Great. Good morning to all of you. Thank you very much for being with us this morning after this bank holiday in the UK. We are going to deep dive on to our businesses, French Retail and Global Banking and Investor Solution. What I just would like to do in the introduction is to speak a little bit about what we are not going to speak about.
And perhaps also importantly, give you beyond entering into the details and integrity of these businesses. Some common important parameters features which are guiding our daily action and also nurturing our long a term perspective. We are not going to talk about International Retail Banking and Financial Services. I'm going to speak a little bit about this, but it is likely that we will organize something, an event like this in the second half in a similar format. So first of all, let me highlight a few things on this group, which are really important and part of its DNA.
The first thing I would like to say, I really believe that we have shown, and we have a track record of combining expertise and innovation. It's really at the heart of the history of this group. And we are pursuing that trajectory. We are developing a model with long term relationship with our clients. It's not a transactional model.
And whether there are corporate clients or retail clients, our clients, I think, value in the long term this capacity to deliver. When I look at expertise, it's of course expertise in certain products, probably well known to you whether there are structured investment products with all kind of underlying assets, structured finance and advisory in selective areas, which are really feeding this relationship with the corporate clients. But this is the same with individual clients as you will see in particular in their key moments of their life and in particular with Wealth management. Innovation, I think we have proven our capacity again to deliver new services, new business models in the long term and these business models are not built just in 1 quarter. Here I have in mind, of course, what we've been able to do with ALD, long term growth and also Boursorama.
We will have a specific presentation on Boursorama, let me just remind you that 5 years ago, we decided to push for the development of what was at that time what I would call an internal startup and which is now much more than just a startup. It is also in the way we innovate and pioneer in new areas. You will see that, for example, in the new renewable energy sector, which is a very big growth engine. We are ranking very well in the world and innovating as probably our teams from GBIS we'll explain. And it's also, I think, in the way we work together and it's in particular important when I think about embracing the new technology because it is probably the number one challenge at the end of the day for all financial service industry.
In the way to disseminate this effort, I'm very happy to see that we are acknowledged and you know there is this ranking in front between all the CAC 40s. It's not just financial services, which is important. It's also industrial companies. We were number 1 in the ICAC 40 award for 2018 after having ranked permanently in the top 2 and top 3, which I think reflects because again, it is the whole ecosystem which assess this capacity the capacity to work together. We are going to communicate in a few days on an internal startup call where we have launched the internal startups which are already very promising.
That's just an example. Sorry, what I would like say beyond expertise and advisory is also to understand for what purpose. And here, I would like to highlight in particular that we think we have precisely the expertise to contribute to positive transformations of our economies. These positive transformations will feed our growth. But again, beyond this is also something which are very motivating for our stakeholders.
I would like to highlight 3 areas in particular, as I said, the transition towards renewable energies. This is something which is becoming a very important sector for us. We are number 2 in terms of financing renewable energy in the EU EMEA region, number 4 in the world, and we are doing this across all geographies. 2nd, mobility. The usage of cars it's fundamentally changing.
The kind of ownership is changing, and we see definitely ALD as a key and a clear leader in that sector with potentially very long development long term development. As you know, it started with a corporate business, car fleet management for corporate. It is now developing a business for individual clients, something like 100,000 cars are private leased cars. And eventually Africa. Africa, let me say, maybe today it's not your priority and for most people.
But we consider that the long term development of African Economies is probably not just a business opportunity, but one of the biggest challenge for Europe. If we think about monitoring the immigration pressure, for me, it's clear that the sustainable development of Africa will be one of the top priorities of all European governments. Behind this, it means, of course, a fantastic opportunity for us to accompany these economies, the African government but also all the multilateral agencies in their efforts to put more money on the ground. And at a time where all international banks with marginal presence in Africa are basically leaving, I think it will be a further differentiating factor. As you can see contributing to these long term trends, again, is not only for us a growth driver, something which will feed our businesses in a profitable way, but also which will make us, we think a responsible bank in terms of committed being committed to these common goals.
Just a world a further world on responsibility and responsibility of banking. As you know, probably at the end of the day, when you think about what would make a bank successful, alongside innovation, it's around being responsible, the question of conduct and culture. I think that the enhancements our shared common culture on one hand. And
of common,
well established, well organized, with good resources, control functions, on the other hand, has been, in the last 10 years, a permanent effort for us. It's very clear. And here I remain very humble, there is more to be done there. We have further projects in that matter, but I think that we have the benefit of having put all the legacies of the crisis behind and already started the journey a few years ago. A last word on the integration of this model because at the end of the day, why to have these businesses together?
It's really to have synergies. A third of our group revenues are generated thanks to synergies between our different businesses and or different geographies. It will be illustrated, I'm sure, in the coming presentation. And I think it enables us, of course, then to develop this business, conquer new clients at with a more efficient way of doing business. The world on the integration from a geographical point of view.
As you know, we are a bank with European roots. We keep this European roots, something like 68% of our revenues are generated in Europe in the large concept of Europe. From a retail point of view, we have, as you know, completed the refocusing of our International Retail Banking having now announced the sale of our last subsidiary in the Balkans. So we are happy now to focus on Czech Republic, Romania and Russia, and of course, in Africa. Looking at Asia and the Americas, we have decided, as you knew, to focus on the CIB.
And I think that overall, this geographical focus and this business focus is perfectly appropriate for us. I will be very short because in a minute you will have a lot of detail on French Retail and Global Banking and Investor Solutions. What I just would like to remind you as an introduction is that we are really combining 2 approaches: omnichannel businesses. I mean the combination between digital channels 2 offer transactions, simple transactions to the clients online and the presence, a human presence with networks to provide advisory services when needed. And second, Boursorama, our online bank with 1,800,000 clients as of today.
The clear leader in online banking in France, which is differentiating itself from other neo banks because it provides a full banking service. We are keeping developing. We are announcing today that beyond the EUR 2,000,000 target that we were able to meet earlier than factored, we will meet this EUR 2,000,000 target in 2019. We aim now at more than 3,000,000 clients in 2021. And importantly, you will see that this business model is intrinsically profitable.
Benoit will come back to that and explain all this in detail. I just would like to highlight 2 key parameters in the way we manage this retail bank in France. First thing permanently in the last few years and today, we are clearly giving the priority to return on equity, preserving the capital usage rather than just the revenue generation and piling up loans, which can be sometimes at very low margins. So this discipline has remained, which makes us probably the most profitable bank in this market. And second, as Philippe Emerick will elaborate, we are probably at the inflection point in 2019 in terms of being able to reap the fruits of all the investments we've done in the digitalization of processes and hence having a capacity to come back to positive jaws in 2020 and going forward, improving step by step our operating efficiency.
On GBIS, again, Severin with his team will comment more in detail. What I just would like to highlight is that what we have announced in terms of strategic adjustment, has been based on very thorough examination, very granular examination of all our activities, all their prospects in a new environment, in a new regulatory framework and that we are very confident to be able to deliver our target while keeping the consistency of the model towards our strategic lines. And this is very important. So we have a capacity definitely to improve the profitability. Let me so just spend a little bit more time on the businesses that we are not going to present, but which are really a pillar of profitable growth for us today as well as in the coming years.
I will start again with International Retail. Let me just highlight and you see that in the translation of the growth of revenues and the profitability. First of all, you have here favorable market dynamics. These favorable market dynamics are fed with good GDP growth overall and prospects. It is true for Central and Eastern Europe, Czech Republic and Romania, 2.5% for Czech Republic GDP growth this year, 3% for Romania.
In Russia, the growth is expected at 1.5%, but the retail market should grow between 12% and 17% according to the central the Russian Central Bank, starting from a very low leverage of households. For Consumer Finance, and we have very good operations across the board in Europe, consumption remains relatively good. And in Africa, growth also remains pretty good. The IMF has released recently its latest forecast for the different countries in Africa. In the countries in which we have a presence, in particular, Sub Saharan African countries, which do not depend too much on commodities, the GDP is very good.
Needless to say, beyond GDP, the rate curve is totally different. It's a fundamental ingredient potentially of growth revenues and that's why you have such a gap currently between what you see in Eurozone retail markets and in the countries like this in retail. In these markets, we have a capacity to further enhance our franchises. 1st of all, by further like we do to a certain extent, of course, in different environments in France. But differentiating in the retail with the best client experience, the digital transformation in Russia is not very different from what we do in France or in anywhere in Eurozone.
Russia is probably more advanced in mobile penetration than Eurozone countries. And the development of digital services is pretty well advanced. Same thing in the Czech Republic, more or less the same features. Of course, in Africa, it's different as the starting point. The legacy
is that significant, but same thing, digital
technology is also there. And as you know, we are developing also our own electronic wallet. On the CIB, we are working, of course, leveraging on expertise. The benefit that we have as being an international bank with specific whether it's in structured finance or capital markets compared with many local banks is a clear edge whether it's in Central and Eastern Europe, Russia or Africa, we will be able, I'm sure, to answer questions if you have on this. And the second thing is we are also able to further improve the gross operating efficiency.
It is true when we look at, for example, certain subsidiaries, the Czech Republic, for example, is moving towards agile working Wey's organization. 40% today of Central Functions are organized in an agile way. It's exactly the same that you can maybe see in your own organizations. It is true also in Africa, for example, where we are currently implementing all our resources in Africa, close to the ground and of course, reduce then the staff in Paris who used to provide services to Africa at more expensive cost. Beyond this, there are also some tactical improvement such as the merger between Delta Credit and Rosebank in legal structures are merging.
Things like this will be which will further improve, of course, the capacity to develop and deliver net profit. A world also on Insurance Financial Services. We have 3 businesses here: Insurance, Fleet Management and Equipment Finance. Across all of them, the prospect of growth and profitability is very strong. Let me just remind you, insurance is, of course, at the heart of bank insurance model in France, but also in all our retail networks.
Overall, our insurance business represent EUR 2,300,000,000 of revenues, and that's 9% roughly of the total group revenues. Well, Fleet Management, I've already commented. It's a long story long successful story of growth, more than 10% a year of the fleet. And as I've said, alongside a structural growth market, which is the car Corporate Car Fleet, the development of private services and a lot of growth going forward. An equipment finance, which is also Alida as well as ALD, a world leader.
ALD is number 2 worldwide and equipment finance is also number 2 worldwide and number 1 in Europe. It's at the heart of the economy, right? It's financing equipment goods across the world and is doing also very well with something like close €30,000,000,000 of loan outstandings. What I'd like to highlight is themselves these businesses are transforming. They are innovating.
They are partnering. ALD, just to give you a few examples has more than 150 partnerships with banks. For example, they provide the service to banks which have not this capacity, there is a concentration of scale effect in this market. We are also pioneering partnership with companies like AON, Enel, Big Utilities or a company called ChargePoint, which is the leader in the electric vehicles charging networks to develop electrical cars because we are accompanying this transition it was also different cars. Regarding equipment finance, we are very much also developing new partnership with European Investment to also move in terms of financing climate transition.
And let me mention one thing, which is interesting also to show the culture of the company in insurance. We've just announced we launched in 2015 again an internal startup called Moonshot, starting from scratch. From inside the company, internal talents, it's contractual insurance. It means the insurance you do when you transact on the Internet, you buy something and you want to tick a box to have an insurance on something. Very small tickets, but an insurance precisely, which is cheap and maybe give you security.
This startup starting from 0 has just signed an agreement with a partner called Road Zen, which is a leading business in global fintech, Indian based fintech, with them entering into a capital, taking a stage at a valuation much higher than, of course, what we invested in the start up to develop the leader in the European precisely contextual insurance market. What I'm just showing here, reflecting is that, okay, we work with external startups. And of course, it's good, but we are able also inside to generate our own innovation capacity and new businesses. Let me say a word on something very different. The risk profile and culture, again, something which is common to all our businesses and that we do not always comment that much in all aspects.
Let me just highlight on the credit risk that we've made fundamental progress in the last 10 years in the quality of our origination. As you can see, in the last 3 years, we have had a cost of risk of 25 basis points on average among the best in Europe. We started this year at 21. As you know, we've kept the same kind of guidance, 25% to 30% for this year. 2nd, we have a very low NPL the ratio, which is going down step by step at 3.5%, which is also very well covered.
Second, on the market risk, also very well contained. On average, 5% of total risk weighted asset since 2016 represent market risk. We have a very disciplined approach in terms of market risk, and the value at risk has remained also very low since 2013. And last but not least, and I would like to come back to that, operational risk, which may be today is the risk which is the most significant to a certain extent, maybe also more difficult to predict. We have, as you know, settled all our litigations last year.
The effort on compliance has been very significant. We have not waited for the settlement to start the journey, as I said, and we had anticipated. But beyond this, we have established now 2 years, a transversal culture and conduct program to ensure that all these elements, not just of compliance but also of culture, we're embraced in all our activities. And 3rd, we've put in place last year, I think, a pretty innovative remuneration scheme for our top 60 managers,
where whatever
their business is, their activity, a very significant part of the variable compensation is linked to common objectives, which are not just financial objectives, which are client satisfaction, which are the level of engagement of the staff on a transversal basis and on CSR objectives. And I cannot underestimate, I think personally, the benefit something like this to cement the action of a management team, which again has a responsibility to manage a group which is integrated and we share, of course, common clients. Let me just remind you a few things on our short term priorities for 2020 that you probably have in mind. First of all, road map to profitability. We have readjusted our target between 9% 10% return on tangible equity in 2020 in a more challenging environment than the one we had in mind end of 2017.
It is the environment which we now we anticipate to remain at lower rates, less growth, slowdown of the economy, not a catastrophe, but a slowdown of the economy, in particular even more 2020 than 2019. We've remained always relatively positive. And I think that we have we see the confirmation of that actually with the real GDP figures. And we are working on that. Fundamentally, we've, as I said, have the benefit of a strong comfort on the cost of risk.
We're comfortable with our guidance. No bad surprise to be expected from settlements of litigations. So it's really the optimization of gross operating income. And this is going to be presented more in detail for to our businesses. I've already told you the comfort we have on our International Retail Banking.
And again, it's a mix of growth of revenues, leveraging on certain business initiatives, an improvement. As you will see on the French Retail, turning point in 2019 2020 will go back to growth, Philippe will comment. And of course, on the cost, a strong attention on the cost. Overall, a EUR 1,600,000,000 saving plan, EUR 1,100,000,000 which was announced 18 months ago, an additional EUR 500,000,000,000 sorry, in Global Banking and Investment Solution. Severin again will come back in that more in detail.
Delivering our roadmap to capital target 12%. Here you have again a few reminder. First of all, in GBIS and Severin will again come back to that, answer your question. A €10,000,000,000 reduction of risk weighted assets by 2020. EUR 8,000,000,000 in Capital Markets, EUR EUR 2,000,000,000 in the Financial and Advisory businesses.
You have seen that we have started implementing this quickly and smoothly. We've already EUR 2,300,000,000 in the Q1 coming from Capital Markets. And on top of that, there will be 10 to 20 basis points overall in the group of optimization,
such as
securitization, insurance, etcetera, with some of that also in the Q1. The second point is overall more disciplined approach in the growth of risk weighted assets. We plan now a 2% average yearly growth of risk weighted asset between 2018, 2020 rather than the 3% rhythm we had in mind at the end of 2017. But maybe more importantly, and you have on this slide how we will differentiate the capital allocation in the different businesses. As you can see, a clear differentiation and more capital allocated to the more profitable and more promising businesses such as International Retail Banking, plus 5% or Financial Services, plus 4% compared de facto, for example, on Global Markets and Investor Services at minus 9%, all this being, of course, at constant COP and GR and C and excluding all the model reviews, including the TRIMs that we have already commented to the markets.
Let me just conclude this presentation, this introduction. Again, we have the conviction that we are going to deliver our short term financial goals. And I hope that this morning with the 2 businesses probably at the heart of that, you will have even more detail to have even stronger conviction there. But beyond this, I just would like to finish on something again looking at the longer term. And here, every one of you can have its own conviction.
We might disagree and only time will tell. But when I think about what will make a bank successful, I really consider number 1 is around innovation. Like a few sectors, retail sector, automotive, the banking sector, the financial services are going through an immense need of adaptation to new clients' behaviors. We have really the ambition to provide a service which will be fundamentally with processes fully digitalized. And yes, there is an effort in the investment there, but I think that the benefits in the long term will be massive because it's a way to improved the client experience, let's face it.
And also, of course, to be more efficient internally compared with steel processors today, which are not digitized front to back and automated. The second thing is I think the capacity to be able to lever on innovative business models. From that perspective, we have the benefit, as I've said, on businesses like ALD, Boursorama, which have ahead 10, 15, 20 years of growth. It's not true for, in my view, plain vanilla, let's face it, retail banking. And these businesses will be probably more cannibalized by all these changes.
And the capacity to have this kind of assets, in my view, is key for the future of any financial institution. And third, I consider that our positioning in promising markets and geographies is also a competitive edge. Let's face it. The mature eurozone market will face further unfavorable conditions. It's probably difficult to imagine a sudden GDP growth improvement, a strong improvement of interest rate.
When you think that you can have a difference between 8% 10% of revenue growth a year, that makes a difference. When you add year after year, that makes a huge difference. And same thing, we are, I think, one of the few European banks to have the benefit of these positioning in these geographies. Of course, beyond that, 2 ingredients which are absolutely crucial, as I already commented: capacity to innovate, remaining responsible. Having this culture shared across the group, it's not just a question of figures here, it's a question of history.
It's a question of tone from the top. It's a question of fundamental DNA of the teams. And I must say, my conviction is Jean Raul at Boff. Even if here again the journey is not finished, let's be humble, but we have both of that and we have, I think, the capacity to make further progress. I will not be longer and I will immediately turn the floor to Philippe.
We will start with the French Retail. We'll then have a Q and A session, then a pause and we will enter into the presentation of the Global Banking and and Investment Solutions. Thank you very much. Philippe, the floor is yours.
Good morning. I'm very pleased to be here with you today to present our French Retail Banking activities. I will be accompanied by 4 colleagues, Mike Christine Duchollet, Designated Head of Societe Generale Retail Banking Francois Mercadale Delasalle, Chief Executive Officer of Credit Dunort Benoit Grisony, Chief Executive Officer of Boursseur Hamard and Bruno Delas, Chief Operating Officer for LG French Retail Banking. Our purpose is to share with you for 45 minutes our activities on our strategy. Our presentation will be followed by a Q and A session.
We have 2 main objectives in French Retail Banking. 1st, stay relevant to our customer by improving the experience and their satisfaction 2, increase our profitability by growing the top line and reducing the cost base. That's our focus and that's what we will explain to you by answering 3 questions. What are our strengths, what are our key initiatives and what are our financial results. But first, I would like to remind you briefly some specificities of our environment and domestic market.
As you know, the banking industry is changing dramatically. Customers, individuals, corporates change behavior. We are increasingly demanding real time, convenient and cheap banking services, But we also will still want personalized attention. Competition orders with new entrants from everywhere, challenger banks, non banking payment institution, credit intermediation platforms, big tax. Furthermore, during the last years, the regulatory framework has significantly redefined the way we operate.
And finally, I cannot but mention the low rates environment, which has been and still it's the most penalizing factors for our revenues. Disruption and market fragmentation are already taking place and could trigger material revenue migration. This movement is also offering for innovative banks real opportunities, including outside the boundaries of our industry. We believe in the potential of our domestic market, the French market. France is a wonderful country full of diversity.
Regarding its banking sectors, 3 specificities should be mentioned. It is dominated by 3 mutualist networks. The market is very competitive as demonstrated 2 years ago with the mortgage renegotiation wave. And it is characterized by a combination of high online banking penetration and persistence of a very dense branch network. Let us not forget the attractiveness of this market.
France is a country with a positive demography. The country is rich with a GDP per capita above the European average and with important savings capacity. The country is also characterized by a strong entrepreneurial energy. It is true that regional dynamics are uneven, but Societe Generale and Credit D'No are well positioned in the most attractive regions. And finally, unfortunately, people still trust the banking system and their own bank.
So we operate on this dynamic market with 3 strengths. Let's focus first on our key asset, our client franchise. Our client base, combining Societe Generale, Credit Union on Boursorama is strong and diversified. 700,000 corporates and professional almost 11,000,000 of individuals. On this slide, you can see the breakdown of the 2018 revenues by client segment.
2 key takeaways. 50% of our NBI is generated with corporate blue boxes And Professional, gray boxes. These segments are at the core of the DNA. They are a great source of synergies with all AG Group businesses. And as I said before, there are sectors with potential in the French market.
Regarding individuals, our overall portfolio is well balanced in terms of age distribution of our clients and duration of our relationship with them. Wealthy, Matafluent and affluent clients represent 34% of our total NBI. There is a clear difference of revenue generation before the various subsegments. Wealthy or mass affluent clients generates revenues 3 times higher than an affluent client would generate twice as much revenues than a mass market client. Therefore, the tiering of our marketing approach is key.
As we will see later, we clearly want to continue to serve our core clients who generate most of the fee rated revenues with the best client experience, the best offer and the best expertise. We also continue to address the mass market segment given its contribution to our revenues, EUR 1,200,000,000 and because some of these clients, notably the young people will migrate in their lifetime to the affluent and mass affluent segments. We'll continue to adapt our model to meet their needs we've a cost efficiency with a cost efficient setup by leveraging our digital banking capabilities. Our second strength is our specific setup in France with 3 banks: Societe Generale, a powerful universal bank with a strong franchise on corporate, private banking and mass affluent clients. Credit Union Group, which is 8 regional banks, premium bank with a highly recognized franchise on SMEs, professionals and entrepreneurs.
Bruce Arnaud, leader of the online banking market in France. My Christine, Francoise and Benoit will comment more into details the 3 banking models. I just want to insist on one point. There are very few clients coming to the 3 banks, And especially between Societe Generale and Credit Unor, less than 1%. This situation validates the fact that each value proposition is considered by the customer as a different and specific one.
We strongly think that this multi bank approach is powerful and consistent with some major trends of the French market such as the fragmentation of the market and the rise of regional and community banks. To make it short, it is a differentiating factor. These 3 banks I'm not acting on a standard basis, but on the contrary, have developed many cost synergies. This is our 3rd strength. We commented this topic during our Digital Day last November, But I just want to remind you the key points.
A significant part of our operating activities is share between the banks through processing platforms such as Transactis for payments and Transfinance for short term credits. Technological capabilities are also developed and materialized between banks. Two examples, The accounts and documents aggregator function has been developed in Borsellor Ama after the acquisition of Fiducio And has been deployed in Credit Unor and in Societe Generale. 2nd example, the tools used for the KYC remediation our share by Societe Generale and Credit Union. Of course, best practices and innovations our spread across the banks.
The recent creation of the group innovation direction will help us to go even further, including with Asia Retail Banks outside France. Critical point, a major part of Societe Generale and Credit Union IT system is mutualized. The 2 banks share 60% of the Run the Bank IT activity, mainly on IT infrastructure and digital hubs. Last November, we told you how our common IT division is conducting a digital transformation, making sure that the new components such as data lake, digital hubs or artificial intelligence are shared by the 2 banks. Finally, let's mention as well that the AG Group corporate functions, compliance, risk, finance cover the 3 banks.
Therefore, the teams share the same methodologies and most of the tools related to those functions. Now I will present you what our strategy in Retail Banking. We have 2 strong strategic actions: expand our reach and adapt our model. Expand our reach. First, we still want to develop our core client base.
As mentioned before, we are proud of our existing client base, but we are facing in the French market an intense competition the new entrants on the incumbents. Therefore, the pace of new customer acquisition will remain a priority with clear and identified targets. In Societe Generale and Credit Unhors, we'll continue to conquer customers focusing on core segments: youngsters, mass affluent clients, professionals and corporates. We also make sure that we keep our leadership position on some geographies, Paris area, for example, for Societe Generale, all markets, legal professions, for instance, for Credit Union. For Bouxurama, As Frederic said at the beginning of our meeting, our ambition is to stay the leader in the online market.
We have built a best in class online bank that customer value, which has a very efficient operating model And which is intrinsically profitable. The 2,000,000 clients milestone will be achieved by September of 2018, 1 year ahead of schedule. Our new target is to reach 3,000,000 customers by the end of 2021. Second, we want to leverage further on cross sell and sell up opportunities. Step 1.
We'll continue to capitalize on HJ Group expertise to offer more and more qualified services to our clients. We have still some room for growth with 4 key internal partners such as AG Insurance, ALD, OSG Real Estate. Step 2, our strategy is also to keep innovating. As Frederic mentioned, we have a strong track record of innovation in Just remember that we were the 1st bank in the world to propose a crypto dynamic card in 2017. We'll keep on investing on new technologies, but innovation is not only a question of technology but also of mindset.
As you know, to encourage creativity, Societe Generale launched by the end of 2017 a major entrepreneurship program called the internal startup call. Several start ups have passed the assessment phase successfully and soon the projects will contribute to enlarge our range of services. Step 3. Our strategy is also to develop external partnerships to broaden our range of products and services. The idea is to master a customer center platform through which other providers can interact with our customers and sell differentiated products and services.
The Credit Union case with more than 30 active partnerships we'll be detailed later in the presentation. Overall, with this cross sell and up sell push, our objective is 3 fold. Consolidate ourselves as the key point of interface with Owing the relationship on the associated data 2, deliver one stop shop for all banking products and move beyond traditional banking to address broader customer journeys And free offer open platforms to allow for third parties to plug in through APIs and provide additional services to our customer. 3rd, in addition to new clients and new range of products, we want to explore new territories on a B2B2C mode. The idea is to offer in white label mode some of our assets 2 players that will continue to manage the end of customer the end customer relationship.
Some of the specialized subsidiaries are already in the Open Banking area. Two examples: insurance with its moonshot startup and France Finance with its consumer credit distribution programs. The acquisition of Treasor in 2018 is a unique opportunity to expand our ability to find new distribution channels for our products. Therefore, we will further structure and develop our bank as a service know how. The key success factors on this model will be operational efficiency and scalability.
To summarize this important slide, to expand our reach means to acquire new clients, to grow our wallet share with customers beyond financial services and to serve with some of our assets all the films in a B2B2C mode. Our second strategic axis consists of adapting further our model. To increase client satisfaction and to improve our efficiency, our target model, as Frederic mentioned, is 1st, to be an efficient producer for all standards operations. We are investing to automate and digitalize as much as possible day to day banking operations. In addition to client satisfaction and cost reduction, this approach contributes to reduced operational risk and compliance risk.
And then To offer high level of expertise, both human and AI driven for key projects of our clients with Telarmaid Solution and Advisory Services. To protect our model, we have launched 3 years ago a large transformation plan with a proper mix of investment in traditional and digital capabilities. I will give you some concrete examples. Enabler 1, digitalized client journeys with best in class experience. Our key question is, Are our digital capabilities robust enough to compete with platforms on Fintechs?
Our answer, we are closing the gap. We offer to our clients the use of the banks 20 fourseven in self care for rich mobile application. It is quite comprehensive, user friendly and very much appreciated by our clients. Our clients can also purchase the main banking products and services online or with our remote relationship manager, thanks to the electronic signature. It is a success with 50,000 signature each month.
And we are also progressively digitalizing our main banking processes, accompanying mortgage onboarding personal loan applications. Enabler 2, leverage on data on artificial intelligence. Two examples. The combined use of data on artificial intelligence allows to optimize and personalize our marketing approach and promote the right offer at the right moment from the right touch point we saw responsible usage of data to remain the 1st trusted partner of our clients. 2nd example, Thanks to AI, we have developed a capacity of detection of fraud by identifying risk behavior in real time.
Enabler 3, expertise on specialization. Specialized relationship managers have been appointed for specific segments, back offices have been specialized and all training programs have been redesigned. And we have also adapted our managerial practices. Enabler 4, overall setup transformation. So this is probably the most visible effect of our actions with a large reshaping of our networks.
Mike Christine will elaborate on this matter. I just want to give you some headlines. Sharp reduction in the number of branches, minus 22% for AG since 2015 and minus 9% for Credit Union. Differentiated formats with flagships, classic branches, secondary branches, professional corners, business centers, nomad bankers, proactive remote platforms. Major back office adjustment and deployment of agile ways of working throughout the organization.
The setup transformation has a very significant impact on all teams. For instance, between 2016 2020, a total of 3,450 FTE reductions are planned in HD Network. Enabler 5, digitalize on data centric IT systems. As detailed during the digital day, We have digitalized our IT systems by using our strong core banking system as backbone and building an ecosystem of digital bricks around it. This digital decoupling free ourselves from our legacy system constraints and give us the flexibility to ensure best in class customer experience to move quickly, to minimize execution risk and to integrate our external partners.
So our transformation is deep. We are developing a flexible, adaptable model, And we will be able to continue our attention to the market in the coming years. Our financial results reflect this overall transformation strategy. During the last year, the interest margin on deposit has been impacted by the low interest rate environment in 2 ways. 1st, the former generations of stable deposits have been replaced by less remunerated generations.
2nd, in the context of low rates, other liquidity in the market and more volatile customers' behavior, we have shortened our ALM policy. This downward trend is called to diminish and the margin on deposit will therefore progressively normalize. Meanwhile, the net interest margin on credits will mechanically increase, thanks to a successful selective origination strategy, we have protected both our margins and our credit risk profile. We will maintain in the future this balanced approach between production volume and profitability. Overall, we are getting closer to the inflection point in terms of net interest margin.
It will stop decreasing year on year and will increase sequentially before the end of the year. Fees should for Paypal progress, thanks to the many business initiatives I have mentioned. In the past, Our 3 banks have consistently demonstrated the ability to generate commissions both on new activities such as private banking On more recurring activities, flows, means of payment. Fees should be stable in 2019 despite the impact of a cap on banking fees for vulnerable clients, impact of EUR 60,000,000 and increase in 2020. After the revenues, the cost side.
Our costs are mainly explained by the impact of our transformation, our growth initiative and the regulatory charges. The first important point is that the transformation plan generates actual savings. They are clearly visible, red column, the evolution of our cost base between 2018 2020. These savings are delivered according to plan and are principally related to staff downsizing in front and back office. We are partly offset by spending increase in growth initiatives on IT cost.
Growth initiatives are of 2 kinds: 50% is about Boursorama Additional Development and 50% about critical growth drivers such as consumer credit, private banking insurance and real estate investment. The increase of IT cost Corresponds to the investment related to the transformation effort that, unlike HR and real estate related costs, are not covered by the provisions set up in 20 2017. They are tightly monitored and strictly aligned with the transformation program. Savings are also partly offset by increase in costs resulting from the new regulatory requirements, taxes and to a lesser extent compensation growth linked Let's move to our overall profitability. In 2018, our French Retail Banking activities posting a good level of profitability with return on normative equity of 11%.
Despite the low interest rate environment, increasing regulatory requirements, investment in network transformation and Boursorama Development. Our networks, Sauste Generale and Credit D'honor have demonstrated their resilience. In 2018, they delivered revenues of 7 point EUR 7,000,000,000 and net income of EUR 1,300,000,000 and a return on normative equity of 11.6%, Which means that we have been able to remain very profitable while implementing deep transformation in a very challenging environment. With Boursorama, we have developed an online banking leader that is profitable of acquisition cost. Indeed, excluding them and under standard method, Boursorama would have posted in 2018 a return on normative equity of more than 14%.
Benoit will comment both of my numbers into more detail in a few moments. Overall, Based on our strategy and financial results, we confirm the guidance for French Retail Banking activities. On the revenue side, progressive improvement in the current rate environment. We expect a light decrease in 2019 between 0% and minus 1%, increasing revenues in 2020. On the cost side, full benefit of this transformation after 2019.
We expect an increase in cost between plus 1% and plus 2% this year a decrease in cost base in 2020. Those trends will have positive geo effects in 2020 and beyond. The cost of risk is projected between 35 40 basis points and the return on normative equity between 11.5% and 12.5%. So to conclude in a few words, we operate in the French retail market, a highly competitive landscape, which is nevertheless attractive and offer opportunities. We have 3 main strengths on which we can rely: a strong and profitable core client base, free franchisees with specific value proposals on a capacity to innovate and deliver synergies with Financi Group.
We
have 2 major strategic axis: expand our reach in terms of clients, services and new territories and deeply adapt our model. This is not just an incremental evolution. We are totally focused on delivery I'm on track on our execution plan. So our work is paying off. Our financial results are improving, and we confirm our with positive jaws in 2020 and beyond on the return on normative equity between 11.5% 12.5% in 2020.
Thank you for your attention. And now I'm leaving the floor to my Christine DuCharlet to continue with Societe Generale.
HD Network relies, as Felicet, on a large and diversified client base, well positioned to benefit from the French Retail Market Growth Drivers. We propose to our customers a universal bank offer, leveraging on the whole group capabilities. I will focus today my presentation on 4 elements: our approach to 2 specific customer segments and the current status of our transformation on the digital front and on the physical setup. So first, I want to present a focus on our French corporates. We have a very dynamic and diversified client base On French corporates with a specific high penetration rates on large corporates and export oriented ones.
We are growing our current base on a regular basis. We have been able, for example, to grow the number of our new clients by 25% on the last 12 months. And we are today reorganizing our approach to this segment by specializing our network to the corporate segment. We have already launched 9 business engines, And we are continuing this transformation in order to reach a target of 30 business changes by the end of 2020. The aim of this transformation is, of course, to gain expertise on our workforce and to be able to present to our customer a better design capability, leveraging, as I was saying, on the whole group capability, We are offering to our large customers already all the group product, for example, the ILD product, the structure financing product, haying, etcetera.
And we are enlarging this approach to all our SMEs. And we are also preparing the future with specific initiative. We are, for example, investing on our setup for start ups. We have more than 150 people specialized in start up, And we are also entering in partnership with BPI, for example, in order to accompany the startup from the beginning And with some accelerators. We have also a specific sector In order to prepare the future on the Grand Paris approach where we develop our financing to the different initiative around the Grand Paris.
The second customer segment which I wanted to make a focus is the WellCare McAffirm clients. We have created in 2014 the new Banque Prive NBP for French Wealthy Clients, putting together the large client base of Societe Generale Network with Private Bank expertise and franchise. It has been a very big success as we have been able to attract over €10,000,000,000 assets under management under management during the last 5 years. We are now spending this new approach to our mass affluent clients. So we are investing On a non economic channel coverage based on an increased number of wealth management advisers And a dedicated remote platform and also enhancing our product offer by leveraging the private banking Specificity and capacity to offer an open architecture context offer to our clients And tailored content.
So we are developing this new approach currently, and we are well on track on the development of the new teams. These 2 new approaches have been made And we are able to do these new approaches because we are investing a lot on our setup and our digitalization. We are investing in our In order to be able to offer by 2020 a full digital day to day banking offer. A full range of standard product online And digital processes in order to be to have front to back better alignment. This is done in order to free time for our workforce that will be able to concentrate more on advisory services.
Today, we have already 75% of our day to day banking offer and standard offer For products that is digitalized. We want to reach, as I always said, 100% at the end of 2020. So we are well on track. And our customers buy it. They go they already do a lot of the day to day banking operation online.
As you can see, 70% of our international transfer are already done directly Without any branch integration and it's the same for our Healthcare. We are, as Philippe said, also investing a lot on online contracts signed. And we have been able to multiply by 10 the number of contracts signed online since the end of 2017. The digitalization of our processes is also progressing as expected. I won't come back on the means of payment that Philippe has commented, but it's also an area where we invest a lot in innovation and digitization.
I want only to highlight an example. For example, on instant payment, on the global HD network offer, not only HD network, but We have a penetration rate today of 40% on the same pigments. And finally, I want to come back on our transformation on our physical setup. So because of our digitalization, we are able to highly transform our setup and to close branches. And so what I want to say on this final slide is that we are totally on track on our transformation plan.
Be it on the evolution of the physical setup, be it on the evolution of the back office albeit on the evolution of the remote platforms. So on the physical setup, we have already closed a high number of branches And we will close finally more or less 22% of our branches before the end of 2020. But the closing of branches is not the only point. We have been redesigning our approach to customer and rethinking about the format of the branches with design thinking approach. And we offer today a multi format approach with traditional branches, with the branches specialized for professional customers, branches specialized for corporate customers, as I mentioned before.
We have also delivered on the reorganization of the back office platforms. So the plan is to close 6 platforms by the end of 2020. We already closed 3 of them. And we will be even earlier on plan in order of closing those platforms. But France is also to specialized platform between individuals on one side and professional and corporate on the other side.
And the specialization has been done, and we are finalizing this process. And that will be ready by the end of 2019. On the Remote platform side, the topic is to be able to use it not only to answer calls, but to sell. And so we are also investing on the people and transforming the way they interact with the customers. And for example, we are already in a position to sell a lot of products.
And on consumer products, consumer loan products, for example, we have been able To sell 30% of our launch through the remote platforms. So everything is on track as I was saying. And the aim of this transformation is mainly to gain efficiency And on Agility in order to prepare the future. Now I will pass the floor to Francois to present to Credit Unoque.
Good morning. So I'm going to speak about the little sister now, Little sister but older anyway. As you know, maybe so I have to pass the line myself, okay. So the CDN Group is a union of 8 regional banks. The oldest was founded in 17/60, long time ago, in the south of France in Toulouse.
And the others progressively throughout the 19th century, Lille, Paris, Clermont Ferrand, all the countries, big regional capitals in France. All of those banks are federated around the same 3 singularities. The first one is that since the foundation, we've been dedicated to the service of entrepreneurs, And this is very strong in our banks. 60% of our revenues come from professionals and small And mid sized businesses, particularly in the range of the EUR 200,000,000 to EUR 7,500 €1,000,000 revenue bracket. The second singularity is that client satisfaction is the driver of our relationship model.
It's based on very close proximity and knowledge of our clients, And we are regularly on the podium of for client satisfaction despite, as you know, of a very tough competition from mutual banks, particularly in France. And 3, our governance is still decentralized, really decentralized. Our banks remained social entities and the CEOs of those banks are entrepreneurs speaking the same language as their clients, bringing more agility to the management and transformation of the group. While, and this is very interesting, maintaining a strict, disciplined and full alignment on all the centralized policies such as risk, compliance, finance, etcetera. What is our strategy?
Our strategy is very simple. Is to continue to concentrate on our core clients through a balanced operating model between human And digital, reinforcing continuously our uniqueness. Concentrating our energy on core clients. As you know, we are a very small group with less than 2,000,000 clients. We are focused on the profitability of our clients rather than aiming for a huge increase in the number of them.
Nevertheless, we continue to focus on the acquisition of good corporate counterparties. Our rate of penetration It's impressive. It's 18%, I mean impressive compared to our size. We will remain strong in the professional space, 9.5% of revenues in this market in France go to CBN. And we will continue to be the private banker of our entrepreneur clients, which is really very specific to Credit Unions.
70% of our professional clients also have the personal account with CBN. Overall, we continue to acquire new clients every year, more than 100,000 in 2018. And we've made a good start to 2019. To foster the strong proximity we have with our clients, we need a balance, as I said, between a high quality human presence on the ground And the support of all the possible digital tools. What we call our star model here on the slide.
We designed it, and it's being deployed according to a number of principles. Our branches first. Our branches, the main ones are profoundly redesigned And rebuilt into concept stores, we could say, co working spaces, dedicated more and more exclusively to providing advice to clients. The others the other branches becoming small base camps either on the street or upstairs in a very specific individualized relationship with the clients. And of course, as every other networks, we continue to progressively reduce the number of them.
Our bankers second. Our bankers are more and more mobile, nomad bankers, working more and more outside the branches And meeting clients where they want and when they want with the help and the support, of course, of all the fully mobile tools needing higher and higher expertise from them. Our Multimedia Expert Center remote platform is playing a bigger and bigger role. It supports the branches to deal with day to day banking and will progressively become the only contact point for noncore clients in order to dedicate fully the physical branches to the core clients. Branch automation, for sure, it's fundamental.
We are progressively phasing out bank tellers. And the self care tools developed With Agile methods, we're building and progressively deploying new features through our redesigned journeys. In order to enforce this strategy, we are committed and embarked in a fully client driven transformation. And this is just to give you a glance of this. Our aim is to provide core clients with a full range of products and services that they can access in an open architecture model on our new platform.
In order to make that live, we did 3 things. First of all, we tried to better know our clients, And we have fully rebuilt our client segmentation. Supported by big data and AI, we now have a system that not only measures the True value, which is common in banks, but also the potential value and the future behavior of our clients. Well, we used to have only 2 to 3 categories. We are now much better at handling the individuality of our clients, Which allows us to create much deeper, of course, relationship.
Second, in order to better identify the needs, we categorized those needs in 28 different universes, thanks to this new segmentation, but also using all the information we can collect on the ground using surveys, using voice of the clients. For an example of those categories of need. If I am the CEO of a very little company, for sure I need to finance the development of my company or I need to finance the transmission of it. But I could also need to find insurance Or need help with accounting to save me time. Or need to understand better GDPR regulation, for example, Because I don't have any expert in house, etcetera, etcetera.
And to answer those categories of needs, we are building what we call our CDN new platform in order to better serve our clients. This platform is supported, of course, by a largely opened architecture built by our friends from the IT. Very soon, our new portal will provide our clients and employees who will also choose the same platform as the clients, a range of products and services that are homemade for the core banking products, of course, But also come from outside. This is the idea of openness. It comes first Through internal partners in the Societe Generale Group, in total synergy with them, important, for example, insurance.
Frederic mentioned that a moment ago. But also real estate solutions, but also car leasing, factoring all the payment systems for sure. And this is new, brought to our clients through the partnerships we have signed over the last few years with startups and fintechs, such as season or pay then or captain contract. And as I as Philippe said, more than 30 partnerships are in place as of today, With potentially the development of 2 startups that we are incubating inside the bank. That will be up and running, I hope, quite soon now.
This open architecture will prevent us from being disrupted, we hope, and will help us to grow revenues, selling new services. It will secure and deepen the link we have with our clients, core clients, which again is the foundation of our strategy, but also our raison d'etre. Going through this cultural and operational transformation, we want to continue to secure our claims satisfaction. This is our first goal. But also to secure our people satisfaction, which is so important, RNBI, our operating costs and our risks.
Thank you very much. I leave the floor to Benoit for Boursorama.
Thank you, Francois. Good morning to everyone. I'm very pleased to explain to you today why Boursorama is an attractive, simple and successful model. So Boursorama is by far the leader of digital banking in France. We have reached more than 1,800,000 clients as of today.
And we acquired 465,000 clients in the last 12 months. So we are number 1 in number of clients and number 1 in client acquisition. We reached this position thanks to a dramatic acceleration of our growth since the end of 2015. We have multiplied by 2.2 the number of clients in 3 years. And the momentum is still very positive.
We have beaten a new monthly record in April, and we have recruited last month 63,000 new clients. And despite the huge enlargement of our client basis, the profile of these clients
are very valuable. They are
rather young, 38 years old in average. It was 41 years old 2 years ago. They have a high sociologic and professional profile. It represents this segment, 35% of our clients. They are urban.
For instance, 8% of Parisians our client of Boursorama. So we have a unique growth in the French market. But I know that there are questions regarding their activity. Are there real banking clients? So the reference the answer, sorry, is yes, Because Bonfimar has developed a full and comprehensive offer.
We do day to day banking, means deposit payments. We do savings with all kind of leagrass accounts. We do life insurance, investment products. We do all type of credits, other drafts, personal loans, mortgages, Lombard credit. And it's absolutely key for 3 main reasons.
The first one is if you have a comprehensive offer, it's the only way to have satisfied loyal an active client. The second thing is the fact that it's a way for us to have diversified sources of revenues. And thanks to this model, we have a competitive advantage versus competitors. It means that we are more attractive And we are more difficult to replicate as a whole. This is the first thing to have in mind.
The second thing is the fact that it works. For example, deposit and savings outstanding has increased each By €1,100,000,000 in the last 12 months. And the global credit amount has increased by €1,500,000,000 in the same period of time. And as you can see, at the start of the relationship with new clients, we have a really decisive moment because we are able to multiply by 3 the deposit in average between the Q1 and the Q4 following the onboarding moment. And you can also see that we are with more and more active clients also on other metrics As payments, connections and opening accounts, we have even higher rate of growth compared to the evolution of the number of clients.
So thanks to its comprehensive offer, Bouffarma is not only just focused on acquisition, but also on equipment in order to create a full
and a long term relationship with
its clients, which is absolutely
key. With its clients, which is absolutely key. So how does it work? Our model is very simple. We developed a pure online banking model.
We have no branches, no dedicated client advisor. And it's a win win situation because the client can do what he wants, whatever the product, including for mortgages, And it gets a very good price because we need fewer people to manage the bank. It's as simple as that.
But to succeed in
this model, there are some clear conditions. The first one is obvious. We need to have all the products, Nativid Digital. And the World Bank has to be supported by automated processes. The second thing is open architecture is not an Clients want the best solution.
It's true about content, where Pharma deliver advices, news, tools for comparison, for example, and we work with 70 providers. They are all external. It's true about products. We have more than 100 financial partners and it's true about services. For instance, we work with the 3 main worldwide payments wallets: Apple Pay, Google Pay and Samsung Pay.
And we are the 1st bank in France having a real interaction through Google Assistant for banking management. At the end, what is very important to understand is the efficiency of our model. As you see, customer service is just here to manage We have less than 1.4 contact per year and per customer. It was 2 in 2016. So the goal is to improve the efficiency each year because it's the key of the model.
So we are less than 800 people to manage 1,800,000 clients. And it's very important because it allows us to have the most competitive prices on the market. It's recognized as we are ranked we have been ranked for the last 11 years as the less expensive bank in France. To give you an order of magnitude, our banking fees on a yearly basis is €10,000 The rest of the industry, it's €215. So there is a huge gap, which is justified by the model.
To conclude, our clients are autonomous and they are satisfied. Our net promoter score is above 40. It's plus 40. And we have a double, sorry, unique position towards mature banks in terms of pricing power because of our efficiency and towards NeoBanks because of our comprehensive offer, allowing us to have a real relationship on a long term basis. So now we are going to talk about financial metrics Because I think this is an important and key point.
If you look at the 2018 financial results of I think that you have to keep in mind 5 elements. The first element, which is absolutely key, is the fact that we do not amortize any of the direct costs related to acquisition. The full investment he's booked the day the client comes. And take in mind the fact that we have almost We created 500,000 clients in 1 year. So it's a huge effect, of course, in our financial metrics.
But hopefully, the investments we need to acquire our clients, it's almost fully variable. 92% of the expense is due only in case of success. I think it's the second point you have to keep in
mind.
If you take now a theoretical view of the financial metrics without any of the acquisition financial effect, you see that the model is virtuous as revenues are growing twice more quickly than expenses. And about revenues, you maybe have to take in mind the fact that half of our clients were not in the bank 2 years ago. So here we are talking about Retail Banking, which is a long term business. So half of our clients were not there 2 years ago. The second thing is we have very young clients.
Almost 50% of our new clients are under 30 years old. Maybe they will get richer. And the third thing to have in mind is the fact that our deposit has been collected in a recent period of time where the rates were not already so good. So just to give you an idea of maybe the revenue will let will stay at lower level than what we see in the mature networks, but they will improve either time. So this is for the financial things.
And now what's next, I think that you have understood that our new target explained by Frederic and Philippe is to reach more than 3,000,000 clients by 2021. The reason is very obvious. We want to leverage our unique position. We are number 1 in number of clients, number 1 in acquisition capacity. We are number 1 in client satisfaction, number 1 in authority and number 1 in pricing position.
So we have a very specific position. The second thing to have in mind and that we are convinced By the fact that we have a real industrial model, developing a full product range of products, And it's allowed us to have the best in class cost to serve per client and to build a relationship for long term with our clients. And the third thing to have in mind is the momentum is still very positive for online players in France. It's obvious. As I said, we beat a record in April.
48% of the French people considering the fact to switch their primary bank. I think it's not a French topic, it's a European topic. So the momentum is good. So we want to leverage our position right now. And of course, if we decide to move from large growth profitability.
The profitability at the midterm point will be above 20% on advanced method, which is not the case today. It means 2, 3 years after the growth the large growth period. And that's it for me. So maybe now I think it's time for questions, of course. That's maybe not alone.
Thank you. Thank you.
Okay. So we are ready to
Hi, there.
It's Nick Davy from Redburn. Two questions, please. The first one on risk weighted asset growth and loan growth. I think the target in there is for risk weighted asset growth to be 0.5% to 1% per year. Loan growth at the moment is 4.5%.
So could you talk us through how you'll keep risk weighted asset growth so low in the period, especially with SME loan growth quicker than mortgage growth. And then the second question, please, on interest margins. Thank you for the update about interest margins beginning to flatten this year. It looks like they'll flatten around 2% as a percentage point of your loan book. So I just wondered if you could give us some more detail about that.
It looks like some of your peers are closer to interest margins of 1.3% to 1.4%. So what is the secret sauce at SocGen to keep an interest margin above 2% when most of the loan rates I can see, at least here from London, are about 1.3% or 1.4%. Just seems like quite a high interest margin. If you could give us any more detail on that. Thank you.
So regarding the RWA momentum, as it was projected in the slide by Frederic, we are in a range of 1% in the coming years because we are also optimizing a lot the way we are managing our portfolio, which was not the case. I mean, it has been the case for a while now in Investment Banking. It was not the case in Retail Banking. So we are starting seriously to work on this topic, including within a global project, Which is led by the Finance and Risk division. So that's why keeping a good momentum on product and credit origination.
We are going also to create a new space on our capital base. Regarding the pricing, I don't know if it's a secret, but that's what I told in my presentation. I mean, for the last 2 to 3 years, we have been, I would say, not conservative, but very vigilant on our pricing, on credit, especially on individuals. And basically, we are reaping all the benefits of this policy.
Florent Van Aacun from Deutsche Bank. The first question is on Boursin Armin. When I look at the slide where you disclosed new financial information, I was surprised to see that even when you strip out the revenue lost with the customer the commercial offers and then also the direct acquisition cost. You still end up to a cost income ratio that is north of 70%, which is not better than a physical network. Now I've seen it's improved over the past 2 to 3 years, but where do you think it can go?
And what can you do further to improve that cost income? And then the second question is actually going back to the deposit margin question. If I understand, it's going to there's going to be a deceleration in the pressure from the deposit margin. What's driving that? Is it basically because the comparison base is improving?
Or are you also on your side doing something different, reinvesting into longer term assets to improve the deposit margin. Thank you.
For the cost income, you're right. I think it's EUR 71,000,000 excluding all acquisition effect. I
think that
it's very difficult to I think it will come around maybe 60, under 60. It's possible. But I think the key point is really the fact that the revenues today, you have all the recent clients. And the percentage of recent clients in the NBIUC is very huge. There is no comparison, I think.
So it's very difficult to have in mind. But the rates are so low that maybe we have to also have in mind that the cost income will not be at 20% or 30 I would like to, but I think with this rate, it's not possible. We can't be dreamer. So I think the fact that it's already EUR671 1,000,000 is not so bad. And I didn't mention it, but you have seen maybe that the cost to serve our clients it has improved by 35% in 2 years.
So I think that's maybe a good point to have in mind also regarding Boursorama.
So on the stabilization of deposit margin, yes, it's a fact that the most important part of the decrease, of course, it's behind us. We have not materially changed our replacement policy. The number which I didn't mention, maybe you have to keep in mind, is that when you compare the deposit margin. So the 2018 compared to 2017 for the Q1, it was minus 9%. And when you compare the Q1 of this year versus Q1 of 2018, it's only minus 4.6%.
So there is a
wind stabilization. This is
Jean Francois Neuez from Goldman Sachs. I just wanted to ask on the sustainability of revenue margins and pricing discipline. If I look around in France, you've described yourself that the market is extremely competitive with mutual players. They are not return seekers. They don't pay dividend and they have 15% at least for Tier 1 ratios.
So the second thing I observe is your own when I drive to France or look around, your own advertising campaign seems to be a lot more favorable to volume under in volumes in general I saw recently. And I might be wrong here, but that's my perception. I just wanted to understand looking at the level of your revenue margin, whether if the competition continues You won't feel yourself you won't feel in a position to have to follow and see your revenue margins under further pressure, given that they start from the very top and how you would respond to a future acceleration in competitive pressure.
On the position, it's true that the competition is very hard in France. That's the reason why we work on our value added approach, and that's the reason why I was insisting on the fact that we present the offer of the whole bank. Our competition is very focused on pricing. They don't Effectively, the neutralists don't look at the same return that we are looking for, but they are not able to offer the same kind of value added approach. And that's the way we want to position ourselves.
We have been doing that for a while on large corporates, and we are expanding that to smaller ones. So that's the way we are resisting to competition. We have also a positioning where at least for Asia network where we are more on the Parisian region and the South of France, where neutrality competition is less aggressive. They are very, very much on Brittany, for example, on the east of France. So we have also a good position towards the mutual lease for that.
Maybe concerning Credit Union. Due to the very long and historical relationship we have with those guys, they know why they came to a CDN Bank in the region. So we keep we're still keeping the capacity to price. And our clients are well, agreed to pay for the service and the strong human relationship as of now, as of today.
The truth and maybe it's not 100% rational, it's that our clients you are still ready to pay the quality of service. Take the simple example of a mortgage. When you subscribe a mortgage, you want a good price. You want also to be sure that the money will be a shield not there at the right time And that your file will be managed diligently. And so that's a real asset.
And I think we are On this example, very careful also about the quality of service delivered by our back offices. And I think the geography mix is also important. For example, On the corporate side, probably the debt prices, I mean, from the bank standpoint, are in Paris. The most competitive areas are in the middle of nowhere in France. When you are in big city, actually, you can manage you have some room for maneuver to define your pricing.
Omar Fall from Barclays. Just a few questions. So firstly, on the selective loan origination policy where you've grown less than peers for several years now. When and how will we we see the benefits of that because so far we've had is NII that's fallen more than peers in the last few years And your starting point of deposit margin was always thicker than everyone else anyway because of the nature of your client base. So is it that when rates start to move up, you have a better path on NII because you have a lower stock of low yielding assets or is it a credit quality issue?
Secondly, just on the deposit margin point, you mentioned that you'd shorten the duration of the ALM. So what is the effective duration of the reinvestment portfolio today? And is it a case for us externally to track that to take like the moving average of that duration or something like that? And then last question, what is the amount of the 2,000,000 clients at Boursorama, how many are primary clients where Borso ama is their main bank account where they receive their salaries or whatever. Thank you.
You want to answer on performance?
Maybe just to answer to this question, we don't have the figure as primary banks for the same reasons. It's mainly because we are very recent clients. But the thing you have to taking mine is the fact that our current accounts in average, it's €2,500 per current account. And in terms of payments, we have an average per month with the debit card at 14.5 per month. So I have no doubt that we have active clients.
That's why I tried to demonstrate before maybe not enough. But primarily, I think it's not for us right now the good view to have in mind.
So regarding the net interest margin, I mean, what I can tell you again is that, that's a standpoint. So making sure that the pricing is appropriate on the credit, but also according to the overall relationship we have with the client. So I think it's a very good practice. Again, I think that even though we have been slightly below payers, steel production volume, especially on the corporate. It's good.
And again, don't forget what I've mentioned at the very beginning, 50% of our NBI. And I think we too often forget that is related to corporate and professional. And these markets are very different than the individuals, especially because the global understanding of the relationship. The long term view of the relationship has some value for the bank, but more importantly for the client. They want us to be there on the long term.
And regarding, yes?
If you wish, I can take the nice ALM question. There's nothing changed relative to what we've said or been saying for sometimes now. As you The average duration of the ALM has been quite stable now. It's about 5 years. It's very comparable to other French banks.
The thing we may be doing different is as relates to the classification of the recently collected site deposits. As you may remember, we consider that some of these site deposits is about €200,000,000,000 site deposits with the French free time. We classify close to €30,000,000,000 of this as rather volatile because we consider that this site deposit growth was explained by the lack of alternative investment opportunity Due to a side deposit in the monetary world. So that's why those are reinvested very short term, I. E, Eonia, in other words.
So basically, we're moving away from the base effect. That also explains why sequentially it does improve. Then you have to take your own assumption. The way to follow it as to as we got to short term rates going forward Multiply by the what if I the collection rate you assume, and that's the way we do it ourselves. To summarize, we've already said In the past quarters that for any 10 basis point change in the rate curve, there is for RBDF, I.
E. The French Retail, roughly EUR 50,000,000 impact plus or minus Yeah, out of EUR 8,000,000,000 of revenues.
Thanks. Yes, it's Kiri Vijaraju, HSBC. Just in terms of the you show on Slide 2017, the mutualization of the infrastructure, 85% within French Retail. Has that can that go any higher? I mean, what's to Going to maybe 100%.
And then also on costs, you show kind of a new type of branch format there. You've got the full service branch, but also some of these new branch formats coming in. So could you give us a feel for what's the cost differential between the kind of old style Full service branch in this new format, please.
Maybe Bruno Delas, our
on the IT part, you know that we mutualize all the infrastructure, I mean all the data center for the bank. And we also mutualize on the software part all the product and services like payments, Like card and security services. We also share all the software on the regularity part. I mean, for example, anti monitoring laundering, okay? And at the end of the day, we also mutualize all the new digital capabilities.
And you remember in November, I explained you that we create some new capabilities like, I don't know, electronic signature. And we use exactly the same electronic signature for all the bank.
Regarding the real estate cost, it really depends on the format. From a pure real estate standpoint. It's less expensive because we are using less space. In some cases, we are not on the street but above. But the other key component to take in mind is that, especially during the last 2 years 2, 3 years, we have invested a lot on ATMs Because we closed the cash machines and the cash function within the branches.
But we created a lot of what we call espaclibro service or ATM machines providing a lot of functions. But the pure real estate component is down.
Andrew O'Flaherty from Credit Suisse. Just correct me if I'm wrong on this, but just on Slide 3630 Slide 6 and 35. Just on Botsorama, I see the revenues excluding commercial this growing at a CAGR of 13% from 16% to 18% versus the client acquisitions where the CAGR is roughly 30%. So is the revenue per customer declining? And is that of any concern?
Is the first question. Then on the second question, still on Botswana, as I see you say you've got 30% market share of online banking. Can you give us a sense what the overall French market for online is growing by just top line. Thank you.
So regarding revenues, I think that you mean that last year, it was a little bit lower than 13%, if I understand your question.
You said a
CAGR of 13% on 5%.
Yes. You're right. It's a little bit lower, mainly due to fees regarding Investment Products because Q4, the end of the year was not very good in terms of trading activity for our clients, but maybe it's not only in Boursorama. And it's also better for operating expenses Last year. Compared to the CAGR?
It's correct to assume that the revenue per client for Boraxorama is decreasing.
No, it's I think it's clearly the effect of the trading activity, which is still huge in Baux Pharma. So people trade a little bit less during the Q4. And I think it's the main effect you have here. So there is nothing regarding your question in the Q1, for example, it's exactly the same growth, same pace.
And then just on the overall growth rate. Sorry? Then just the second part of the question, just the overall growth rate
for Online Mining.
Yes.
I don't have 20% of French people with an online bank. I think it was in a study last week. And the growth is quite huge because we had 4,400,000 clients in Online Bank at the end of 2017. And we think that it was EUR 7,000,000 at the end of 2018, including M26, Revolut, Nickel, so all neobanks, not only online banks. It's all pure online 3 years.
It's Bruce Hamilton, Morgan Stanley. If I could just ask a couple. Firstly, just Surking back to Nick's question at the beginning. So in terms of the sort of loan growth in French Retail versus RWA growth, Can you sort of walk us through some of the ways you can optimize that so that the RWA growth, it sounds like, will be materially lower than the lending growth? And then secondly, so you mentioned there are ways that you can mitigate RWA growth.
Could you
just help us understand some of the bigger ways you can manage that you run lower trajectory in RWA versus loans. And then secondly on Borsorama, I guess Just understanding the revenue generation from a client over time. So for a client who's been with you 3 years, say, how different does that sort of does the revenue capture change over time? Just trying to understand perhaps the revenue growth potential as we look forward.
So if you see the revenues of our clients, It's clear that there is a big effect in the 1st month as I show you regarding the average deposit between the Q1 and Q4. We have multiplied by 3 the deposit, and it's exactly the same for the 3 years. So clearly, the relationship begins with the current accounts with a very low amount. People are testing us. And little by little, the relationship comes With Libert, with life insurance, sometimes investment products, but it's not a very efficient thing in France.
And we have also credit, which is quite new for us. I mean, the personal loans we started in 2016 to sell this product. And we have almost EUR 1,000,000,000 right now. So things are too new, to be honest. Clients are too recent to have a perfect view.
It's why I can't answer to be I think we need to be humble, but what we see is the deposits, the credits are increasing exactly And sometimes even with a higher rate in term of activity. And I think it's that I hope you see it in the global outstanding we show to you. We have EUR 21,000,000,000 in term of assets. We have almost EUR 8,000,000,000 in credit. So we have real clients.
But the question is half of these clients were not there in 2015. So I can't imagine everything right now. What I'm sure is I have a comprehensive offer so they can be equipped by both pharma. And when we do it, it works. Sorry to not be more assertive.
I think what is important for Mohamed is to keep in mind that really we don't know yet what is the future, but we are monitoring objectivity very precisely. And looking at all the clients vintage by vintage to understand exactly how they behave, what kind of product they buy. And that's true that it's quite impressive because for the time being, we behave very consistently. So your first question was about loan and how do we Well, it's a lot of components. So it starts again with origination policy.
Also, we have a lot of projects to make sure that we have clean data. And we have identified some move for progress. We have also securitization project for securitization, sales of portfolio. That's part of all the constraints we are managing, RWA, NPL and all these kind of things. Of course, we are leveraging all the technologies which have been developed in Investment Banking.
And now also VC has been expanded to Retail Banking.
Questions. The first maybe more for William. In terms of the divisional return, I guess that assumes risk weighted assets for TRIM as well. So how much should we expect this in French Retail Banking? And then the allocated equity, I assume that's 11% or is it 12% in line with your group target?
And then on the on French Retail Banking, you talked a lot about new customer acquisitions. So how many years on average What do you expect in case of Bose Rama, how many years do you think it would take for new customers to be profitable? And what's the sort of like cross selling ratio? So have most of your customers one product? Or is it you said some have the second product.
And you mentioned cross selling has improved. Maybe if you can give us some color. And I think the new customers were across the different networks. So maybe if you have Thuleis can talk a bit as well about how long it will take for new customers to be profitable. Thank you.
Maybe on RW, and it allows me to clarify because we had some questions. Just at the group level, the 12% target by 2020, which we I expect to be above. This includes everything, including TRIM, Just to be clear. So what we're talking about here in terms of the return on normative equity for retail also assumes everything in the RWA base, including an interim impact. Now this is different from the 0.51 percent per annum, which is organic at constant foreign exchange, is not relevant for retail, but in perimeter previous any TRIM impact or any other regulatory.
And lastly, to your question, we don't provide granular split of TRIM on businesses. What we have Said and we can reiterate based on our knowledge is the fact that the bulk of the TRIM impact will revolve around the CIB activities, particularly the market And the Roanee, Frederic reminds me, is calculated on the basis of 11% of RW.
Time for profit. Our new clients, I think it's really depending on the environment, of course. But today, it's around 6 years for our new clients to become profitable. Including what I said before, we have a lot of strong clients, a lot of young clients. And the second question was regarding the equipment.
The only thing I can tell you is we have 30 products globally in the range of products. And it was 3 products per client 1 year ago. It's 3.1 today, including the growth of the client base. So it's always difficult to have a judgment on the results, but it's improving. And I think you saw it, but in average, our client has EUR 12,000 EUR 12,500
and EUR
4,500 in credit. So I think compared to, for example, neobanks, when we have figures, it's not so obvious. It's not exactly the same size per client. It's 15 times lower, to have that in mind.
Tarek El Mejjad from Bank of America Merrill Lynch.
Just a couple of questions.
The first one on your strategy of volume growth, especially on the retail networks, digital and Internet network. I mean, you clearly don't want to compromise on your strategy. You're getting like affluent and high net worth. But I mean to Benoit's comments, I mean is it now a moment to invest and maybe grow further in low profitability,
younger or younger professional people?
Because for now, there the younger or younger professional people because for now they might not put your salary with you, might not buy expensive products, but in 15 years of time When they will irritate or get more successful or more experienced, they will be more possible. And this is what actually the Revolut and N26 and Borsoorama looks like to that's on because that's where the growth will come from later on. And my second question is on costs. I mean, clearly, again, competition. I mean, interest rates remain low.
Your strategy to minimize selected volume growth. So clearly, cost is the lever you have to pull. And I mean, since 2017, we didn't have any update on where you can adjust that lever Things have changed there as well in terms of interest rates. And one question here is, when you announced departures or Because closing branches is actually good, but the lease is not the most expensive thing. It's really people working there.
So what you do in France is that you just reshuffle people around, is good as a responsible employer. But I mean, why in France we don't have like a net departures of staff when there is cost cuts?
We have a lot of departure. We are reducing the workforce for 2,500 people on our plan. So we have a lot of departure, in fact. So it's a real we will work on cost. What we do in digitalization is to offer to try to have our customers doing by themselves a lot of the operation in order to be able to free time for workforce, to decrease the workforce and to focus our first More on advisory, value added products, etcetera.
So we are working on the number of people, heavily working on the number of people, first of all. And after in terms of clients, I won't speak for both Surama, but even on the traditional networks, and I will let Francoise also speak about that. We for example, at HD Network, we acquire a lot of our new customers when they are young. It's a big driver of our acquisition of new customers. So we invest for the future.
And Ita has been paying Over time. And that's the reason so we invest on the fixture. On the beginning, when we acquire them when they are young, they are not profitable. But over time, They tend to be very profitable. So we really do a lot like that.
We also invest another way of acquisition, obviously, We stayed loan with consumer loans, but we truly have a big part of our new customer that are June and specifically on for the students one, where we have a specific acquisition strategy there.
Effectively the same. We continue to acquire new clients and particularly even in our old networks, they continue to come because of the specific service. And at the same time, we continue to decrease the workforce. You're absolutely right by saying that the number of branches is not really the right KPI. It's the number of people, and it is continuously decreasing in CDN2.
Well, and at the end of the day, the ultimate TPI is euro. And in the chart, I show you the red column. So you I don't have the amount, but it's quite significant and it's actual cost cutting. And most of it relates to people who left. So we are not advertising these numbers every day for obvious reasons.
But yes, people leaving the company, not just finding a new job, a new opportunity. And that's all the purpose of the provision, which was defined in 2017, which we are using. We use it in 2018, again this year and again next year.
Matthew Clark at Mediobanca. I had a follow-up question on cost As well. On Slide 21, it's not clear to me whether you are still guiding for 2020 costs to be below 2018 Or whether they're now going to be above. Because on the chart, which doesn't have any numbers, it looks like they're going to be slightly above 2018 costs whereas previously And the slides that gave the cost trajectory, it was to be down a bit. So has there been any could you just clarify that?
And has there been any slippage in the cost ambitions for 2020 on Retail overall.
Thank you.
So actually, yes, the guidance, it's a cost reduction in 2020. So it will be I don't know if we disclosed this number, but it will be slightly below
2018. Okay. Can you not be any more specific there? Because previously, you showed year by year growth.
No. But again, the guidance we and we'll stick the guidance. It's still an increase in 2019, but deceleration of increase and actual cost reduction 2020 and so on.
No quantification. No? No quantification of the
2020 costs. Okay. Thank you.
Two quick questions. First question is regarding insurance. I am quite surprised, generally speaking, by your, I would say, low profile ambition in this area with an equipment rate of 12%. When I look at your main peers, And for instance, Credit Agricole, we can see that the equipment rate has increased a lot in the last 3 years, more than 6 points, for instance, for LTL, you are currently at 9.5%. So my view is To say why are you so shy, I would say, in this area, which is a basin of profitability in low interest rates.
And I'm not only talking of protection and casualty, but also protection and health and not savings. But I think you lack something here in your speech to investors in my view, Because I think it's clearly an important point. And my second question relates to the JV with the CIB, once a time once upon a go, you used to give some figures regarding the JV between CIB and Retail and particularly regarding the equipment of the Utility Intermediary Companies. I would like to know where does it stands, this business, Which is more and more competitive because we are going to see some American banks in this area, it seems. But also mutualists, which were currently not too much present on that, but are trying to be in this area.
How do you see your added value in this area and the growth of this part of the business. Thank you.
On the first point, you are completely right, and I was not clear enough. But when I mentioned in my presentation that we have a year for growth we for existing internal partners. I mentioned insurance, and that's definitely one of our priority. And we are currently new plans, which have been defined, Societe Generale and Cres Luneur to go further because definitely we have, yes, room for growth, room for profitability in this area, in which we have not been good historically. Regarding our joint ventures with Investment Banking, so we have several joint ventures, one for private banking, one for ForEx and interest rates.
I think the one you are mentioning is what we call MCIB. So MCIB, it's key. Again, when I was mentioning part of G and A, we are at the heart of it. It works very well. We have extended it.
Now we have something called SG Entrepreneurs for Societe Generale. We have the same kind of structure For Credit Union, combining not only MCIB, but Private Banking and even Real Estate Management. And we have, how many, 8 teams dedicated In the regions, yes. The regions, not only a team in Paris, but also some when I was mentioning specific account managers, that's part of it.
Yes. And Mercedes Benz has been developing very well on the past years. We are leader for the ATI segment. And it is the segment that is effectively targeted today by the merchant banks, etcetera, that coming to the market, but we are already leader and we have been developing our franchise on the past years. And through this return on teams, we are extending the franchise to smaller ones that are not the target of the JPM and other American players.
And we have a very wide coverage of our client base in order to propose them all these approach, M and A, social finance, etcetera.
And the last piece of the setup is that last year, we have reinforced the joint venture, the partnership between Jean Pierre Dupont, Which is a subsidiary of Credit Uno and Societe Generale, and we have clearly defined the parameters of each bank. So now, Jean Gare DuPont is in charge of all the operations below €50,000,000 including for AG customers, if necessary. So we are really leveraging our capacities in the small mid cap market.
Yes, good morning. It's Sven Stahlman from Autonomous. I would like to revisit your RoTE target, please. You're basically guiding for revenue that seems about flat 2020 versus 2018. 1st down a bit and up a bit.
On cost, it's the opposite. 1st up a bit and down a bit, but about Same in 2020 as in 2018. Cost of risk, probably a bit higher the way you guide than in 2018, and it's on the growing loan book. So your pretax profit could be very much lower than in 2018. And at the Same time, you have some risk weighted asset growth.
So I wonder how you want to improve your RoTE from 11% in 2018 towards 11.5% To 12.5 percent, except for maybe by a lower tax rate. And the second point, revisiting the question on expenses. Before you started the transformation of the business, you had a cost base of about EUR 5,500,000,000 And since then, you have cut a lot of branches and you consolidated call centers and a lot of staff has left. Is there any chance that once you're through this, let's say, in 2021, your cost base will actually be lower than EUR 5,500,000,000.
Thank you.
Regarding this last question, it really depends we don't control 100% of our cost base. You have seen, for example, in Peshawar that A big part of our effort has been offset by additional regulatory costs, taxes and so on. The cost which are under our control will decrease for sure. For sure, because we start to the effects of all our efforts. And it's true for this year and it will continue in the next years.
And regarding our target ROE, when we you combine and what we are combining in our spreadsheet all the numbers. So increase of revenues, decrease on cost, strong monitoring of risk of RWA. We are we feel this bracket communicated to you, the 11.5% to 12.5%. That's our guidance.
So now together with the team, with Jean Francois Gregoire, the new Head of Global Markets with Pierre Palmieri, the Head of Global Finance with Cecile Barteneff, our Chief Operating Officer and also with Alexandre Flory, which is Head of Equity Derivatives in the Global Markets Division and Sylvain Cartier. Congratulations Sylvain. You have been appointed yesterday as the new Head of the Fixed Income Activities within the Global Market Business of Societe Generale. So we are there this morning to go deeper in our Global Banking Investment Solutions activity and to answer your question. So let me start with a conviction we have, which is a long term conviction.
If you look at structural growth drivers on the environment Where we are working with, Societe Generale has recognized leadership, which are very well fit with those structural growth drivers. First of all, In mature markets, the aging of population is creating huge new needs in term of investments For a pension years. And we have in that and specifically in the low rate environment, which will last for long in Europe. In that world, we have with our Investment solution franchise, her key strength to address this, which is also a resilient strength we have. We can see that and we can discuss with Jean Francois later on.
Secondly, The world today has a huge need in the name of energy transition and infrastructure needs. And our global finance and specifically our structured the franchise. It's completely not equated with those needs. And you have seen that during the last two quarters how we can benefit if we put the capital at work and we will comment that all those trends clearly. And 3rd, there is the international trade is still a positive trend in the world despite the noise we can hear every day the discussion between countries like China and the U.
S. This creates additional needs for our large corporate clients in terms of international trade. And we have decided to invest, as you know, some years ago to our transaction banking solutions. So we are there clearly aligned with long Term trend. And we have already global leadership position or local leadership positions in that field.
The vision we have in terms of model, as you know and Frederic insisted a lot on that this morning, we are a relationship bank. And we want really to create long lasting and trusted relations with our clients. And to do that, we have implemented for a while, as you know now, a specific coverage setup. And this coverage setup is based on what we call our senior banker organization and the client management team. The goal.
The role of this coverage team is, first of all, to build and to establish this long lasting relationship. But there is also another role, which is to sell the full offer of the group, not only the GBIS product lines, but the full offer. It's working very well with RLD. We are one of the first fleet management provider through this coverage with equipment finance and even with service retail services. This coverage team have also a second mission, which is key, a third mission should have said, which is to manage the client profitability and to manage the client allocation of capital.
And this give us a clear capability to make an active portfolio client portfolio management And to reallocate capital when we think there is opportunity. Our vision is we have to serve clients where Societe Generale is the most relevant for them And we have also to say, we are the most relevant for Societe Generale. For us, it's the way to deliver the right return on our global corporate and financial institution franchise. On that, you can see that over the last 4 years, we have been in a position despite the environment, which was still uncertain, to grow our client revenue. Thanks to this organization, I think so.
We have also a focus, specific office focus like all division within Societe Generale Group regarding client satisfaction. We have implemented a close monitoring through the Net Promoter Score measurement every year with our client. And the good news is we have increased our NPS by 15 point of percentage during the last 2 years in the GBIS world. So we are monitoring that clearly. The last point is we are concentrated in terms of clients.
We have 800 strategic clients and interestingly those clients are served a different region of the world. And I come to the next slide now. How do we justify our geographical footprint for a bank like us with 8 €5,000,000,000 highest client revenue that I mentioned. Of course, Europe is our domestic market. But as I said, we have global Franchise Investment Solutions, Structured Finance and Asset Finance.
Our geographical setup is there to be in a position to reach our clients everywhere in the world to serve them with our global franchise. On the other hand, we have also the ability to accompany our European In the international development. Interestingly today, Europe is 68% of our revenue in 2018. The Americas is 17% Asia is 15%. In terms of growth, we see that Asia 1st, America 2nd and Europe 3rd in terms of growth potential during the last years.
It would probably continue in that direction. In Americas and Asia, we are just serving on our core strengths. Just give me time to give you examples on America. On America, we are still seen by our clients there as a leading equity derivative house clearly. And we have a strong franchise in the U.
S. We have also serving and through this liquidity franchise, we are seen as an investment solution bank. Just to give you an example last year, the first product in term of customized investment products of Athene, I think they were number 2 in term of fixed index Viable, no, Viable, fixed index liabilities in the U. S. The first product of this company is associated with our products.
Not seen by the clients, we have been the structural and we have been in a position to serve that. Just to see that we have a very specific niche, but we have the legitimacy to be on that market. The second area where we have a liquidity in the U. S. Is structured finance, of course.
And we have developed from now 3 years our asset based products activity, which is very, very performing and very successful, generating more than EUR 100,000,000,000 of revenue last year, I mean, starting from 0 3 years ago in the U. S. So second point is 21 percent of Americas revenue is coming from European clients. And in terms of DCM, we decided, for example, to be an active The bookrunner on their Dixie and operation in U. S.
Dollar. And now we are among the top 10 in this market with highly competitive, we have nowhere from years ago. Just to show you that we have some volatility in this U. S. Market.
In Asia, it's a bit different. In Asia, we have been for a while, later in term of B2B2C Investment Products. And our main clients are private banks in this area. And we have seen Well, the main private line as a first partner to develop them investment product for their retail clients. But we are also developing our corporate clients with our strengths in Asia and with our natural resources capability also in Asia.
Today, Asia is 15% on our revenue, 17% of our Asian Pacific revenues are made with European clients. Just to explain you that our global setup is really in a big question and consistent with the capability that we have within Societe Generale. Now let me spend some time on that slide, which It's a result of the detailed and granular analysis we launched some months ago to revisit and to make we can restore the profitability of GBI, which was the main point for me to address after the 2018 difficult year. So if you have a granular approach, you can see very interestingly that in Global Market Investor Solutions Services, sorry, Which has been in 2018 the lowest return of our part of the lowest of our activity. We have split in 3 main activities: Investment Solutions, which is mainly the structured product, cross asset structured products, you know very well.
Financing Solutions, which is mainly collateralized financing solutions we are to financial institutions mainly providing and the flow activity. Jean Francois will come to that in a minute, how to this is played. But in terms of capital allocation, this Global Market Investor Solutions business is representing 50%, five-zero, The total GBIS capital consumption. And in this part, you have 25% in Investment Solutions and Financing Solutions. Those 25% on term of capital allocation are delivering higher return than 10% and even last year in 2018.
It's very important to have that in mind. So I have heard a lot of questions regarding the franchise associated with the impact. Is this global market has been impacted? What we can see here in 2018 that in terms of investment solution and financing solution, our franchise is intact and still profitable In 2018. The issue we have is on the flow activity, which is representing 25% of the capital allocated to GBIS, 50% of the global market, where we have a suboptimal return.
And it's the reason why we are, in our plan, focused On the restructuring of this activity, I will come back in a minute on that. Now if you have a view on the 2 other businesses. In financing and advisory, Well, driven by Structural Finance, Asset Finance and Investment Banking and Transaction Banking. Globally, this business is profitable. But we have separated in this slide what we call the corporate lending.
The corporate lending is a must in the client relationship, of course. And the return on the specific RCF or term loan activity is not very good as you can see there. So the issue we have in that field, because the competition is very high, to be honest, on those planned vanilla financing products, you have Chinese, the Japanese and all the players coming in, even in Europe, for example. So for me, the real issue we have is to increase selectivity in terms of corporate lending allocation on our core and profitable client relationship. It's one of the area where we will improve also the return during the next period of time.
Globally speaking, the rest of financing advisory is profitable. And we have even if it's only 10% of the capital allocation of GBIS, I have an issue on Wealth and Asset Management. You can see that the return is below 5% in 2018. To be very clear, we have different parts in that area. We have Liqso with 2 parts.
1 is ETF, which is still highly profitable franchise and the other one is Traditional asset, active asset management. We have an issue of return. And the second part in Private Banking. In Private Banking, we have the French With Frontline Banking, which is growing and profitable. And Philippe told you that we have still huge potential if we include the mass affluent Population of clients within our private banking setup, if I may say, what we will do is the long in the midterm now.
We have a good profitable and growing part. On the other hand, we have this international private banking activity, which is not profitable yet. So we have to restructure that. It's one of the part of the plan I will comment on. So this slide has been already shown to you last Friday.
So I will not comment very fast, but just I want to justify what we are doing there. Clearly to refocus our global markets on strengths. Strength, as you saw, is Cross Asset Investment Solutions and Financing Solutions. Where we have to restructure is on the flow activity. That's the reason why we have decided to close the part which we have the less profitable.
And in some parts, we have decided also to, if I may say, We have closed businesses and reduction of cost base across the board in this activity. So you know that we have decided to close the commodities OTC activity, which is 60% our total commodities activity. So we are In the commodity world, very importantly. Secondly, we have decided to close the prompt trading activity. And 3rd, in the prime services, We have decided to be much more selective in terms of capital allocation.
And we are it will have an impact on clients and on costs. And 4th, in the fixed income and currencies activity, we are streamlining the situation everywhere in the world, Meaning that we are reducing costs in Asia, costs in America and costs in Europe in this activity. We are closing and Renfrocer be more specific, but we will close some debt, clearly emerging in the U. S. We will close, of course, as I said commodities, OTC and the card and so on.
This represent the core of our refocusing on global markets. With the target to save €8,000,000,000 of risk weighted assets Before TRIM impact. As mentioned earlier by Julien, the global TRIM will impact more global market activities than the rest So we have to have that in mind when you made this assumption and when you made the assumption of risk weighted asset evolution and that. So it's before TRIM, of course. We made, which is a good achievement, EUR 2,300,000,000 in the Q1.
Very importantly, the Q1 outcome in terms of risk weighted assets that leverage Is EUR 5,500,000,000 linked to the market normalization in terms of risk of market risk, which is something which is a part From this EUR 2,300,000,000. This EUR 2,300,000,000 is a real structural reduction we made in the Q1. And we will do 80%, we say 80% of the EUR 8,000,000,000 by the end of this year and the remaining part next year for global markets or EUR 75,000,000 Sorry, we said 75. I hope we'll do better than that.
On the
cost, and I can tell you today with uncertainty on the top line, the cost adjustment base is the core objective of GBIS clearly. We have in addition to the plan we announced during the Investor Day, we have decided you add EUR 500,000,000 of cost savings in our plan. With for the first time a real guidance in terms of absolute term Of cost base. We are targeting to be below €6,800,000,000 of euros in terms of cost next year from €7,200,000,000 including the integration of EMC From Commerzbank, which is, roughly speaking, this EUR 500,000,000 cost saving. How we will do that?
We mentioned already last week that we will close business In Global Market Activities, specifically in fact, we will not do only that. This EUR 500,000,000 is the global cost reduction plan, which is Across the board with all the businesses of GBI. It's very important to have that in mind. Even if 75% of this cost reduction is related to global markets, Everybody will contribute. And Pierre will comment on we have decided to merge, for example, the Global Finance activity and the Investment Bank.
This merge will lead to Savings, cost savings, synergies, of course. It's a 14% contribution to the total plan. And as I said, we are restructuring our international private farm. We are closing the international headquarter, if I may say, in Paris, and we will relocate that in Luxembourg. So we have also a 10% contribution all this restructuring necessity of asset and waste management activity.
The way we will do those cost reductions are very usual, if I may say. The first labor in the service industry like bank is not is not purely internal staff, so linked to our culture of business. We will also reduce the external IT staff needs to the agile methodology, we are expanding cost of Reservoir And we will reduce the discretionary cost. A big part of this and Cecile is there and she comment on. We are reorganizing completely our back office and IT organizations within the GBIS.
We are merging the operations, back offices and the IT teams in a relationship with all business lines, which is the first step in what we call the agile organization of Of a company like us. So we are really dealing with everything we can to adjust this cost base.
So now the main question
everybody could have in mind is how we will deliver our return. So you have here the theory of return. Interestingly, you can see that our published return Our GBIS has been above 10% for the last 5 years with one exception, which is 2019. Since 2018 has been a very tough year for business like us, not only for us, and with a specific impact on the Q4, as you know, which has been not the biggest for Societe Generale. So we can say that 2018 is not necessarily the structural level of return if you had a look on the path.
But there is some structural event We have to take care, which is the main objective of our plan. TRIM impact, which is something which is not in the past, we will have to manage for the long term for the future clearly. And secondly, we are now in a scenario where the interest rate will be low for longer in Europe with an impact on volatility. There is a kind of correlation in our view between the interest rate and the volatility label, which means that we have also to adapt our setup To a lower client demand in terms of aging products, which is linked to the flow activity I already mentioned. So it's one of the main reasons of our plan also is to adjust this new environment, the global GBIS setup.
So how we will get to this 11.5% to 12.5% return we have targeted for next year? The first thing and I had this question from Pierre last Friday is yes, there is a slight assumption in term of market condition improvement for next year, First thing, slide. So the revenue in 2020 in our plan is slightly higher than 2018, first point. 2nd point, the cost. As I say, we have put a cap on our cost target of EUR 6,800,000,000 next year.
And 3rd, there is clearly a retroactive asset management behind this target. And now with TRIM impact, post TRIM impact, we are targeting to be more or less flat in terms of risk weighted asset between 2018 and 20. It's a bit difficult to predict because we have not the final outcome of the TRIM review clearly. Perhaps we are on safe side saying that. It could be a bit less impacting us.
But in any case and we are guiding you on the cost of risk normalized. Last year, it was less than 10 basis points. And well, we have 20 basis points for next year as a guidance. All that dimension makes us confident in the fact to deliver this target in term of return. And to be in a box, 75% of the improvement is coming from the cost part and 25%, roughly speaking, could come from the Revenue part, just to be more precise to the answer in the question.
But there is uncertainty on revenue. But I can tell you that If the revenue would be a bit lower, we will have to adjust again our cost and risk weighted asset consumptions clearly. And we have possibility in my mind to do that. Just to and then to give the floor to Jean Francois, I would like to conclude on the vision we have as the Global Banking Investor Solution. As I said, and this is in the DNA of Societe Generale, we are first of all a relationship bank, Meaning that the transactional relation, the bank the transactional banking, which is part of the business, is not the core of our business even if we need it.
Because there is 2 words in transaction banking. There is a payment part, it's core, but there is this part in this story. I can give you this story where we are 10 years ago in the U. S. 10 years ago in the U.
S. Associated with it was 10 hedge funds, separate hedge funds in New York. Today is completely different. We have client strategy. We're a really integrated setup in New York, serving all the group clients where we have at Societe Generale and within GBIF.
So this relationship vision has been built over time and we will continue to that in that direction. 2nd, And I think it's still a DNA of Societe, which is recognized by our stakeholders. We will bring expertise and innovation, as Frederic mentioned, for the bank, we will do the same for GBIS. With this positive impact ambition. It's fairly to say that we are leading back in renewable today.
The growth in term and Pierre will comment on that in a minute, The growth in terms of origination for renewable projects, energy projects, has been significant, more than 1% during the last year. So we have really something interesting there. Of course, the global target we have, globally speaking, is to raise our capital return, capital above the cost of capital through what I said, very selective capital allocation, very focused on where we are strong for clients and of course With anticipation. There is still a question regarding the potential impact on Basel IV on our businesses, very clearly. It's too early to say on the final FRTB.
The good news, I think, is we are in a position to anticipate. We already did decision, make decision, for example, to reduce the maturity of some very structured product. We could be impacted by the FRTB to manage that transition into 2024. So just to make you aware that this Pavel, for question, is at the heart also of the way we are today managing our businesses. It's very important to have that in mind.
And just to finish, I want to tell you that we have a clear vision that we want to build the European B2B Banking Services platform with HD Market. And it's the reason why I mentioned earlier in some other presentations. The willingness we have to develop partnerships. This platform is an open Platform and we need to develop partnerships. So it's the way we will continue to maintain and share and protect our franchise.
On the short term, the right commitment we have together is 2 things: deliver the plan in terms of cost and capital, and we are very much, can tell you, committed on that, But also and very importantly, protect the franchise. The real risk we have in this transition period is really to lose the franchise. And I will try with the team now to demonstrate that what we have did up to now, we have protected the franchise. And the decision we took is also protecting the franchise. It's a key point and we have to manage those two dimensions with the team, which is not an easy path today because when you make a big reserve restructuring like we are doing today, that is a risk that people are just impacting their commitment and their engagement.
So we have to manage those 2 dimensions. And clearly today, and you saw that in the Q1, that the contract is protected and we are committed to do that. So at the end, we will restore also small parts of GBIS to bring the return We want to bring it. So thank you for your attention. I will let now Jean Francois to go deeper in the global market activities.
Hello, everybody. So beyond the let me turn to Global Markets. So beyond the classic asset class view, we like to describe our activities using 3 different categories that Investment Solutions, Financing Solutions, Flow and Engagement Solutions. And we think it's particularly relevant for LG in general and particularly relevant for LG now when we have to make a strategic decision. So these products, this offer, how does it go to our customer base?
So we have basically 3 categories of customers: financial institutions, corporate and distribution. So distribution, we mean by that the B2B2C business where we sell mostly investment products to our retail investor through bank or insurance networks. For example, our own retail banking, but as well in Asia and in other retail networks in Europe. Financial institutions, this is where we sell the full suite of our offer. Obviously, we sell ALM, aging solutions to insurance companies.
We sell financing solutions To banks and we said obviously to asset managers, hedge funds, pension funds, investment solutions. Last but not least, corporates. The corporates are important for us. It's mostly hedging solutions, But as well some investment products for their own treasury, for example. Before I dive deeper into these three categories of businesses and give you examples.
Let me stress out something very important for to understand our franchise, something that is part of our DNA and that explained very much our franchise. There are 2 main characteristics. 1st, we have a truly cross asset offer. And this is due to our history. At one time, we had an organization that was completely cost assets in terms of investment products.
And we have kept this feature. So in our organization, now we are still very much cost asset. So as long as there is some hybrid products or hybrid quant research or products that are involving different asset classes. We see that we are much more competitive, much more reactive than the competition. Another characteristic maybe you know, but that is deeply entrenched in our history is that we have been the first and we are still a lot of structural, as we call engineers, in our front office staff.
So originally that was in the Investment Solutions business in the Exotic business. But for recent years, it has been spread over the entire organization. So now we have these people in Investment Solutions, in Financing Solutions And as well in Flow and Engaging Solutions. So that's where across the all market organization, we see really ourselves and our customers see ourselves the solution house. So now let's look deeper at our Investment Solutions business.
I start by this because We think this is our core DNA. This is one of our jewels. This is our oldest business where we think that we are a leader, definitively a leader in equities, but now a leader we think across assets as well. Well, we basically we answer to the complexity that some of our customers do have an investor has to generate returns and it's particularly complex in an environment when rates are 0, yields are so compressed. So we come up with solution with products that are exactly suited to their needs and showing enhanced returns.
So I give an example on structured products. Obviously, the auto callable equity products maybe some of you have heard of. So these are products that are principle protected. So that means that the customer will get back to its principal except in a very extreme down scenario on the equity market. And as soon as the equity market goes up, then it will get reimbursed with a very nice coupon.
So this is why in such an environment recently it has been so popular. So because this product is now very much standardized, where do we bring innovation? Because we are still seen as a house bringing a lot of innovation. This is in the fine design of the underlying. We came up with little tricks on the underlying that makes the difference and that show products that are less risky and that are showing a little bit more coupon.
As well over the last year, we the Novotrig which was a philanthropic component. So when the product is reimbursed a little bit is given to charity. It has had a huge success. So on this, the innovation is not on the payoff. It's on the little that we do on the underlying design.
That's for equity, but I say that beyond equity, we have very much developed our offer on rate and credit product. To the extent that last year maybe you have heard that the market conditions were a bit tough for auto callable risk management. And actually our rate business has had its best year ever. So overall, it was well diversified and that's how ultimately we had in 2018 an investment solution that was still very profitable. On this, we pride ourselves Of being extremely risk conscious on these products.
We manage these dispositions with eyes wide open. We think that from sources that we have that we have the most sophisticated setup for risk management in the Wall Street. But this feature is developing a new set of offer to other customers 2 sophisticated clients. When we add the second order risk components of our investment products, our auto call level. We make these sophisticated clients benefit from this opportunity that we call hidden assets.
For example that's on correlation. So we enter into swaps with the sophisticated clients so that when the future correlation between equities is not too high. They will benefit and they will have a nice positive expectancy on these results. So here you see that there is a strong virtuous circle where we generate business with these customers. And at the same time, it reduces our risk and allows us to grow our auto collectible book in a very responsible manner.
I come back to more planned vanilla products that we classify as well in investment products, the warrant and certificate. So here it's completely simple. These are calls and puts. So the value is not created by The payoff and the complexity of the risk management that you need to do. But by the very this factory, this IT factory that you need to put in place to animate 1,000 and 1,000 prices on different products all over the world in real time.
This is a very profitable and old business of SoftBank because we have been the first ever 30 years ago to issue the 1st equity warrant. But this is a business that has to renew itself year after year. So for example in Asia recently over the last 2 years we reconquered the top one position by implementing low latency techniques that was used in other parts of our business. What is our plan here is very clear. We want to be world leader.
And for this, we need to make a breakthrough in Germany because Germany, German warrants is a big, huge market in terms of size. It's very difficult to penetrate. This is exactly the goal of the EMC acquisition where in the beginning of 2020 we'll be active on German warrants and we hope at that time to be world leader.
Lastly,
another type of strategy that we have been developing and that is hugely successful and has a huge growth potential. The index strategies. So these are trading strategies that we do and where we passed the performance to investors through indices and swaps on those indices. As Sarah mentioned, We have had enormous commercial success in the U. S.
With insurance companies with their fixed annuity programs Well, they asked banks to provide them with underlying 2 digitized performance for their policyholder. It's not a new market. Banks are already present on this segment. But we completely disrupted this market over the last 18 months by proposing indices that were extremely well risk adjusted and where the performance of our products was the best in absolute terms and in risk adjusted terms. So we have a huge success there.
And this development is extremely interesting because there is almost no market risk and almost no scarce resource usage on the structured products. We are very aware of the risk and it cannot grow infinitely. On this, there is a huge potential. Then let me accelerate. On the financing solution business, completely different business.
What do we do here? Our customers do have market assets and we finance these assets. So initially, this is the very well known Coutu Finance or Govee's report that has been done for 4 years. But here there are 2 developments that occurred over the last year. So first in flow financing, flow financing for us is the most liquid assets.
1st on our side, following the New Age acquisition, we are still developing the synthetic equity prime brokerage. This is something core that is very linked to our Prime Services clients and our Equity business And where we will accelerate the development now. But there is something very interesting that happened in the market over last years because client financial institutions because of regulations need a lot more collateral. Actually, this is a market that has emerged To trade collateral. This is a new market.
It's always a new market. We have an edge because we're able to understand and to put IT systems to profit from that and to advise our customers. Just simply, if an asset manager is naturally long govies, maybe he will enter into a downgrade asset exchange. So he will give his govies and get equities. So the other asset manager is so he will get a pickup for that.
The other asset manager get govies because he needs them to post them for derivatives of margin. And between these bonds and the equities, they can be in different currencies. So there are a lot of arbitrage and for the customers to benefit. This is something where we are extremely active over the last few years and we are putting in place some very cutting edge IT development using cloud computing. Because when you think about it, it's a huge optimization problem where we have good ideas to serve our customers.
Then structure financing. So this is on the more on the longer term. These are assets that can be extremely complex. So it goes from equity bonds, emerging assets, EBS. But then it goes to hedge fund shares, private equity, even life settlement policies that we have financed.
We have done a big deal in the U. S. Again recently. So we have now the full palette of eligible assets. We again like on the structured products, we take our time.
We want to be extremely risk conscious to know exactly what we do. And overall with the risk, the haircuts that we take on the collateral, this business is extremely profitable in terms of ROE because even in extreme scenario, with a shock on the collateral, we don't lose any money. So this business overall is extremely important for us because it's recurrent revenues and recurrent revenues for market activities that's something very nice. You have observed in Q4 or even generally that our revenue volatility it's lower than others. This is partly because we developed that.
And this is ROE extremely relative. Finally, our flow and hedging solutions, which represent currently half of market revenues. So this is where actually we need to have focused on mission. Why? So first, structurally, We have never seen ourselves as a flow monster, as you know.
This is especially something dangerous right now, Because with the rise of cost of doing business, there is even more benefit for sales. On top of the fact that flow by definition is benefiting from size when flows are always going to the biggest marketplace. So by definition, it's so to have the ambitions to be big to everybody at the same time everywhere it's absolutely dangerous. At the same time, we do have strength. For example, on equity derivatives, it's well known that we have developed that for years.
And we have specific ambitions where we want to be good. Another characteristic is that this Flow Energy Solutions obviously is extremely synergetic with other market activities for our investment solutions. We need to have a sufficient good flow business for our financing business as well. And with the group In retail banking in France, in IBFS, in for corporates, obviously, there are a lot of links. So this backbone, we want it to be solid and then to generate profits on focused areas of expenses.
Particularly, what do we do? What are we decided? On cash products, mainly on cash pure execution businesses, this is where we want to be lean. We want to be lean to support our corporate issuers that are using ECM and ECM franchises. And we will work on efficiency in terms of cost and RWA allocation for the rest.
For example, there are even desks where we decided to stop like inflation in the U. S. Or emerging credit in Europe. And we are currently reviewing our old primary dealership setup. In clearing, so clearing is special because we have a strong market share.
We have a leading position. But here we identified very clear optimization in terms of RWA that we have started to do and that you can already observe in Q1 and it will continue to deliver. Lastly, on derivatives, I said equity derivatives is a strong franchise. Here and that applies as well on fixed income. Our specificity is to be a solution house.
So we can add innovative content to our customers through research, engineering, as the markets. We have an environment where actually the very important tool to provide ideas and we are remunerated for that. On fixed income. In Europe, we have a strong franchise that we want to protect with corporate. Obviously, with our presence in Eastern Europe or in Africa on emerging markets as well.
We are strong. So we are very clear about what we do well, where we still want to progress and where we want to optimize.
Thank you very much.
So good morning. So I will talk about Finance and Advisory. F and A is a diversified business aiming at providing advisory and financing solutions to our wholesale clients. It's a business that is well diversified in terms of regions. You can see that we are active in EMEA Americas and in Asia, Asia being smaller but growing pretty fast in absolute and relative terms.
But we have a global responsibility. Each Head of Business has a global responsibility, which is very important. Good diversification as well in terms of businesses. So first we have Asset Finance, which covers real estate, shipping, aircraft, leasing and export finance Asset Backed Products, which is securitization and a broad definition Investment Banking, including ECM, DCM, M and A, LBO Acquisition Finance and Telecom. We have the hedging because we've got some JVs together with our global markets.
We then Transaction Banking, I'll talk about this in more detail, Natural Resources and Infrastructure. And last, what we call the corporate lending, which is not really a business. It's the portfolio of these RCF big vanilla transactions that Severin described, which is something we do for the sake of the relationship because it's a strong cross selling enabler, not only for the financing and advisory business lines, but for the whole of the group. So this business is putting aside corporate lending is our profitable businesses as Stephane said above 15% return on equity on average. And if you take the structured finance activities, it's even above 20%, Structured Finance being Natural Resources, Asset Finance and Asset Backed Products.
And interestingly, these businesses are even more profitable than before the crisis. Project Finance used to be a 12% return on equity business. It's more than doubled today. We are diversified in terms of clients, Financial Institutions and Corporates. And we've got strong competitive advantages.
1st, we have in many sectors a strong industry knowledge. And this is a very strong competitive Vantage because it takes from 10 to 20 years to really build an industry franchise. So we are strong in energy and metals and mining, telecom, real estate, shipping, aircraft and a few others. We are also, I think, one of the best banks around when it comes to structuring and finding tailor made solutions for our clients. Last, we've got a global and holistic approach to our markets.
This is also very important because our vision is that more and more the markets are going to be global. Issuers will go issuing into different markets, different regions. There will be conversions between the banking, the loans, syndicated markets and the capital markets. And having a global approach to these markets is important. And it enables you also to better manage your risks and risk awareness is also a strong competitive advantage and we'll talk about this later on.
In terms of revenues, we have over performed the Investor Day plan between 2013 and 2016. We had promised a growth of 8% a year, we have delivered more than this, strong increase in NBI. Then you can see we decreased a little. This is due to the commodity crisis. The oil crush was such that it was wise, we believe, to slow down a little.
But now we are again in a growth mode. We are increasing and this is confirmed in Q1 2019. We are in line with the Investor Day targets. And in terms of net result, we are even above this. We decided to put forward some products, the most profitable products, the most accretive, which are asset finance and asset backed products, and we have increased on average more in these businesses.
We underlined the Renewable Finance because it's a very interesting case. The Energy business post crisis has picked up very nicely. And I think we went out of the crisis very successfully. But within the energy space, the most biggest growth is the Renewable business. It fits well with our positive impact approach, but also it is a very profitable business.
We have multiplied by 2 the income over the past 2 years. We have also gained market shares. In 2018, we gained market shares in almost all our activities. The way we tend to look at this is, when competition is not too high and especially when the American banks are not too much focusing on one given market, our objective is to be in the top 5 worldwide. If we are in markets where all the banks are really focusing as a priority, for instance, DCM, our targets will be to be in the top 5 in the European region, but still with a global reach.
What is interesting also you can see when
it comes to advisory, we
are number 1 worldwide. And This is important. We want to be advisory driven. And when we are not competing on balance sheet and it's balance sheet driven and driven by size, we tend to punch above our weight. Now transaction banking is something that was also put forward during the Investor Day.
It is an area where we are investing. It is important, first of all, for the client proximity. There's an important client angle and this is one of the reasons why this is an important investment. It is stable in terms of revenues and it is accretive. It's got a good level of profitability.
It's accretive at the GBIS and at the group level.
This business here,
what you will see
the number, the NBI EUR 2,000,000,000 is not only what is within the GBIS world. We've got SEK 400,000,000 basically that is accounted for within the Wholesale Banking. But the rest of it is you will find within the retail networks. So this €2,000,000,000 is at the group level. We have increased our market share in this business going from EUR 10,000,000 to EUR 7,000,000 in Western Europe in Payment and Cash Management.
And therefore, we are well on track to deliver the Investor Day targets. We
are going to
So now how do we manage our capital? We manage capital very carefully. 1st, we are selective at the when we look at the global client relationship and we take into account the global profitability. We are selective at the deal level and we've got a minimum for each of the transaction we consider. We reallocate between the different businesses depending upon the relative profitability.
But we're also implementing and we have implemented an OTD model. What does it mean exactly? So if And I would like to separate 2 things, the primary phase and the secondary phase. On the primary phase, what we do is that if you are leading a transaction, if you are a book runner, you will be the bank distributing the loans on the market or the bonds. We are number 5 in EMEA in terms of book running.
So it shows that on the primary business, we are distribution driven. And this is a function of the number of mandates you get as a book runner. Just to give you an idea, we originated EUR 80,000,000,000 last year and we distributed on the primary market EUR 33,000,000,000 Being a book runner is important because you get more fees. And you are in the market, you understand the markets, you can take more underwriting, which is the most profitable part. So we are very fee driven and you see the fees account for 50% of our income.
But what is more important is what we do on the secondary side. Once you've got the deals getting into your books because you cannot do pure OTD except the high grade bond market. You we keep final takes. And even on Capital Markets, you bridge your warehouse before you exit to the Capital Markets in many cases. So once the assets get into the balance sheet, what do we do?
We have built a whole range of products our solutions at Corit in order to manage this actively. Secondary sales to investors or banks. Insurance. And this is a very important solution because that has been building over years and good complement to secondary sales. Securitization, synthetic securitization, selling a 1st loss on the portfolio of assets and we did this on our LBO portfolio.
And you see that this one that is on the bottom left, it is increasing significantly and it is going to keep on increasing. And the way we do it is that at each point of time, we look at our portfolio, we look at the deals, we try to see what is the best solution in order to create more value as possible. For instance in 2016, we sold most of our LBO portfolio because it was the right time to do it. We sold EUR 1,000,000,000. It's not nothing on secondary markets.
But the following year, it was not the right solution. It was better to use insurance on other asset classes and this is what we did. So as a result of all this, we our NBI and RWA has increased. It has reached a record high. If you would not take into account the corporate lending book and the other financing activities, it would be even steeper.
We have reached a record high in structured finance with 7.6% NBI on RWA. And normally this red line there should decrease because of competition, the fees and the margins are going down. So it shows that we have been efficient in terms of maximizing profitability. Then the questions you may have is in the context of now the Basel IV, so called Basel IV. What will happen to these businesses?
So several things there. First, we don't know exactly what will be the impact, the magnitude of the impact. Still a lot of uncertainties in the way this will be applied. But we are comfortable that we can manage the situation. First, we are not going to be static.
We are going to reallocate between the different businesses because some businesses are not going to be impacted and there are even some businesses which will probably benefit from this. Second, we believe that the
pricings are going to be reviewed.
Of course, if there's a 7% impact, the pricing will probably not move. If the impact is higher, I think at some point there will be a repricing on the market. And this repricing will in a way be beneficial because we will be able probably to bring more liquidity in these activities, especially on the structured finance activities, where the pricing are not attractive enough for some investors today. So I think if you are fee driven, if you are OTD driven, You are well placed to resist. I think the banks who are not leading transactions, who are not leaders in their markets, and this is why we want to be leaders in our markets, they will have difficulties.
For a pure asset taker in these activities, it's going to be tough. So we are convinced that we can through reallocation within our business mix. More OTD than even today, because we do more advisory Because there will be some element of repricing, we will, I think, in relative terms, even benefit from the situation. It was not a good news for the industry, of course, but in relative terms, I think we are well placed. Last, how do we go through the cycles?
And you know, it's credit markets are cyclical markets. So we have going. And I think this is a very interesting chart because it goes backwards and captures several cycles. So you can see the subprime crisis, which translated into an LBO and real estate crisis, the liquidity crisis, then the commodity crisis. Several things.
First, in spite of the very harsh crisis that we have seen over the past 10 years, we have never had a negative net result. We have always been net result positive. 2nd, you see that post crisis, usually we recover quite a lot because our net cost of risk decreases quite a lot because we recover a part of what was defaulting. Because of the structural nature of many of our activities because we've got securities on most of our loans. 3rd, Our net cost of risk on average over the whole period has been below our expected loss, which proves that our models are conservative and that we have over performed in that front.
Last, we have a kind of countercyclical activities. You can see, for instance, when there was the commodity crisis, the rest of the markets were pretty stable, except for 209 because the magnitude of the crisis was such that it kind of embarked most of the sectors. So this is my time for my conclusion. First, I'd like to say that we've got 2 very strong assets, the trust of our clients And the quality of the relationships across all these periods. And second, the quality of the teams.
And we are think by having on some of our activities leadership positions, we are still in position to attract a lot of talent And also the experience of our management team who has been going through all these different crisis and cycles. So we are confident that we can deliver profitable growth going forward throughout the crisis and throughout the cycles.
Thank you very much, Pierre. So now we open the Q and A session. Hi.
Hi, me again. So just I mean, you mentioned you are relationship banks, which is, I guess, how you've been created actually 100 and 50 years ago And develop big projects. But I saw in your slide you put your ratio focusing on 800 clients. Is that a big I mean, honestly, I have no idea, but it seems to be a big number of focused clients. And is there, I the Turing within these H and L clients and how really because that's asked the question about profitability for most of these clients.
And second one is on Capital Markets or Global Markets. From Coalition data, 36% of your revenues, you're ranked top 8 and above. And we reconcile that with the slide you have today about the RWA density. That shows that's around 35 or above of RWAs in global markets. And So the EUR 8,000,000,000 number that you came with in terms of deleveraging, is that really like going through I know there's been True, like, details, division by product by product.
But is there more to do there? Or you think that this is really what you can do in the medium term?
I will let Jean Francois for the second part of your question. For the first part of your question, when we say strategic clients, for us, it's a very a clear definition. It's the clients where we are allocating our scarce resources in priority. When I say scarce resources, I mean senior bankers, teams and capital. And in this Iceland client, they are not all the same level of development in the relationship.
So you have some which are very mature with high level of revenue and good return. But we have also what I would call prospects where we think that we can allocate more cash losses now. So it's the reason why it's probably as a big number. But in fact, it's also the investment part of our franchise So now on the second part. Correlation, as you know, Vatai is something which is the bench It's very limited.
It's not the total market, first of all. So we have to take that with
Yes. When we look at aggregate numbers, it's difficult to draw lessons. So that's why we took time to really analyze my buckets that are consistent. Sometimes on such a great numbers where you can see some more detailed analysis. And here you can see confirmation of our strength in investment products in equities.
We have kind of 16% market share and we are by far the top one. And then overall Investment Solutions. We are in a very top league with 9% market share. In financing businesses, It's not so much about market share because then it depends a bit about your balance sheet that you are deploying. But with the ROE that we have on this activity, so between 15% 20%.
We are very much satisfied with that, with our RWA consumption. So then we come back two of the main points. So that's the flow business. On the flow business, we know what we want to do in terms of Protecting some franchises. And on some of us, yes, we are taking actions.
€8,000,000,000 when you zoom on those sub activities and not on the total of March. It's already very significant. So that. So we think that with this, we can really stabilize and improved globally the ROE of Mark.
Important to say that the importance Management, if one day we have to go further because we think that We will go further. But my view, we don't intend necessarily to have the same return on equity for all the businesses because there is a big synergy a link between the flow, as I mentioned, and the rest. So we can accept to have on the flow activity, let's say, a 7 The fast return if globally we are delivering the cost of equity above. So for me, it's important to have that in mind. So exactly what we are designing today.
Bruce.
Thanks. Yes. Bruce Helms from Morgan Stanley. You spoke quite a bit, obviously, in terms of shrinking some of the fixed income flow. But what about equities?
I mean, most banks don't make much in equities in Europe. So what you're changing strategically there. I mean, obviously, others on the continent have looked to outsource or partner in research. They've looked at maybe partnering on execution BNP with GTS in the U. S, for example.
So what else are you doing within equities to try and rate? It may not be the capital intensity that's it's bad as fixed income, but the profitability still feels quite challenged across the industry.
If I may, I would take the point. I will let Jean Francois to complete. When you look at the equity, you have to look at the chain. It's a chain, in fact. It's an equity chain.
And it's starting with the need of our clients Let's say, equity capital market needs, for example. And there, we are the leading bank in Europe for forever, if I may, and we have a big position in equity capital market Spain, in Germany and in other countries like that. We want to protect that because it's our corporate franchise, which and in some cases, also the financial institution and more the corporate franchise, which is really driven there. So the point for me is to protect this franchise because it's a key part in the client relationship first And then to see the chain where you are in a position to save cost and to get to benefit from the scale of economies. And the question is more on the execution part, Well, we have a question of size, I would say there.
So probably the point I already mentioned that we will have to optimize the chain clearly, and we are in the process of optimizing the chain. In some cases, we can find some partners to do that. We don't exclude that solution. But it's a core point you have in mind that we want to product the corporate franchise also. And in some cases, we will exit in some countries locally, we don't mind.
But on France or Europe, it's something we cannot we want to stay there. So for me, it's not only global market question, if I may say, on the equity. So second part is we are very not in France, but globally speaking, we are small in cash equity. And so we could be much more selective probably also in the research part.
Not much more to add. With MiFID. As well you know that it has put even some more strength some more difficulties on this business. So we are open to all creative solutions and there are a lot the talks in the markets, and we are listening to the talks here.
Hi, everyone. It's Nick Davy from Redburn. Two questions, please. The first one, I don't see the phrase repricing very much in the presentation. And I just wondered if there was any pockets of these businesses you talked through, particularly in financing, where you see any repricing underway.
And maybe specifically, if you can talk to corporate lending, which you say here is 10% of the risk weighted assets delivering less than a 5% return on capital and where the strategy is increasing selectively, which to me seems perhaps counterintuitive. The second question on Basel IV. I know you've alluded to it, and I know in general, your advice to us Is to wait and see. But given that it is likely to have a large impact on the capital allocation of this unit, I just wonder to what extent work has been carried out about the economics of some of the decisions being made today in tomorrow's regulatory environment. Thank you.
So I will let Pierre to take the repricing point.
So On reprice, I thought you are going to answer to the second question. In terms of repricing, what we have seen of pricing pressure over the past years. It is kind of stabilizing over the past 18 months. I think it has stabilized. I think it is not increasing yet.
Then it depends upon each subsegments because it's not a homogeneous market. So the LBO market has little to do with Project Finance in Asia. But globally, we still see a lot of liquidity into the system, into the banking system. And therefore, yes, a lot of competition. So I think we are at the bottom of it.
But again, I think the positive thing is that you can distribute. And so the answer to this is more than ever, we need to go have this OTD machine going. That's the only benefit you get from stronger pressure on margin is that there's more liquidity and therefore you can distribute more. So I think for us, it has been manageable. And I think it's more a problem for the asset takers and pure asset takers.
Yes. If I come back to your point regarding corporate lending, I'm sorry, I have not been clear because It's really what we are managing is a client profitability. So when you are allocating capital like you are putting an RCF in place or you are putting some financing, 5,000,000,000 financing in place. So this decision is taken note on the return on this specific product, which is highly competitive, but globally speaking. When we say selectively increase, it means that we will choose a client where we will allocate those resources because globally, we have a growth potential and a return potential.
It's the way I should have said. So sorry for that, I was not clear. So it's not so counterintuitive in fact in my view. The second part regarding Basel IV. I'm sorry, but we are not staying and waiting.
I mentioned we have 2 different questions. And Pierre covered that point In the structured finance, and we can come back if you want. On the global market, the interpretation of the current FRTB is still Cristiano. But there is a risk on some parts of our businesses. And the decision we are taking today is just to limit the maturity of our exposure to be sure that we can manage in 2024 when it will be enforced, that we will not be stuck in something which we have to exit in some cases.
If the new rules are completely, if I may say, destroying the return, we will exit from businesses. So the real answer we have to this question is to manage the maturity.
Hi there.
There is a question there, yes please.
Hi, Omar Fall from Barclays. Just three questions. Firstly, on Private Banking outside France, is moving the headquarters enough because you have EUR 50,000,000,000 of AUM, you haven't made money for several years, but these are businesses that other banks would love to take off your hands. So why is SocGen the right owner of these assets at a time when you need capital and this is a non dilutive getting rid of these would be non dilutive to The second question is just on the repo business. You mentioned some of the positive elements of regulation, But all through last year, the regulator has been upset at French Bank's window dressing around leverage ratios, and they've made that pretty clear.
I know the business has a good return on equity, but the return on assets is not very good. Is this an area you'll be looking at? And then lastly, just on Slide 46, you highlight you'd like to keep profitability above cost of capital. What do you think your cost of capital for this business is.
So to come back to the Private Banking, International Retail Banking the Private Banking. In fact, our global private banking has 3 legs. The French one, which is under a joint venture with the French retail, which is growing fast. We will extend the presence we want to have there. There is a U.
K. Situation where we just are in the process to merge between Ambrose and KleinWords. We made this is not profitable yet due to this process of integration. And there is a rest. And the rest is 3 important: Luxembourg, Switzerland And Monaco.
During the last 5 years, on those three specific areas, we have been under a deleveraging process to refocus on the client quality we want to serve. And we have divided by 2 the number of nationality we are serving and so on. So The impact of this rationalization has been a decrease in asset under management, a very strong decrease. And today, if I add all those different parts, we are around probably EUR 30,000,000,000 of asset under management. So what I am doing today is I am creating this international pact with Luxembourg, Switzerland and Monaco under one roof, which is a move I made in terms of headquarter.
And there is a link with France on those specific points. So for me, there is probably a meeting on the long run to stay there. Everything is open. We can change our mind if we have to. But for the time being, we have
a plan. We have a
plan in terms of restoring profitability with those specific UK and with those global non French part. And we will rise because of capital consumption there is limited. We have put a cap in term of credit allocation to the total IUM. I am managing that cap and I can reduce it Even if it's an appeal product for the clients, we can reduce the capital consumption there, and we will do that if necessary. What I want is to restore the return as soon as I can.
So on the repo business,
we have not been
in a case of window dressing at all. You are probably mentioning some peers, not us.
I think it's always worth to understand what we've said about this. First of all, the leverage ratio, as you know, is not mandatory as of yet, but we are we stand at 4.3%. And if it would be when it would be mandatory, it's probably in the area of 3.5% as far as we are 2nd, we have an internal board approved floor under which including within a quarter, we don't want to go below. So that which is set forth much above these future mandatory threshold. So I don't think we it's already enforced today.
It will be from a regulatory standpoint. We stand at 0.3% and the limit under which we never want to be Based on the Board decision of Societe Generale, within the quarter, not just at the end of the quarter, it's much above this EUR 3,500,000,000. So don't think we are in this case of window dressing at all.
There was a question there?
Yes. On Slide 41, thanks a lot for the additional detail on the geographies. I was just wondering the revenue mix, Does this broadly reflect as well the risk weighted asset allocation, I guess, ex operational risk weighted assets? And then to Anders, I'm a bit surprised about I was told you had more European client revenues in the Americas and Asia Pac. But is that because the rest of the revenues with non European clients is basically equity derivative structured finance where you consider yourself world leader?
And then second question on the costs. So you indicated the cost could be So the revenues are not in line with your revenue expectation. So what sort of like sensitivity are we thinking about? Is 10% of the costs Really, I mean, flexible or 20%. So to give us an idea about maybe what part of the costs are variable.
I think at the last Investor Day, you gave a percentage of 30%. I think that was at the group level, which seems to be a bit higher in that context, but anything would be helpful.
Okay. And coming back to the risk weighted assets allocation, I am not excited because this figure in mind, but it's not the difficulty to mention it. And what I say, it depends on the business model we have. So I would say it should be roughly aligned with revenue more or less. So it's my Yes, if I may say.
Regarding European clients, Parashaw, it's fair to say that the share of financial institutions In Asia, for example, it's much higher than globally speaking because we are serving this B2B2C market and we are big clients like Singapore banks like Japanese banks and so on, which explains why in Asia, the percentage of European clients is lower. Clearly, we are due to our setup there. And in the U. S, it's a bit the same answer. But we have to say that we are also a corporate franchise in the U.
S, which is a long lasting corporate franchise And where we have we will continue to have profitable relationships. So it's coming from the history of the bank. In terms of flexibility, of course, flexibility. The next question is what is the horizon you have? Well, it's short term flexibility and long term flexibility.
At the
end, any cost is flexible At long term. So my point is what is your short part of your question is what is your short term flexibility? It's important to have in mind that the short term flexibility have an impact on the future return and future very important. I will give you two examples. I can have a very strict flexibility of my IT investment.
I'm spending EUR 1,700,000,000 in IT. I can really say that next year I will cut severely my IT spend. But you will have an IT impact 3 years after that. So the flexibility is not total. It's not EUR 1,700,000 I say.
It's a part of that, If I may say. And we can just reprioritize our IT project to be more flexible of that. And in the part of that, it's some 1000000. We can flexible. Can prioritize certainly, not the total part of that.
The second part is, which has been said in the past, is bonuses because it's depending on your revenue. But at the end for me also there is a we have to manage this flexibility with if I may say with security because at the end you are losing your team And if you are paying them and you are putting at risk your franchise. So we have been managing that risk very easily during the last period of time. We have low revenues That we cannot do you can put to 0 this €700,000,000 in terms of balance we have there. So there is Probably 7 1000000 of flexibility, but difficult to say because we have to go deeper in a way we want to, but we will decide to stop and serve.
But it's the other magnitude.
Yes, two questions. First question is regarding the evolution of the business. We felt qualification of some platform, the development of Multi Dealers platform. We also hear about Project Smart, for instance, regarding primarily bond issuance and electrification of this kind of business, etcetera, etcetera. We see there a kind of deflationary trend in terms of revenues.
Of course, we can assume that in regards of this trend, we will have also a decrease in cost. But all in all, how do you see the impact of this strong trend On your cost income, I would say globally for the industry, not especially for you as a surgeon, But globally, how do you see this trend? And my second question is maybe more a question for Frederic, Regarding the fact that your Global Markets division accounts for around 20% of your net banking income compared for instance with 10% or less than 10% for BNP the our credit record. How do you feel comfortable regarding the fact that this division as I would say, bad reputation in terms of ROE today, volatility in revenues. Don't you think that even if you make a lot of efforts on that division, that we'll wait on the perception of investors.
And how do you dilute. Or do you think that it would be useful within a 5 year or 10 years, 5 years? Trying to deal with that by I don't know, but I have an ID.
On the electrification? [SPEAKER JEAN FRANCOIS XAVIER BOUVIGNIES:]
Yes, I start by the first question. So, yes, obviously, the electrification has an effect on the cost, but maybe at the same time fees are decreasing or even more than that. So that's completely part of our analysis. Yes, we are part of this effort with SG Markit. But, Roy, it's not a pure execution tool.
And we don't want to go much deeper into this execution business because we think it's extremely difficult and maybe we are not in the best position to reap the fruits. Our positioning again is to add content. And in the SG market, it's not purely about execution, it's as well market insight, it's trade ID, it's risk management and it's the old package for us that makes sense And we'll not go on pure volume and lower fees because that's not our play. What we see in terms of electronic exchange for us fits with our identity of bringing
again, I will take your second part of the question, which is probably a nice way to speak about consolidation beyond, I guess, just the capital markets. Maybe and then we might end there. First of all, I think there are some wrong perception. We have, as it was said, a low volatility of our revenue line from a quarter to the other. It's very important and it's related to what Jean Francois said, for example, in the development of relatively recurrent revenue generation businesses such as the financing activities And the Investment Solution to a certain extent because it's also a widespread number of clients.
But as you've said, on the return on equity, and that's why we are the issue. We need to do better, needless to say. Can I say, if I may, beyond that, and I've made just an interview morning on the Feet, and I will say exactly what I said to the journalist? If you look at banking union and the completion of the banking union. The logic the logical outcome is more consolidation in the banking market in Europe, Definitely, because you have too many players, it's more fragmented and it corresponds to the idea of a more integrated market.
And clearly in that perspective when you think about it Societe Generale is probably one of the players which have on one hand enough activities to leverage on such a consolidation process. If you are just a retail bank in one country, not clear that moving to another country makes a lot of sense. It's very obvious that we are one of the very few banks with some capacity to leverage and mutualize some investments or, of course, client capacities. And at the same time, we have a size because there will be a limit of the size with all the parameters that we all know, MREL, etcetera, which is probably around €1,000,000,000 We have a size opportunity to think about maybe growing. But at the same time, let's be realistic, today there are still too many obstacles.
Beyond the fact that we are just in a period of time where there are elections, etcetera, I mean and so much more to you in the coming 12 to 18 months. I mean, we have a lot, I mean, because what we've been just trading requires a lot of energy of the management and all the staff. We need to have a better and more visibility on the rules of the game, not just the regulatory the implementation of the regulatory framework, But beyond, the problem of this banking union is that when you think about the way even countries look at their own banking system. It is in contradiction to a certain with the initial plan with a more integrated market. So we need to overcome still probably because there is still an incomplete construction on Resolution Extra.
We need to overcome current behaviors, which are obstacles and would not help us or any bank to get the full benefits of a merger, knowing that what you know is, of course, the additional and the cap. Immediately as you grow, you have a risk of having to have more capital. The posture of the SSM will be critical in matter. Let's also take just let's leave Mr. Henriette just some time.
He's just there new to assess whether associated with this 12% target if it were to grow, could keep the 12% target, for example, if we were to grow. And precisely, as you said, Dilute to a certain extent the capital market activities, make maybe even the system more resilient and not just But just there for 2 months. So what I mean by this, there will be a time exactly in line with, I think, what we've said 18 months ago, end of 2020. You will know about Basel. You will have a clarity on what the new commission, the council wants to do.
And it might then be the time to see whether or not it can add more value rather than just grow. But it's not today, I think, the right time. And we have so much to do today to create much more value by effectively delivering and getting a price share price, which will reflect much more the intrinsic value of the bank. And then we will have time to see whether again the conditions, the overall environment you can make that an opportunity or not and the jury is out there.
Okay. Thank
more time with all our management team. Some of the people here did not have the chance to speak, but it's an opportunity for you to meet with them.