Liam will go through our results and the presentation as short as possible. And then with all our management team, we will answer your questions. Let me just remind you this good guidance, 2 questions per person, so that everybody has time to have his answers or her answers. So we'll start immediately with the first page, Slide 4. Just let me highlight that we have posted solid results.
But beyond the just the financial results, I would like to highlight that we are making good progress consistent with our different strategic objectives. First of all, we are posting a Strong net banking income increased 9% but 4.4 including your clear share revaluation. That's something pretty solid compared with other European banks in an environment which remains challenging. We have overall a net profit of €1,250,000,000 and So return on tangible equity of 11%, both for the quarter and the 1st 9 months of this year. 2nd, we are pursuing with a lot of determination the refocusing of the portfolio of the group and the optimization of capital allocation that we had announced end of 2017.
And this week, we have announced the sale of our Retail Banking published subsidiary Eurobank to Bank 1,000,000. This is again part of our plan. And as you can see, we are acting and we are selling. We will be able to come in more detail, but good assets in good conditions. We are also we are making a definitive progress regarding our litigations.
We are putting behind us this quarter the financial cost of our U. S. Litigations. The last litigation was regarding the U. S.
Sanction. We should be able to reach an agreement in the next few days or very few weeks, but the financial impact is 100% covered with the €146,000,000 additional profit. 4th, we pursue the strengthening of the balance sheet. Our core Tier one ratio is increased by 8 basis points in quarter, thanks to our results. But beyond this, all our key capital ratios are up in the quarter.
We have completed our yearly funding program and we have been put on positive outlook by Standard and Poor in late October. Let me also highlight that again this quarter, the net cost of risk is very low at 22 basis points, 18 basis points for the 1st 9 months of the year. It reflects the very good quality of our portfolio and the strict discipline in terms of credit origination and our NPL ratio continues to decrease quarter after quarter and stands now at 3.8%. And 5th, last and but not least, we've made further progress in our goal to be at the forefront of positive transformations and be a responsible bank. We are definitely, I think, ahead in terms of digital transformation, but in a By the way, we have won the 1st prize at the ICAC 40 award.
So it's an award in France, which rewards the top French company in terms of digital maturity. We are also the number one French bank in the Rub Eco Sains Sustainability Ranking, and we are in the top 10 European banks among 133 of our peers. And regarding gender equality, We are also number 1 French bank and 14th among the 3,000 companies in the world. So There's always more progress to be done there, and we need to remain humble, but that shows a capacity to make progress. Let me just comment very briefly this disposal program and reallocation of capital.
Page 5, We have again announced disposal. The estimated positive impact on our core Tier 1 is going to be 8 basis point once the transaction closes. Overall, we have announced for the disposal, which represent plus 23 basis points of core Q1, which are not yet in our 11.2% figure. At the same time, in a very selective way, We are investing and for example, we made an acquisition in the feed tech called Trisol, which should enable us to develop new businesses. It's a business which provide core banking services to a new partner.
We are absolutely comfortable in our capacity to complete disposal plan. Let me just remind you that we aim to have the equivalent at the end of 50 to 60 basis points of positive impact on our Q1. You will see further announcements in the coming new quarters. And let me just highlight that currently, we look at no acquisition. The priority is clearly to increase our capital, core Tier one ratio.
The Commerzbank was an exceptional opportunity. It It's perfectly with our business and will be very positive in terms of aero resolution. But at this stage, I see nothing like this and we are really concentrating on the organic development of our business. Let me just again well, I will for the sake of the time, let me just say one word on Slide 6. I've already commented on these rankings.
I just would like also to illustrate that regarding our objectives in terms of financing the energy transition. Now we had announced a €100,000,000,000 commitment both the balance sheet and through significant and senior roles in Green Bond Origination, where we have achieved 58% of our target. I think we are really online in terms of this objective. Let me, for example, highlight with the Societe Generale, but also our subsidiary ALD have issues very positively impact bonds, RIN bonds, and I see development of this business going forward. Now I will turn the floor to William for him to enter a little bit more in the detail of the figures.
Thank you, Frederic. Good morning, everyone. So I invite you to go straight to Page 8 with the headline numbers for the quarter. As Frederic already hinted, the main first point I would like to make is on revenues. Revenues are up 9% of year on year.
They are up 4.4% when adjusted for the impact of euro tier revaluation. The revenue growth is broad based across businesses with the special dynamics in International Retail Banking and Financial Services and CIB will come back on this. 2nd point, underlying net income stands, as Frederic just mentioned, at €1,250,000,000 It is up 16% year on year. Group RoTE stands at 11% for the quarter as well as for the 1st 9 months of the year. And 3rd, EPS for the 9 months of the year ended at €3.62 per share, which is up 21.5% relative to the EPS for the same period of last year.
We have a dividend provision equivalent to €1.81 per share, which corresponds to a 50% payout. Turning to next page on the cost of risk. Just would like to stress The cost of risk for the 9 months 2018 at the end of September for the 1st 9 months, Cost of risk stands at 18 basis points. Let me remind you that we revised our guidance in Q2 with regards to the cost of risk for 2018, it was initially forecasted to be between €25,000,000 and €30,000,000 Now we are We have revised the guidance to 20% to 25% and we are at 18 basis points again end of September, which make us confident to be in check, if not better than the guidance for the year. This is an opportunity for me comment on Page 10 about the risk profile
of the
group, it shows that we have a sound and conservative approach to risk, especially on 3 accounts I would like to comment upon. First, we have a well diversified risk exposure across geographies, sectors and counterparties. And if we focus more particularly on country risk, I think there is a case that we are probably more cautious than a lot of peers. Group exposures to many emerging markets currently facing Thermal including Turkey, Argentina or South Africa as you can see point is very limited. We give you On the chart, our exposure to Turkey, which is less than 0.3% of our exposure at default at Groupe Laban, but also our exposure to Italy is very limited.
2nd, We continue to work consistently on improving asset quality. This has been the case for the past years. This quarter, again, we managed to decrease The NPL ratio, which now stands at 3.8, we have a commitment to continue decreasing that ratio over the next quarters. And last but not least, on market risk, as you can see, our standard metrics to measure market risk, The average rating value at risk stands at a very low level consistent and with a slight decrease for with the past quarters. Let me highlight that it goes in sync with 2 important elements.
1, we have less volatility than many peers in the revenues of and results of our CIB activities, including market activities. And we have no legacy books left in our work account. Going on Page 11. As Frederic said, we have made further improvements in improving the capital base and the liquidity and the funding structure of the group this quarter. 1st and foremost, the core Tier 1 is up 8 basis points organically this quarter and goes up to 11.2% from 11.1% at the end of Q2 2018.
This obviously translate into an further increase in the total capital ratio Tier 1 ratio of the group. 2nd, we have a TLAC ratio, which makes further progress for the quarter. You may remember that For the past quarter, it's been consistently above the target, the FSP requirements expected for 2019, which is 19.5 percent and also that we are already MREL compliant. If you look specifically at the TLAC ratio at 20 2.8%. This means that implicitly, we are already meeting the target ahead of schedule only with sub debt.
And leverage ratio is stable over the period. The liquidity ratios improved. LTR and for a comfortably above 100%. The liquid asset buffer is up from the previous quarter to €276,000,000,000
The €76,000,000,000
we've completed our funding program for the year and we benefited from a revised outlook by S&P We will now reiterate the delay with a positive outlook from October 24, 2018. I will not comment on Page Well, but we're obviously happy to take any questions you may have. And I will turn to the businesses, starting with The synthesis on Page 14. We've highlighted on this page the 5 key Group components across the 3 group pillars and the corporate center that make the results of the group. Let me start with the bottom reiterating the group RoTE for the quarter, which is 11%, as we said, as well as for the 1st 9 months of the year.
How does split. 1st, Trans Retail Banking. The return on equity is very resilient at close to 11% for the quarter. We have the benefit from our growth initiatives That goes against, obviously, a difficult interest rate environment, as you know, and our information investment International Banking, Retail Banking, post another very strong quarter. The return on equity is just about 17%, good commercial momentum across all regions and therefore be it volumes or revenues with positive jaws for the quarter again.
Same story for Insurance and HIFO Services to Corporate, Very often, high single digit or double digit growth, the return on normative equity is close to 20% this quarter. In CIB, the return on normative equity is 7%. This is usually reasonably weak quarter Seasonally, the Q3, so it's in sync with what we had last year. But I would like to stress and we'll come back on this, The very strong performance year on year in terms of revenue growth. And last, Corporate Center.
We have a positive contribution of the Corporate Center this quarter of about EUR 37,000,000 net income impact, plus €37,000,000 despite 2 one negative provision, which is €136,000,000 and with an exceptional element, which is a revaluation pure OQ shares for about EUR 271,000,000 Coming on French Retail Banking, let me first comment on the fundamental business dynamics. As Frederic said, we have in this business as well some good vibes commercially. We start stressing the increase in fees and commissions, which you can see are up 3 point 6% this quarter relative to the same quarter of last year. Let me remind you that fees represent 40 3% of the total revenues of the French Retail Banking and that we have already in Q2 in posted plus 2.5% increase in fees, and this is quite differentiated in the marketplace. We also made progress, constant progress in the client base, starting with the key client base that we target.
Mass affluent and Wealthy client base is up 5.1% this quarter, and this goes together with Further increase in AUM in Private Banking growing at 3.9% as well as fees in that particular with the client segment. We also have yet another record quarter for Porso Rama with the clients of Porso Rama standing now at EUR 1,600,000, up from EUR 1,500,000 last quarter. And we also have in our core franchise for professionals and corporate clients, an increase respectively of 1% of the client base. This goes in sync with increase in volumes, especially on the loan side, where we have Still a strong dynamic for consumer credit production, which is up 11% for the 1st 9 months relative to the 1st 9 months 2017, but also medium term loans to companies remain solid in an improved economic environment with a 4.2% increase in investment loans outstanding. And now let me comment On the insurance business, where we still we continue to post strong performance in France, The outstanding of life insurance are up 2% this quarter.
Protection premiums are up 6% and Property and Casualty Premium are up 5% in France this quarter. We would like To draw your attention, particularly this quarter, this is the next page on the private banking platform that we have created and how we envisage to develop that platform for the MASA Fluent clients. Altogether, when we combine the private banking clients, I. E. With clients with AUM above €500,000 We what we call the patissimo new clients, the French mass material clients, we have 500 480,000 clients, AUM close to €130,000,000,000 revenues are above €1,000,000,000 and this yields a very accretive ROE.
This is a very important thing we wanted to stress because it makes us clearly a leader in that client segment in France. We have, back in 2014, reshaped the private banking Infrastructure in France, which has yielded positive results, increased number of clients 8% versus 2014 cumulated inflows in excess of €14,000,000,000 We are now in the process of deploying a new coverage, a new product, and new advisory model for the next segment, which is the mass affluent client segment. And we are confident this should with positive results as well in the next coming years. So in a nutshell, French frankly, the banking results for the quarter, revenues up 2.3% this quarter. Adjusted for the restating for the adjustment trading costs that we had in Q3 2017, the revenues, the amount was €88,000,000 Revenues are down 2% for the quarter as well as for the 9 months.
So we have contrasted combination with commissions up 3.6% for the quarter. Net interest income is down 7% 7.2% exactly for the quarter year on year. Operating expenses increased 1.4% year on year in French Retail Banking and 2.1% for the 9 months. Let me remind you that we have an objective to keep the cost increase just below 3% for the year given the investments we're making. So we are when on track to meet the target.
Overall, return on nonmaterial equity is 11%. Turning on International Retail Banking. As I said, this is another strong quarter. Overall, outstanding loans up 7%, deposits up more than 6% over the last 12 months. The growth is supporting revenues up 10% adjusted for foreign exchange for that division and allows the group to benefit from an operating leverage with the global returns on normative equity in excess of 17%.
More precisely, I would like to mention that the performance is very broad based. So in Europe, if I take just the net interest income They have been trending higher over the last year on strong loan growth, especially in consumer finance, plus 12%. In the Czech Republic, we had a +6 percent and in Romania, plus 20%. That goes Firstly, on the back, again, as I said, of strong loan growth, but also an improved deposit margin. In Russia, if you adjust for foreign exchange, volumes and productions are double digit growth, Acceleration in retail loan production at 21% for the quarter year on year and growth in retail deposits of 15%.
And last, in Africa, revenues grew at 8% versus the same quarter of last year. Turning on financial services in insurance. Let me highlight first life insurance. The outstanding for life insurance are up 3% year on year, together with a continued improvement in the Unit Linked share outstanding, which the share of Unit Linked is 28% in Q3 2018 versus 26% for the same period of last year. Personal protection insurance premium up 9% and Property and Casualty Premium are up 12%.
So if you combine it with what I've said about influence in France, you can see that we also have a very positive dynamic outside of France in the insurance business. A and D posted a very good quarter. Fleet growth was 10%, revenues 6% growth Despite lower residual values and the cost income at 50%, which translates obviously in still a very good Return on equity, let me mention that S and P was as well upgraded sorry ALD was as well upgraded by S and P to 3 BBB plus. And finally, final equipment finance loans and leases outstanding were up 6 percent for the quarter. Overall, the ROE was about 20%, just short of it 19.6%.
One area we wanted to highlight particularly, and this is on the next page, Page 20, for the quarter is the consumer finance. Especially, if I may say so, specialized consumer finance model, which is quite distinctive at Societe Generale. So altogether, consumer credit represents an outstandings of €44,000,000,000 for Societe Generale. 44% of it will be booked within the retail banks, such as personal loans, And more than 50% is booked in specialty finance platform, which has distinctive qualities. They're the strong predominance of B2B2C models.
So they worked in an open architecture model through partnerships. They are quite focused on leading franchises. Some names are very well known and very well positioned in terms Market share in their respective markets, you take the example of Germany with Betica or Ciatek, these are very strong brands in France, as you will find finance or risk finance in Russia would be in that case. And they're also very innovative. These are areas where the processes are almost fully guys for almost all geographies.
So this is €25,000,000 outstanding, out of which 61% is in the attractive car loan segment. The loan outstanding grew 10% year on year. So this is clearly a growth engine for us. And the profitability of these franchises is 17%. So it is accretive growth for the group.
Overall, For the whole pillar of International Retail Banking and Financial Services results, page 21, revenues are up 8 percent adjusted for foreign exchange impact. Operating expenses are up 5.4% adjusted for foreign exchange, so positive jaws clearly for again this quarter for the division. The cost of risk is in check and we made further progress on the return on normative Equity, we stand at 18.2% versus 17.4% in Q3 2017. Turning on CIB and starting with Global Markets. Let me highlight the strong performance in terms of revenue growth with Global Markets Investors Services posting 8% growth year on year with Strong growth in equity, plus 19% year on year, which as you You can see or you may have seen it's probably on top of the pack amongst peers.
Same for FICC, revenues are flat year on year and probably in advance versus the most peers. In terms of regions, we got an improvement in Europe together with still strong dynamics in the U. S. And Asia. I would like to stress particularly the Strength of our financing and advisory business is a key component of our CIB business.
It's close to 30% of the total revenues in CIB. We have a very strong quarter again after an already From quarter in Q2, we had we posted in Q2 a growth year on year 6%. We posted a growth 9%. This is the highest level in 2 years and this is variable based across all asset Classes and franchises be it corporate loan, asset backed products, asset finance and advisory. I would like also to point you to the good momentum in Global Transaction Banking.
As you know, we have announced that we have restructured our global transaction banking steering and the component that is booked within the CIB pillar, gross double digit at close to 20% year on year. AUM, Oligor and Private Banking were up for the quarter. So in a nutshell, the results for Global Banking and Investor Solutions revenues up close to 8%, 7.7%, with a rebound of global markets and good momentum in financing. Positive news for the quarter. On a 9 month basis, operating expenses increased by 1.6%.
The return on the mortgage equity stands for the quarter at 7%. For the 1st 9 months of the year, it is 9.5%. Last comment on my side is on the corporate center. As I said before, we have 2 exceptional impacts to consider in the corporate center. 1 is a positive.
This is a revaluation of our shares in Europe for a positive yielding a positive NBI of €271,000,000 The other one is Negative is the further allocation to provision for disputes for an amount of EUR 136,000,000. The bank booked in its financial statements as of September 2018 the provision for disputes amounting to EUR 1,58,000,000, which includes the disputes that Frederic referred to, I. E, the U. S. Sanctions amongst others in compliance with IFRS.
Let me just stress that For the 9 months of the year, should you adjust for the €336,000,000 provision for dispute that we incurred to date as well as for the positive impact of EUR 271,000,000 which is linked to the European revaluation. The operating income for the Corporate Center stands at +3000000.
Thank you very much, William. A very brief word of conclusion. As you know, we have fundamentally high strategic objectives. And I think that this quarter, we are delivering performances consistent with these objectives. Consistent with these objectives.
1st of all, grow the revenues. They are up 4.4%, if I exclude this exceptional capital gain, and we see the positive development of our growth initiatives. Also, the transformation of our businesses, in particular, the French Retail Banking, we are in line with our objectives. And of course, pursue the transformation of our balance sheet, risk profile and the funding On the cost, we are also in line with our guidance for the French Retail business and we have positive for the 2 of the main businesses, International Retail Banking as well as Global Banking and Investor Solutions. I have already commented on the refocusing.
We are moving ahead positively. And as I said, being at the forefront of responsibility is also part of our strategic goals, and we are making good progress on that. Let me just remind you that we have again this invitation on 22nd November, digital journey, we would like to go more in detail in the way we adapt our businesses with the new technologies and embrace them in our business models. So now we are ready to answer your questions.
The first question comes from Stefan Stalmann from Autonomous Research. Please go ahead.
Good morning, gentlemen. I'm surprised I'm number 1 in the line, so I'm going to enjoy it. Two questions, please. The first on Global Markets. If I look at the 9 months performance, not the Q3, 9 months performance, it seems there's a bit of a problem developing.
Your fixed income revenue is down 13%, equities is flat. Your cost income ratio is up from 78% to 84% year on year. And I think it's probably fair to assume that your equities business has a lower cost income ratio than your fixed income business. Does that suggest that your fixed income business year to date is running close to breakeven. And if so, what are you intending to do about this business?
And the second question relates to IFRS 16, the upcoming accounting change on leases. Could you give us already an indication of how this might impact your CET1 ratio, please? Thank you very much.
And Stefan, I will let William, answering on your second question, that's Stephane, Caban and Francois, your question on the capital market.
Yes. Good morning, Stephane. It's Sylvain speaking. It's fair to say that in our global market, the equity franchise has higher return equity, the fixed income one. But we cannot say that we are breakeven.
We are still positive in our fixed income activity, but less than the equity. So the long term view we have is to continue to invest in some specific niche where we can deliver higher profitability in the fixed income and continue to protect our position in equity.
Yes. Hello. Of course, our capital trajectory includes our assumptions with regard to IFRS 16. These are not material impact as far as the group is concerned. So take it, the 12% target includes the implementation of IFRS as far as we are concerned.
Great. Thank you very much.
Next question?
The next question comes from Maxence Le Gouvello from Hello.
Yes, good morning, everyone. Two questions on my side. The first one, Are you confirming your target of core Tier 1 of 11.5 for the end of 2018? And the second will be on the foreign retail. It's been 3 quarters in a row that we are seeing some great performance.
What is the next step in terms of Development of the digital, the acceleration on the revenue side, can you give us a little bit of flavor? Thank you. Maxence, good afternoon. I will leave in a minute the floor to Philippe on the international retail, which is, as you said, in financial service, absolutely confirming its capacity to grow in a very profitable manner. Regarding our target for Tier 1, we have in mind to be at this target of at this very close.
We are generating organic capital as we reflect this quarter. There is an element of Potentially on the closing of first acquisition and first the disposal which was announced. But we are positive on, again, the capacity to deliver also on the capital. Philippe, can you comment on International Retail? Yes.
Good morning, Maxence. Yes, I confirm that across the board, in general and pretax banking, so the vertical line between Russia, Eastern Europe and Africa is delivering both growth and profitability. And you see that the top line is moving at the pace of 10%. But we continue to deliver profitability of around 17%, between 17% and 18%. Having said that, this is, of course, a vast group of entities and we are working closely on the ground to improve the efficiency.
What I'd like especially to highlight that we are rolling out across the board strategies to implement digital platform in Russia, in Czech Republic in Africa. And just to give you a few examples, we have under the leadership of DidioGev, you know that we have implemented the digital store in Russia. Already today, 60% of mortgage origination is done online. So we are moving very fast in Russia. In Czech Republic, the objective is to have by 2020, 40% of the headquarter in agile escape mode.
So this is also moving fast. And in Africa, you know that we have opened SD ABS in Casablanca. So we are developing through our satisfactory additional services for Africa. And we have located expertise, talents, resources in 2 regional headquarters, Abidjan and Voila. And the plan is to capture the growth in these vertical lines, Russia, Eastern Europe and Africa, and to develop the objective we have in yesterday.
Thank you. Next question?
The next question comes from John Pice from Credit Suisse. Sir, please go ahead.
Yes, thank you. So first question is on International Retail Banking. Your growth rate of revenues this year and for the Months has been a little bit ahead of your business plan. Do you think that as we go into 2020, you'll be able to Staying this outperformance or perhaps as the interest rate rises come into the base, the revenue growth slows a little? And then my second question is with the 23 basis points of disposals that you're planning, roughly what is the revenue and the net Some impact that we'll leave the bank with those?
Thank you.
John, I will Turn the floor to William if he's able to make the rough calculation of what has been already announced. Let me just say again, really, I believe the International Retail and the Financial services is a division, which is a key edge, key advantage for us. When I think We are, as you mentioned, in regions with good economic activities. If I may see level of interest rate which are more normal or sometimes which are normalizing and ahead of the Eurozone, and we are very positive given the quality of the franchises. So I would say after 9 months So and having it not even finished the year, it's a bit premature to comment, but we are really very positive and comfortable in our capacity to deliver on plan.
2nd, on the disposals, while we then making the rough calculation. I just would like to highlight one thing. It's really we are done also, I think, a good job in the last few years to improve the performances of these assets. They are good assets. They might not correspond in the coming years to our core strategy or to not have enough synergies to justify us to keep them.
I think we are have selected the right moment to sell. We are selling to industrial buyers, which have good synergies. And I think it's really positive, and that's why we want do that as smoothly as possible currently. William, have you been able to make the calculation for John?
Yes, because there was some degree of strategy in the thing. So let me Tell you first factually, if you add up for the 2017 2017 Results for what the entities we have already announced that we were about to sell is a 23 basis point equivalent. The net income altogether is a bit less than EUR 50,000,000 5. 5.0. 5.0.
5.0. And I'd like to stress 2 things that goes with this. While if you take the €23,000,000,000 this 23 basis points, no short of €1,000,000,000 of capital. So make the whole calculation. If you reallocate that capital theoretically to our best businesses, which are yielding above 15%.
Then obviously, this is not a bad call. And second, we have not commented so far on the prices And the valuation that we strike is at, but in average, they are significantly above one times book.
Great. Thank you. Next question?
The next question comes from Jean Francois Neu From Goldman Sachs. Sir, please go ahead.
Hi there. I just wanted to ask a quick question on CIB. So this quarter there was, as you said yourself, The run rate of revenues where the growth outpaced that of peers. And given that when that was maybe not as good, The cost didn't show the same level of flexibility as you would find in some other investment banks. I was surprised to see today cost growth in the global markets business ahead of that of the revenues.
And I just wanted to understand what the drivers of that were or for example, if you're experiencing wage Pressure in France as banks are reallocating apparently a lot of staff there, these type of things. And my second question was just on the core Tier 1 target again on of 11.5%. I heard your answer before and I think it would be helpful if we could understand in more detail how you could bridge the 11.2 to date to EUR 11,500,000 in the coming quarter as I think it's a very important driver for the valuation of your shares. Thank you very much.
I will let Stephane answer the question. And again, there is a positive Yes, this quarter, it's important. Again, our fundamental target is 12% core Q1 ratio. We are making progress on this. As I said, we expect potentially organic capital generation.
We will see when we will close effectively our acquisition. So there might be, depending on that, something slightly below. But fundamentally, the key question is this bank able to generate capital? Is very clear. When I look at 2019, 2020, we will register the benefit of our disposal.
We are now providing a lot of visibility on the litigation, which was when I look back Beginning of this year, one of the and we will look back at the year, one of the great achievements that it would be that We have put behind us the financial cost of the 3 litigation, which we are still pending. So I think we are very confident in our capacity to meet our objective of 12% for 2020. Stephane, on the cost?
Yes, to point to Francois, it's fair to say that on the Q3, we had a cost rise, which is nevertheless, we have a positive yield, but which is higher than we have seen from the previous quarter. The first point is last year, we had a very low point on the Q3 2017 in terms of cost base for seasonal non regular. I would say it's not a structural question. And on the 9 months, it's also to say that we are seeing our cost evolution, which is related to the investment we are now doing. Globally speaking, at GVIA, as Sven is said to say that we're investing in our market activities Today, there was a growth initiative that we have announced in our Investor Day and certainly in our Filancing and Advisory businesses, we are also investing there.
So the cost evolution for the time being is related to this investment. And we expect to have better later next year. It's to the Investor Day presentation we made.
Thank you very much.
The next question comes from Guillaume Tiburghien from Caressant. Sir, please go ahead.
Yes, good morning. The first question relates To the comments made by the ECB member following the publication of the European EPS stress test, whereby banks below 9% after the adverse scenario would be scrutinized particularly. So would it be fair to say that you should have the 9 plus 3.6 of adverse scenario impact and therefore maybe you should target 12.6% instead of 12%. The second question relates to a recent article in Le Monde, with regard to the potential inquiry on Kumkum and Kumx dividend arbitrage, can you give us a feel as to The timing of this inquiry and what would be the next steps in the inquiry? And the final point is not a question, it's a clarification On an earlier question, you said that the target of 12% Equity Tier 1 included your expectation of IFRS But can you actually give us the impact of IFRS 16, please?
Guillaume, First of all, I think you should not at all over integrate the comments which was made And on this 9%, I don't think at all it will be a threshold and you should think in the way you have followed. What I mean by this, and it was part of our plan before the stress test to increase our capital ratio at 12%, But I can't help thinking that it is absolutely the right level for us when we look at our risk profile. And when I just compare with U. S. Banks, which are fundamentally and the largest bank in the world are managing for Tier 1 between 11.5% 12%.
Let me also just mention that regarding this stress test, How will I say? Probably, as the methodology remains Let's be nice. It's a bit rudimentary for some elements. And I'm convinced that the SSL will further refine this methodology. So again, 12%, I think it's the right target, and we are confident to reach this target, and we are acting on our front to do this.
Your second question is around Let me highlight also, you should take some distance from press
articles. Today, first of all, there's absolutely
no internal or investigation from external investigation on the Kum Kum in France. 2nd, the first article related to percale, what's the word in English per physician, which was absolutely not related to that. So it's just wrong information. And regarding the COMEX, the COMEX in Germany, there is just a very limited litigation and nothing which could distort our P and L. So what I'll just let me just mention from that perspective and take the time to comment again of the validation because it's an element, I'm sure, of potential comfort in terms of P and L going forward in the next 2 years and capital generation.
As I said, we have put behind us in this quarter the financial impact of our 3 U. S. Litigations. And we have no litigation again going forward. I remain very humble, but which again can have a significant impact going forward in our P and L.
These issues go back to the pre financial crisis. And sometimes, as you know, more than 10 years ago, as well as this the COMEX issue that you mentioned. Clearly, when we will add regarding Societe Generale the cost, You will see that we will have paid much less than a lot of our peers. We've also, I would say, litigation is more concentrated in a limited number of problems. But let's say, we are I'm remaining very humble.
What I mean by this, we are drawing and we have drawn the lessons and we keep them in mind. Before the financial crisis, it's probably fair to say it was a period of time where the management in general of CIT activities and our own one did not pay enough attention to certain that serves the robustness of control infrastructure and with probably too short term approach regarding profit generation. What I tried to do in the last years is really to build a strong bank with the combination of skill and entrepreneurship spirit mindset, but also with a much more longer term, if I may say, sustainable approach of the business. But it's also fair to say we live in a very different world and a more demanding, a stricter 1, with much more diversified requirements of regulators on the decision topic, which impose all banks to invest. And when I say this is my conviction is that the only way is to comply.
It is nice to have again robust control infrastructure and also take advantage of the new technologies and to invest in informational systems. In our strategic plan last year, We have taken into account the cost of these initiatives and investments. And I would like to highlight that I think it's important not to compromise because otherwise, it could be then the recipe for future problems. So it's really part of our businesses. As I said, I'm happy to have put these big litigations behind us.
And really, our commitment is to avoid future problems. And I'm confident when I look at our existing remaining litigation, which are of much smaller scale. And with the culture of this bank where effectively we did not to have a lot of very diversified litigation that going forward. We will have a clean P and L, in particular in the next 2 years, which are important for the capital buildup. I was a little bit long, but I want to make that point on the litigation.
And so as you know, our litigations are permanently disclosed in our different yearly and half year reports. But Be careful with the press, which might have also sometimes not necessary the right information.
Just very rapidly on IFRS 16, as I said, I confirm this is taken into account in our 12% target. I confirm as well this is a very manageable number, but I would like to say that we are not willing to disclose it. Otherwise,
we would have to
disclose each and every impact when or not material.
Thank you. Next question.
The next question comes from Bruce Samuel from Morgan Stanley. Sir, please go ahead.
Hi, good afternoon. Thanks for taking my questions. 1 on French Retail and one on sort of international. I guess on French Retail, obviously, the fee growth is pretty encouraging. But I was just trying to get a better sense of how you think about the net interest income line.
So in terms of front book, back book Replication pressures, when might we expect that could see stabilization? Because obviously, then you've got quite a decent top line story theoretically. And then linked to that, in terms of the Botsorama contribution, can you share anything on the revenue or profit contribution? Or is that still around Breakeven and in investment mode. And then secondly, on the international side, Czech and Romania, obviously, continue to benefit both from top line growth, but also provision releases.
How can we think about sort of sustainability of those releases or think about the path to Normalizing sort of cost of risk, is that something that you'd anticipate coming through in 2019? Or is there still a Specially benign environment that we should be modeling continued reversals. Thank you.
Thank you, Bruce. Philippe Emery for the French retail and Philippe I'm for the international retail, more specifically Czech Republic and cost of risk. Philippe, may I?
So yes, thank you for your question. Regarding the fees, The momentum was quite good actually on the Q3, notably the fees related to service year, which is a good satisfaction because, of course, it's also related to the increase of the number of clients and more especially of to our core clients. Regarding the net interest income, So as you see, it's down by 7% on this quarter compared to last year for two reasons. The first one, which is the most important one impacting the deposit side, It's the impact of the negative rates, which remains, we mentioned, during the Q2 also. And so it's basically 2 thirds of the decrease and It will continue with the situation on the interest rates.
And the second one is related The lower prepayment penalties, which is going to stop because Now, to see the situation, I mean, we have much less prepayments. So we had a base impact, quite important compared to last year, which is not going to continue. And regarding the last part of your question, yes, we can say that the pro form a is close to the breakeven.
You may remember, we had made a focus in Q2 on Bonsorama and already mentioned clearly that we were profitable pre marketing costs, Marketing costs being 2 third variable linked to the client acquisition and that also this net income adjusted for marketing Incost has grown 2.5 times over the past 3 years. Philippe? Yes. Good afternoon, Bruce. Just to confirm that the outlook and the sentiments we have on Czech Public and Romania is still very good.
It's positive to see that we in those countries, we managed to avoid the situation of over eating, let's say, momentum. So we see Czech Republic heading towards 3% GDP growth next year and around 4% for Romania. For obvious reasons, the write backs we have seen in past quarters We'll stop sooner or later. So what we expect and this is consistent with the local disclosure of KB. So we expect the cost of risk to start to increase in 2019.
So what could be the question about the normalized rates of cost of risk in Czech Republic it would be around 30 to 40 basis points.
Thank you.
Thank you.
The next question comes from Anke Reingen from RBC. Madam, please go ahead.
Yes, I'm not sure if there was an answer outstanding, but so I just had some questions on
your previous guidance. Can you maybe just on French
Retail Banking, obviously, Can you maybe just on French Retail Banking, obviously, you've given some previous comments about the revenue expected revenue decline and also Your cost growth, which I guess from the comments in the slides would now suggest you're more looking at potentially plus 2% year over year. And then on the impact of disposals, I was I remember you said €50,000,000 loss last time and now you obviously sold more assets. Is this because Poland was loss making? And then I was wondering about the EMC benefit. I think you said €150,000,000 gross operating income benefit.
But I think looking at the Commerzbank numbers, They have obviously the performance there has come down, but I'm just wondering if you reiterate your expected benefit. And then, sorry, lastly on the Corporate Center, Can you please update on where your guidance is given your given where you already are at the 9 month stage? Thank you.
Yes, on the line was not perfect, so I hope I understood your question. 1st, on the of the French retail. We don't change this guidance. We've said an evolution of net banking income this year between minus 1 and minus 2. It happens to withstand at minus 0.6 for the 1st 9 months when you exclude the Telcel provision.
And on the cost, we also stick at this step to this guidance of below 3%, knowing I think we are at 2.1% for the 1st 9 months. Regarding the disposal, again, I would like to come back to what William said for the overall disposal of the 23 basis points, the plus €50,000,000 Poland was making some profit. It was not It's a good as I said, these are good assets, but strategically fundamentally either too small in their markets with not the capacity to become a leader. And I think strategically that it makes sense then to make a choice or when the level of synergies is not sufficiently enough, it's not sufficient to justify then to have to absorb all the constraints of the global CFI. So but it's a bit it's businesses which makes profit.
Fundamentally, the disposal will beneficial to the group, either through the reallocation of capital or the increase and is the priority of core Tier 1. And regarding The EMC business from Commert, we have already disclosed that nothing changed regarding the benefit and the reduction of the profitability of the CIB. First on the corporate center, William, because here we could elaborate. Yes, Andre, I have a question on the cadence of the corporate center. So perhaps you can elaborate it.
Okay.
Yes, as you may remember, should be referring to it, the previous guidance The guidance for the corporate center that has been given previously is minus €400,000,000 GOI, underlying AGO life for the year. It is true that for the 1st 9 months, as I said, that the underlying figure is rather positive with a +3000000. So let me remind you about what we have in the corporate center fundamentally and the policy we have generally speaking and I'll come back on the guidance. First of all, the policy of Societe Generale has been consistently in the past
years and
quarters recently in the past years and quarters to build everything we can to the businesses. So we don't keep much cost at the corporate sector in LaVon. As a case in point, restructuring costs of the French Retail or the CIB activities are fully brought by taken by respectively French detail of CIB activities. So this is a general policy that also applies to the liquidity cost for the group. Now when you look more into the details, The main reason why we overperformed is linked to the liquidity cost, especially We had effectively this year a little less Costs that we had budgeted in the way we allocate budgetarily the liquidity cost to the businesses.
We don't adjust quarterly on a quarterly basis the cost we build to the businesses As far as the liquidity, we raised at group level being cost of capital transformation, the spread and the subordination cost. So There is an element of difference and clearly we over performed, if I may say so, in terms of our whole cost of liquidity. So overall, if I go back now to the guidance, based on what we know, both on the liquidity and The cost base of the corporate center, which as I said, is minimal because we keep only around 200, 300 even of Head of Fiscals at the Corporate Center level, we can say that this Minus €400,000,000 is conservative. We may be in a position to beat The figure for the full year as you input in your question.
Next question?
The next question comes from Flora Benhakoun from Deutsche Bank. Madam, sorry, please go ahead.
Yes, thank you. Good afternoon. Just one question on my side going back to capital. I just wanted to ask how You have incorporated potentially some regulatory risk also in your trajectory, especially towards 2020. And I'm thinking especially on the TRIM process, whether you have any view on either the size, the magnitude that it could represent and the timing.
Thank you.
Jonny Leboe,
Deputy CEO? Yes, Lorraine. The 3 process has been ongoing now for for almost 2 years. We have taken into account the impact as they came, and they have been rather limited, still ongoing process. We don't Expect any significant impact in the coming quarter and then we have trajectory of 12% takes into account regulatory adaptations or requirements.
And again, I would like to Please, we will be there as we have been complying with our target in the last plan. I'm very confident in our capacity to meet this target. Next question?
The next Question comes from Kiri Vijaykarajah from HSBC. Sir, please go ahead.
Yes. Thank you. Kiri Vijarajah, HSBC. So firstly, on French Retail and the growth in the business customers You posted this quarter an uptick there. Could you just give us a bit more color on what's driving that?
And is there any distortion coming in from Authority lending, because I think in the past that's been quite lumpy for you. And then on the insurance side, some of your peers have actually posted Some pretty strong insurance numbers this quarter. So first of all, are you kind of happy with your kind of commercial performance in insurance? Actually, is there anything you can do to close the profit gap in insurance versus some of your other peers in France? Thank you.
I will let Philippe Henrique again comment on the financial performances. Let me also just mention one thing which is important always to keep in mind. In the way to monitor the credit origination, let me just mention that we have given the priority to maintaining a good level of return on equity. It is pretty interesting to compare from that perspective our performance when you reintegrate all the costs for to know our peers in the P and A to compare our return on capital. And I must say, I'm pretty happy in relative terms of the resilience of our profitability.
Based on of the FX insurance and mortgage. Philippe?
Yes, regarding commercial activity, no, there is no specific trend related to lending to local of policies. The commercial momentum in the last quarter has been overall quite good, quite satisfactory regarding individuals, especially on consumer finance, thus in the number. And also, we continue to be very selective in terms of credit origination with corporates and professionals, but the quarter was quite good, again focusing on our core clients. So yes, a good quarter. And again, I repeat on the commissions, it it was quite satisfactory services on financials.
And I think that we have a 4 Percent increase of NBI in French insurance, we think we tend to think it's a good rhythm in such a for the 1st 9 months, it's a good rhythm beyond the quarterly figures. It's a good reason your year reason for this kind of business.
Can we move to the next question?
Yes. The next question comes from Del Simley from JPMorgan. Madam, please go ahead.
Yes. Thank you for the presentation. So I've got 2 questions as well. Just a follow-up on capital. You've had risk weighted asset growth so far around 3% for this year.
Just wondering For next year, if that's kind of the new run rate that we should assume or does that include some regulatory impact, which won't be repeated, given That seem to suggest that the German impact won't be that large. And the second question is on French Retail. I know it's maybe a little bit early, but just wondering sort of in terms of for next year, in terms of the revenue outlook, In terms of the progression, because I think that in your business plan, you had something like 4% in the next couple of years. And obviously, this was based on rate assumptions on OET, which are significantly higher than current levels. So just wondering in terms of the magnitude of What we should expect in terms of progression after this year's decline?
Thank you very much.
Well, Tafin, good afternoon. I think your question relates fundamentally to 2019. It's a bit premature to comment and we will do that like we do usually probably at your end with the yearly figures. Let me just again highlight on the risk weighted asset that the way we projects on risk weighted asset growth takes into account fundamentally the capital management purposes. We plug the different elements potential for growth, optimization of capital allocation in terms of profitability, potential impact of whatever kind of regulatory rules, etcetera, with the idea to comply with the capital level.
So I mean, this is the way we are currently to be preparing our budget, but the process is not finished. Same thing on the French Retail, we will comment a bit earlier on the perspective for 2019. What I would like to highlight, we are actually in line with our guidance for this year on the NBI. Next question?
Thank you.
The next question comes from Nick Davy from Redburn. Sir, please go ahead.
Yes, good morning, everyone. Thanks for taking my questions. 2, please. The first one, perhaps for Severin on this Ongoing debate around cost investments in the markets business. And sorry for the trip down memory lane, If I look down the last 15 years or so of revenues in the Markets business, it does seem to Averaged SEK 1,400,000,000 a quarter pretty much whatever the weather.
I mean, it averaged that between 2,002,007. It averaged that in 2,007 to 2012 with a bit more volatility and these days less volatile, but still EUR 1,400,000,000 Since 2012. So I'd just like to understand better really what makes this finally a source of revenue growth for business. I understand we've been True. A lot of turmoil in the last decade, but I just struggle to see a sustainable period of Markets revenue growth in the last 15 years absent leverage.
And then the second question, sorry, if I can just follow-up on the French retail net interest income trend, Down 7% year on year. I think you ascribed 4.5% or 5% year on year decline, excluding renegotiation fees. My question would be, what changes that picture given that Frankfurt loan rates in France are pretty stable? Obviously, a big part of this is the replicating portfolio where swap rates aren't really moving. As we go into 2019, should that be our kind of base Run rate for net interest income next year.
Thank you.
Nick, I will leave the floor to Cyraine and then Philippe.
Thank you, Nick, for your question. And it's sad to say that we have been for a while in a specific environment. Our target in this specific environment is to strengthen our core strengths and to try to deliver if we make in the market share gain. So we are not betting on the growth, on the market in our view. And we're investing today and visible in our cost evolution, but it's for a while to continue to take market share.
And we see opportunities specifically both opportunities from growth and specifically today in Asia, for example. So we are also investing in some, if I may say for us niche market today to gain some market share. The second hypothesis of our strategy, and you mentioned that for me is very important is to stabilize to lower the productivity about top line in the global market activity. So we are pursuing also diversification. And in our plan, in the Today, we have some growth initiatives, which are really tough to continue to stabilize the top line and to progressively continue to take market share.
Philippe?
Yes. Yes, you're right. I think we The sensitivity is important, especially regarding the reinvestment of volatile deposit at short term, currently at negative rates. Just to give you an indication of the sensitivity, an increase apparently, increase of 10 basis point in the euro interest rate means for French Retail Banking an increase of €35,000,000 of net interest income.
Next question?
We don't have any further questions.
Okay. Well, thank you very much for attending this call. And I hope we have answered all your No more questions? Very clear?
No. We don't have any further questions.
Okay. Well, again, thank you for your attention and have a good afternoon. Thank you.