from the line of Flora Bocahut at Deutsche Bank. Please go ahead. Your line is now open.
Yes, good morning. The first question is regarding the French Retail commissions. If I would adjust for the EUR 61 million that you mentioned this quarter, I would get to commissions that suddenly collapse a bit this quarter, especially on the service commission side. It's an almost 9% decrease year-on-year. Just wanted to ask, first of all, whether you could elaborate a bit on the reasons around that. The second question is regarding the FICC revenues. When we look at it on a year-on-year basis, it's pretty okay. Actually, maybe even pretty good considering the deleveraging. When we look at it on a Q-on-Q basis, compared to Q1, you are the only bank so far seeing such a big increase versus Q1. The question is really what drove the difference between what you printed in Q1 and what you just printed for Q2, please? Thank you.
Flora, good afternoon. I will turn to Philippe Aymerich for the French retail and Jean-François Grégoire, Head of Global Markets, to answer your question on the FICC side. Philippe.
Yes. Yes, you're right, there are various components regarding this decrease on service fees. The first one, of course, compared to last year is the impact of Yellow Vests. You know that these measures get kept in some fee. It has a significant impact on this quarter, basically compared to last year of minus EUR 21 million. That's more or less 50% of the decrease. Second component, we have also a decrease on some fees perceived on mass market clients. People now using all the self-service, the digital things, are more careful on the use of the overdraft. We have also a decrease on these fees.
The third component, compared to last year, on this line, we have also the impact of the premium paid to the new clients of Boursorama, and as you know, the quarter has been quite strong, so we have also an impact compared to last year. I would like also to insist that on the contrary, there is still a good momentum on fees related to corporate insurance and private banking. Finally, and I think that you have also to take into account the trend on the line over income, because on this item, we have fees, notably fees related to subsidiaries on consumer finance and also on insurance, which are close to commissions. Maybe in other banks, they are classified as commissions. That's the explanation of this trend.
Thank you, Philippe. Maybe just for the sake of clarity, let me just highlight a little bit and explain the 61, because it's not specific to Société Générale. It's something common to all the French banking industry. You have specific instruments when the government wants to collect taxes on a compulsory way, which is called anti in French. There has been, in the last few years, a debate. The government said it should be actually taxed with the VAT. We challenged that as a profession with a legal action on our side. We provision on the VAT without charging the clients. It happens that effectively, we won this legal action. I guess that most banks will effectively recognize the revenue. Of course, it meant less money in the last few years or quarters on that front because of the provision.
Now, Jean-François, on the FICC side, the evolution of our activity between first quarter and second quarter, please.
Good morning, Jean-François Grégoire speaking. It's true that there is a rebound compared to Q1. Actually, our quarter is even better than the last three quarters. We were not satisfied with the Q4 and the Q1 results, obviously. We are happy to see that even with the lower revenues that we have on the commodity principal part, where there is obviously a deleveraging, we are going back to our more normal productivity. To name a few, on the flow business, we like to distinguish between flow financing and investment solution. It's the rate business that is much stronger than in Q1 and actually more in line to our normal business. In investment solution, there was poor demand from investors in Q1, so here as well, the improvement is significant. It's both on the rate investment product and the credit investment product.
Thank you. Next question.
Thank you. Your next question comes from the line of Tarik El Mejjad at Bank of America Merrill Lynch. Please go ahead. Your line is now open.
Hi. Good morning, everyone. Can I just come back, please, on the Global Markets? You've described what happens in Q1, I think previously you said that the deleveraging would drive around EUR 200 million revenues drop. Should we expect if you had a few tens of millions gone because of the deleveraging so far, for the remaining EUR 3 billion, should we expect around EUR 150 million of revenues coming off from that? That would be within this year and next? So far we have the costs well modeled, for the revenues, to be fair, it's still a bit not clear. Second question on capital.
Clearly you've done very good progress. Your aim is towards a Basel III target. You've seen all your peers clearly have and run their strategy on a Basel IV, even they compromise some short-term growth to build capital faster towards Basel IV. How do you think about internally, your budgeting how you deal with growth and so on. How do you think about the Basel IV? Still on capital, just can you reconfirm you still have the EUR 2.2 floor in the dividend? I didn't see it in the slides. Thank you.
Yes, Tarik, I will give a different comment on your first question. Let me just highlight on your second one. Yes, we are plugging in the calculation in 2019, 2020, that you saw page 12, effectively the 50% payout and the floor of EUR 2.20. Can I just say on Basel, we can confirm our previous estimate on the operational risk and credit, and we updated the calculation, and it's actually slightly lower than the EUR 48 billion, I think it's around EUR 46. It's roughly 110 basis points.
As you know, as you see with the kind of projection that we have for end of 2020 and plus the capital generation in 2021, 2020, we feel comfortable to absorb the Basel IV impact. I think the issue is more, of course, to adapt the business model to have a good profitability. Stéphane , on the estimate of revenues.
Yes. We don't change, up to now, the guidance we gave you, at the end of the first quarter. I answer what we have already, but the first part of the revenue impact will be seen, and the full impact will be seen next year, because it's progressive. We don't change the assumption we made and the disclosure we made to you in the first quarter for the full 2020 impact. It's more difficult to see how fast you will have this in the quarter three and quarter four. I think the point is more to have in your mindset and your budget impact for 2020, which we have already disclosed.
Okay. Frédéric, if you can just follow up on your answer. Your base case now is, we get to somewhere around 12.4% next year, we'll offset Basel IV as it phases in, basically. There's no intention to come with some additional management actions to offset earlier than first implementation date of Basel IV.
Listen, Tarik. We have done, and I think everybody will acknowledge, much better than anybody could have anticipated on the capital. We remain very positive on the 12.4%-12.8%, so it's not 12.4%. Can I just say that, if I just look at the capital generation for the next 18 months, the +22 basis points, may I say it's relatively, probably conservative, when you see that in six months we did 28 basis points. We'll monitor that. We know how important capital is, I think it was reflected in the last six months. We remain very confident with our target. We are above the 200 basis points margin over the MDA. I think things are really developing in the right way, if I may, when you look at this capital trajectory.
I think we have provided, hopefully, a lot of comfort in just six months towards that level.
Okay. Thank you.
Question.
Next question comes from the line of Jacques-Henri Gaulard at Kepler Cheuvreux. Please go ahead. Your line is now open.
Yes. Good morning, gentlemen. Two questions. The first one on the capital, congratulations for getting where you are. I guess the one thing that really showered a little bit the enthusiasm last quarter was the fact that a couple of days after your 11.7% and your 50 basis point accretion, was the fact that you had hired McKinsey as a consultant to help you, quote, solve your capital problem, that's the way it was put on tape. Basically it doesn't look you need any sort of consultancy to get where you are. After that, you had also a report on the tape according to which you are on the verge of selling your U.K. private banking business. Could you clarify what happened on the consulting side, please, because that was a bit disturbing. That's question number one.
Question number two, the cost of risk in Africa ended up with a significant bounce in the second quarter. It would be helpful to have a little bit of a guidance for the end of the year or for the next year about where we should have the trend on the cost of risk there. Thank you.
Jacques-Henri, good afternoon. I will let Philippe comment on the second part. On the first one, of course, absolutely ridiculous, this element. We don't need, exactly as you said, any consultant to act on capital. We know our business. We are deploying, and I think all this is just noise, which makes absolutely no sense. We are acting. We are acting on different fronts. As we said, the net profit, which is good. A strong discipline on risk-weighted assets across the board. We have said that we have been going through all our activities to do that. The refocusing of CIB, which is going well, the disposal, which follows strictly the guidelines, which was decided when we commented on the adjustment of our plan beginning of this year, which is to sell.
We have started before, which is to sell assets, which can be nice to have, but at the end of the day, in terms of synergies, are not necessary that core, and to optimize the allocation of capital towards our main franchise. We know how to do that, and I think it was demonstrated in the last six months. Can I just say my confidence to pursue that trajectory. Back to Philippe.
Yes. Good morning, Jacques-Henri. Thank you very much. You give me the opportunity to highlight that the outlook in Africa is still very bright. Just a few figures. You see that the top line growth stands roughly around 5%, and we focus a little bit more on Sub-Saharan Africa. We are on growth of 10%. Regarding specifically the cost of risk on IBFS, you see that we are currently at 38 basis points in terms of cost of risk. We are well below our guidance. We give during our Investor Day that the cost of risk should stay within 70 basis points. My point is that in Africa, clearly the outlook is very calm in the subcontinent, in Western Africa and Central Africa, where the GDP growth is still around 5%-7%.
Maybe more contrasting in Northern Africa, and the cost of risk maybe reflects the complexity of the situation here and there. Down the road, cost of risk is very low, and we are comfortable with the guidance we gave two years ago, that we should be well within the 70 basis points for 2020.
Okay, gentlemen. Super clear. Thank you.
Thank you. Next question.
Your next question comes from the line of Azzurra Guelfi at Citigroup. Please go ahead. Your line is now open.
Hi. Good morning. One question is on capital. On the regulatory impact that you expect, can you give us some split between 2019 and 2020? Also coming back to the point on tiering. Last time, I think you had around EUR 80 billion of excess deposit at the ECB. Is it still the case? Thank you. Just to try to understand what could be the benefit of.
Azzurra, William, if he has the figure, will answer your second question. On the TRIM, if you refer to that, as we've said, we expect the bulk to be in the second half, of course, it can be also postponed. It's still a little bit uncertain, but a significant portion of the EUR 26-EUR 46 estimate range should be in the second half.
To be clear, in terms of iterate from one quarter to another, you see that our liquidity buffer increased EUR 11 billion this quarter. It's in average at the ECB, we have between EUR 30 billion and EUR 40 billion on the current account.
Next question.
Your next question comes from the line of Matthew Clark at Mediobanca. Please go ahead. Your line is now open. Matthew Clark, your line is now open.
Hello. Sorry, still on mute. Just a question on the EMC contribution this quarter. Could you break out what it gave on revenues and costs? I know there's the EUR 21 million restructuring or integration charge. In terms of the contribution to ongoing earnings, how much is already in there? Thanks.
Matthew, good afternoon. I will guess very limited, because it was just a process of integration. Sylvain, can you confirm?
Yes, it's insignificant this quarter in terms of contribution.
When should that start to be noticeable?
We don't change. We say that late next year. We will have not the full impact next year, because the transfer of the businesses will be over the next 18 months, starting in the second quarter. You will have the full impact in term of P&L, and we mentioned that it will be a EUR 150 million general impact in 2021, to be clear. You will progress from nearly zero this quarter to this full impact in 2021.
Great. Thanks very much.
Thank you. Next question.
Thank you. Your next question comes from the line of Guillaume Tiberghien at Exane. Please go ahead. Your line is now open.
Good afternoon. The first question relates to Basel IV. Would you care to give us a first assessment of what you think the FRTB impact could be? The second question relates to your TLAC. Obviously, you seem to have a very comfortable level, I'm wondering whether your stock of AT1 at EUR 9 billion, when presumably you only need EUR 6 billion, is not a little bit too high, and can you not optimize that? The third, it's not a question, it's just a clarification. I don't think you answered the question on whether the dividend is still floored at EUR 2.20.
Hello, Guillaume. Good afternoon. I will give William answering your two questions. I said, sorry if it was not clear. Yes, all the calculation that we made in the capital trajectory towards 2020, so it means for 2029 and 2020, encompasses in the calculation both the 60% and the potential application of the floor. The two are integrated.
Perfect.
William?
Hello, Guillaume. It is true that we have amongst the very strongest ratio with effectively TLAC being one of the first banks and well compliant, and also with a Tier 1 ratio of nearly 15% and a total cap of 18%, that benefit from the strengthening of the core Tier 1 ratio. It is also true that we have always had a policy to upfront the necessity to tap into the S&P markets. We may do some marginal adjustments because we're also very mindful of the economic sense of all of it. So far, we are happy to show that we have a balance sheet that is strong across the board, and that leads me to pointing everyone to the fact that core Tier 1 is only one of the key ratios. The way we steer the balance sheet overall is a little more comprehensive.
You're correct. On the margin, we could do some economic adjustments and replace, for example, some Tier 2 instruments with more S&P, if this is more economical on the margin.
On the FRTB, let me just say, we are still refining the interpretation of the text. Let me just remind you, we have capital market risk at EUR 17 billion. Our first assessment, certainly, it is very manageable. Let me just also remind you, it is likely to be implemented between 2024, 2025. At least not earlier than 2023, but more likely in 2024, 2025. No figure at this stage, but as I said, a very manageable impact at the group level.
Thank you.
Next question.
The next question comes from the line of Maxence Le Gouvello at Jefferies. Please go ahead. Your line is now open.
Yeah, good morning. My question would be on corporate finance. You have already achieved your yearly securitization. What kind of level can we expect on 2019, please? Thank you.
Okay. Maxence, good afternoon. Maxence , can you just clarify when you say corporate finance, because you mentioned securitization at the same time. Could you be a little bit more?
You mentioned-
Can you elaborate on your question?
You mentioned on your slide 20 that you have an active management of your portfolios, and you have apparently transferred some risk and assets for EUR 10 billion in first half of 2019 when you already achieve EUR 11 on 2018. My question is, which kind of range can we expect and what kind of RWAs can we expect in term of free up?
Okay, thank you. Thank you to clarify that, Maxence. Thank you, Maxence, for the question. Sorry for having you repeat it. We are managing our risk-weighted asset consumption in our global banking under the new limits we've fixed. That will play out the new program we have. We are managing. We don't change the total target we have to reduce by EUR 2 billion our RWA consumption in GLBA. We are using to address the origination we have. We are using all the tools, risk transfer, securitization, and recapitalization. The real point made in terms of risk-weighted assets is we will be at the target we are committed to using all the instruments we have. We have an active capital management.
I don't think it's very useful to add the part of the distribution part, but because we are managing with our OTD processes, the global risk-weighted asset consumption.
There are still, for me, I add just additional operations to come, so which give us a lot of comfort in the management of the risk-weighted asset in the coming quarters in terms of capital trajectory. We think that things are really under control.
Thanks.
Thanks. Next question.
Your next question comes from the line of Omar Fall at Barclays. Please go ahead. Your line is now open.
Hi, good afternoon. Just two questions. Just taking your comments around the impact of lower rates in Western Europe making your remaining international retail franchises more valuable, is the implication therefore that, when we think of the remaining disposals in the program, the 33 basis points-43 basis points, we should think of assets outside of that? In that vein, could you help us understand the synergies with the rest of the group of the custody business? When you stopped disclosing it separately a few years back, it wasn't making much money. Are you the right owner of that asset? The second question is just on the 26 basis points-46 basis points of further regulatory headwinds. Is NP calendar provisioning included within that?
Sorry if I missed the I know you don't have many NPs, but there are some pretty surprising outcomes for that in the sector, so I was just checking. Thanks.
Omar, the first question, I will leave the floor to Stéphane to comment on custody. We've said, regarding International Retail, the disposals are done. We will keep our current operations in Central Eastern Europe, Russia, Africa. As you said, I see that as a real and clear asset as effectively in the Eurozone, retail activities might further suffer from a longer low-rate environment than expected. That's done. We will not do more. I'm not sure to have understood exactly your question on capital. Can I just say, I think that we've given a range between 30 and 50 basis points, which precisely takes into account some uncertainty. We are also then making the calculation, that's why we have a range. The first point of the 12.8, on one hand, takes all the worst assumption and the best assumptions.
It's probably fair to say that at the end of the day, we might end up in the middle at this stage. I think that we give as much information as we can on that front, and we think it's still a reasonable range for those framing exercises for 2019, 2020. Séverin. Yeah. Sorry?
Sorry. It was actually just on NPE calendar provisioning, and the impact that might have and whether that's in your guidance?
Okay
of regulatory headwinds.
Okay. I will just give you on that, and then [Séverin Cabannes] on NPE. Yeah. C?
Yes. Hello. I assume you are referring to the backstop expected on new NPEs starting in 2018, which would have an impact for 2020. As you already said, we have already a quite high coverage ratio, so we expect this to have a very limited impact. It is included.
Great.
All right. [Séverin Cabannes]?
Yes. Regarding your question, it's a fair question. If you look at the synergies, which we have with this business, with other activities with the group, we have real synergies. We have synergies with global market activities, of course, but we have also synergies on financing advisory because corporate clients are also clients of our custody business. And we have synergies with the retail because, as you know, our custody activity is mainly institutional but also retail. There is real synergy with other clients, with other activities. The second part of our thinking is the capital intensity of this activity is limited. Today, the global capital allocated to GBIS businesses, SGSS, our custody business, represent 2.5%. The real point I have today in my plan is really to restore the profitability.
Even if the capital consumption is low, we have this issue in terms of return within our customer business. The plan we have launched is also covering our customer activity, and we have clearly an efficient and productivity plan in the plan to restore the profitability. For me, at that time, there is still a value to create in restructuring our customer activity. There is also a consolidation in the open market. You can, through our fees, increase your size, not necessarily through acquisition, which is not our strategy, but just to a normal commercial activity to grow. It's a side business, but I want to feel that we can deliver more value within Société Générale with this activity.
Sorry, just to follow up on that. Given that you're slightly ahead of the 12%, you're clearly very confident of your ability to generate more capital. If one of the levers had to be reduced, would it be the potential for maybe not selling the full 33 to 43 basis points worth of additional refocusing programs, i.e., to try to not dilute the earnings by selling some further assets? Could that be a possibility if the capital generation maintains its current track?
No. Listen, we have definitely a list of assets which makes sense in our view to sell, in particular, again, to allow the core businesses to have growth and further development, while of course, having the top priority in terms of building our Tier 1. I don't see a reason to change that assumption. We stick to our plan. As I've said, further processes have been launched to meet the target, and I don't see a reason to change that plan.
Thank you very much.
Next question.
Your next question comes from the line of Lorraine Quoirez at UBS. Please go ahead. Your line is now open.
Hi. Well, congratulations on achieving so much on the capital front in such a short period of time, I think these progress are very important for the investment case, obviously. Now, I'd like to move on to the underlying profitability. I can read you put a 9.7% ROTE, I think, if you adjust for some numbers in the corporate center, the underlying profitability is actually a lot lower. Even if you have progress on the capital, I was wondering whether this structural low profitability is not something that could come and haunt you again in the future. Thus, my question would be, how can you accelerate the cost-cutting, particularly if the interest rate environment is trending lower? Thank you.
Lorraine, thanks again for your kind words on the capital. Can I say that this issue of profitability is probably common to many banks in Europe? We are engaging in a cost cut. We are following our program. As you know, we don't have yet all the benefits of things which have been launched, as we just mentioned, for example, on the CIB, it's fair to modest part of the cost saving that we have in mind. We will further improve profitability with the contribution of International Retail and Financial Services. Of course, we are monitoring strongly the cost on the French Retail. Can I say that we are ahead of also our target that we're given for this year.
As you can see, a lot of effort are made on cost, and we know it's also a key lever, going forward in terms of profitability and an area of focus for all the teams in the group. We are working on that significantly, and we speak to that discipline on the cost side. Can I just highlight the decrease of cost in the French Retail this quarter, decrease of cost in the CIB, this quarter also, even if we don't get the benefit fundamentally of the full restructuring, I think we are moving in the right direction.
Maybe just to follow up on the French Retail. The costs are coming down 1%, you still concern cost to be up 1% or 2% versus the previous year. What's happening in the second half? Is it really like restructuring costs being booked or can you explain it?
Yeah. Lorraine, it's fair. We don't want to change our yearly guidance every quarter. It is likely that our initial guidance was a little bit now it can appear a little bit conservative.
Thank you.
Next question.
Your next question comes from the line of Kiri Vijayarajah at HSBC. Please go ahead. Your line is now open.
Yes. Good afternoon, everyone. First question on French Retail. Given the move in rate expectations in June, I'm just wondering if there's been any sort of flow-through in terms of mortgage pricing, and in particular, actually, if there's sort of early indications of refi activity picking up in French mortgages. I know it's kind of early days, but just in terms of if you've had incoming inquiries from mortgage customers. Second questions for the other Philippe. Loan growth in the Czech Republic, that seems to have slowed quite dramatically, just 0.7% you show on slide 57. Is that the rate rises in the Czech Republic starting to bite into loan demand, or are you turning a bit more cautious on the Czech Republic? Just some color on what's going on there, please. Thank you.
Yeah, Kiri. First, Philippe, on the refinancing of mortgage, then the second one on Czech Republic. Philippe, a mic .
At this stage, regarding renegotiations, the volumes stay very low. We are at 3%. I remind you that first quarter of 2017, we were at 25% at the peak. At this time, we do not see a significant wave. The repurchase, anticipating the repayments are also quite low at 4.9%, which is what we call the normal level.
The second Philippe on the Czech Republic loan evolution, please.
Yes, Kiri. Thank you very much for your question. Here, a point of clarification. If you want to measure and to go properly the evolution of the funding loan in Czech Republic, you have to strip out a technical effect on the repo book. If we exclude this effect, in fact, the loan growth stands at roughly between 3.5% and 4% top of my mind. More in line, a little bit below the market, more in line with trends we see on the market. We have to neutralize this effect.
Okay. Got it. Thanks, guys.
Thank you. Any more question?
There are currently no further questions. Please continue.
Okay. Well, I think as there's no more question. There's another question, sorry. Yeah?
There is one further question just come through. It's from the line of Pierre Chedeville at CM-CIC. Please go ahead. Your line is now open.
Hello. Good afternoon. Two quick questions. First question regarding the cost of risk, and particularly in the CIB. I wanted to know if there are any write-backs this quarter regarding the cost of risk, because I'm a little bit surprised to see it so low, regarding the fact that we all know that some situations are quite tricky in France on some dossiers classé, I would say. My second question is regarding Romania. We can see here again that the cost of risk and also in Czech Republic, the cost of risk is a net write-back. Here we are not in an environment linked to, I would say, low interest rates. The correlation between low cost of risk and low interest rates is not evident, I would say. How do you explain that quarter after quarter, we have these write-backs?
Shouldn't you do a definitive write back once for all, that we could see, I would say, the normality profitability on these two subsidiaries? One suggestion, if I may. You have talked about a deep dive on international banking, which is a very interesting perspective. I think it would be also interesting to see what is your strategy and your position regarding the payment fight, because we see that a lot of banks and new companies are very eager on this subject, and we don't know a lot regarding such strategy on payments. Thank you very much.
Pierre, good afternoon. I take your point on payment. We might not be able to do it on November 20th, as we have already many items, and I think very interesting ones, actually, in terms of further development and profitability going forward. I take your point. We leave the floor to Philippe in a minute to Romania. Can I just say on the overall cost of risk, in particular referring to what you said, Pierre
Yes.
We are by definition, provisioning when there is a potential issue. We don't comment on any specific file. This good level of cost of risk includes the adequate provisioning. You might know we might not be necessarily the most exposed on certain of these files. I just would like to reiterate our comfort regarding our guidance. We said 25 basis points to 30 basis points. We stand at 23 basis points. I'm very confident on the capacity to maintain this guidance and this low level of cost of risk in the year 2019, so for the second half. Back to Philippe on Romania, more specifically.
Yes, Pierre, thank you very much. It's true that we have a write back this quarter again in Czech Republic and Romania. We have for EUR 7 million in Czech Republic, roughly EUR 25 million in Romania. Here, just I remind you two things. We don't have this quarter reimbursement of insurance. We have this benefit last year. I think this is more or less the effect of IFRS 9. You have to capture, let's say, in a forward-looking view, all the adjustment on your pay attribute. Currently, the outlook is positive and the benefit of that, this is fairly technical. We have, as expressed of our exposures and cost of risk on the Euro business unit, stand at 4 basis points, so it's very low. You all know the benefit and the pitfalls of IFRS 9.
Clearly, as we speak, the outlook is positive. Once again, I confirm that we are comfortable with our guidance for the cost of risk on the IFRS for this year, next year.
Okay. Thank you very much.
Thank you. Apparently there is no more question.
There are no further questions.
Okay. Well, thank you very much for your participation. Have a nice summer break if you can take some holidays in August, and see you in the autumn. Thank you very much. Bye-bye.
That does conclude the conference for today. Thank you for participating. You may all disconnect.