William will go through our results and the presentation as short as possible. Then with all our management team, we will answer your questions. Let me just remind you this good guidance, two questions per person, so that everybody has time to have his answers or her answers. I will start immediately with the first page, slide four. Just let me highlight that we have posted solid results. Beyond 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 increase, 9%, 4.4% excluding European share valuation. That's something pretty solid compared with other European banks in an environment which remains challenging.
We have overall a net profit of EUR 1.25 billion and a return on tangible equity of 11%, both for the quarter and the first nine months of this year. Second, 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. This week we have announced the sale of our retail banking Polish subsidiary Euro Bank to Bank Millennium. This is again part of our plan. As you can see, we are acting and we are selling. We will be able to comment more in detail, good assets in good conditions. 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. The financial impact is 100% covered with the EUR 136 million additional provision. Fourth, we pursue the strengthening of the balance sheet. Our Q1 ratio is increased by eight basis points in the quarter, thanks to our results. Beyond this, all our key capital ratios are up in the quarter. We have completed our yearly funding program. We have been put on positive outlook by Standard & Poor's 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 first nine months of the year. It reflects the very good quality of our portfolio and the strict discipline in terms of credit origination.
Our NPL ratio continues to decrease quarter after quarter and stands now at 3.8%. Fifth, last 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, in a responsible way. We have won the first prize at the eCAC40 Award. It's an award in France, which reward the top French company in terms of digital maturity. We are also the number one French bank in the RobecoSAM Sustainability Ranking. We are in the top 10 European banks among 133 of our peers. Regarding gender equality, we are also number one French bank and 14th among 3,000 companies in the world.
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 five. We have again announced this disposal. The estimated positive impact on our quarter one is going to be eight basis points once the transaction closes. Overall, we have announced for disposal, which represent +23 basis points of quarter one, 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 a fintech called Treezor, which should enable us to develop new businesses. It's a business which provides core banking services to neobank. We are absolutely comfortable in our capacity to complete our 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 Core Tier one. You will see further announcements in the coming new quarters. 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 fits perfectly with our business and will be very positive in terms of error reduction. At this stage, I see nothing like this, and we are really concentrating on the organic development of our business. For the sake of the time, let me just say one word on slide six. 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, we had announced a EUR 100 billion commitment through the balance sheet and through significant and tenured roles in green bond origination, where we have achieved 68% of our target. I think we are really on line in terms of this objective. Let me, for example, highlight that Société Générale, but also our subsidiary ALD, have issued very positive impact bonds, green bonds, and I see a development of this business going forward. I will turn the floor to William for him to enter a little bit more into the detail of the figures.
Thank you, Frédéric. Good morning, everyone. I invite you to go straight to page eight with the headline numbers for the quarter. As Frédéric already hinted, the main first point I would like to make is on revenues. Revenues are up 9% year-on-year. They are up 4.4% when adjusted for the impact of euro revaluation. The revenue growth is broad-based across businesses with special dynamics in international retail banking and financial services and CIB. We'll come back on this. Second point, underlying net income stands, as Frédéric just mentioned, at EUR 1.25 billion. It is up 16% year-on-year. Group ROTE stands at 11% for the quarter as well as for the first nine months of the year.
Third, EPS for the nine months of the year stands at EUR 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 EUR 1.81 per share, which corresponds to a 60% payout. Turning to next page on the cost of risk. Just would like to stress the cost of risk for the nine months 2018 at the end of September for the first nine months, cost of risk stands at 18 basis points. Let me remind you that we've revised our guidance in Q2 with regards to the cost of risk for 2018. It was initially forecasted to be between 25 and 30.
We have revised the guidance to 20-25, and we are at 18 basis points again end of September, which makes us confident to be in check, if not better than the guidance for the year. This is an opportunity for me to 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 three accounts that I would like to comment upon. First, we have a well-diversified risk exposure across geographies, sectors, and counterparties. 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, country facing Market Turmoil, including Turkey, Argentina, or South Africa, as the case in 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 group level. Also our exposure to Italy is very limited. Second, 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. Last but not least, on market risk, as you can see, our S&P metrics measure market risk, the average trading value at risk stands at a very low level, consistent and with a slight decrease with the past quarters. Let me highlight that it goes in sync with two important elements.
One, we have less volatility than many peers in the revenues and results of our CIB activities, including market activities, and we have no legacy books left in our accounts. Going on page 11, as Frédéric said, we have made further improvements in improving the capital base and the liquidity and the funding structure of the group this quarter. First and foremost, the Core Tier one is up eight basis points organically this quarter, and goes up to 11.2 from 11.1 at the end of Q2 2018. This obviously translates into a further increase in the total capital ratio, Tier one ratio of the group. Second, we have a TLAC ratio which makes further progress for the quarter. You may remember that for the past quarters, it's been consistently above the target, the FSB requirement expected for 2019, which is 819.5, and also that we are already MREL compliant.
If you look specifically at the TLAC ratio at 22.8%, this means that implicitly, we are already meeting the target ahead of schedule only with sub-debt. Leverage ratio is stable over the period. The liquidity ratios improve, LCR and NSFR are comfortably above 100%. The liquid asset buffer is up from the previous quarter to EUR 176 billion. We've completed our funding program for the year, and we benefited from a revised outlook by S&P. We're now rated A with a positive outlook from October 24th, 2018. I will not comment page 12, 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 five key group components across the three 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 first nine months of the year. How does it split? First, French 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 investment in transformation. International Retail Banking was another very strong quarter. The return on equity is just about 17%, good commercial momentum across all regions and therefore big volumes or revenues with positive jaws for the quarter again. Same story for Insurance and Financial 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 a reasonably weak quarter seasonally, the Q3, so it's in sync with what we had last year. I would like to stress, and we'll come back on this, the very strong performance year-on-year in terms of revenue growth. Last, Corporate Center, we have a positive contribution of the Corporate Center this quarter of about EUR 37 million net income impact, +EUR 37, despite one negative provision, which is of EUR 136 million, and with an exceptional element, which is a revaluation of Euroclear shares for about EUR 271 million. Coming on French Retail Banking, let me first comment on the fundamental business dynamics. As Frédéric 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 3.6% this quarter relative to the same quarter of last year.
Let me remind you that fees represent 43% of the total revenues of the French Retail Banking, and that we have already in Q2 posted a + 2.5% increase in fees, and this is quite differentiated in the marketplace. We also made 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 a further increase in AUM in private banking, growing at 3.9%, as well as fees for this particular client segment. We also have another record quarter for Boursorama, with the clients of Boursorama standing now at 1.6 million, up from 1.5 million last quarter. 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 first nine months relative to the first nine months of 2017. Medium-term loans to companies remain solid in an improved economic environment, with a 4.2% increase in investment loans outstanding. Let me comment on the insurance business, where we continue to post strong performance in France. The outstanding of life insurance are up 2% this quarter. Protection premium 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 mass affluent clients.
Altogether, when we combine the private banking clients, i.e., with clients with AUM above EUR 500k, with what we call the patrimonial clients, the French mass affluent clients, we have 480,000 clients, AUM close to EUR 130 billion. Revenues are above EUR 1 billion, 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, accumulated inflows in excess of EUR 14 billion. We are now in the process of deploying a new coverage, a new product, a new advisory model for the next segment, which is the mass affluent client segment. We are confident this should yield positive results as well in the next coming years.
In a nutshell, French retail banking results for the quarter, revenues up 2.3% this quarter. Adjusted for the restating for the adjustment of hedging costs that we had in Q3 2017. Let me remind you, the amount was EUR 88 million. Revenues are down 2% for the quarter, as well as for the nine months. We have contrasted combination with commissions up 3.6% for the quarter. The 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 nine 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. We are well on track to meet the target. Overall, return on normative 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 a global return on normative equity in excess of 17%. More precisely, I would like to mention that the performance is very broad-based. 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, + 12%. In the Czech Republic, we had a + 6%, in Romania + 20%. That goes obviously, on the back again, as I said, of strong loan growth, but also an improved deposit margins.
In Russia, if you adjust for foreign exchange, volumes are, 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%. 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-link share outstanding, which the share of unit-link is 28% in Q3 2018 versus 26% for the same period of last year. Personal protection insurance premiums are up 9%, and property and casualty premiums are up 12%.
If you combine it with what I've said about insurance in France, you can see that we also have a very positive dynamic outside of France in the insurance business. ALD posted a very good quarter. Fleet growth was at 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&P was as well upgraded. Sorry. ALD was as well graded by S&P to BBB+. Finally, equipment finance loans and leases outstanding were up 6% 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 20, for the quarter, is the consumer finance.
Especially, if I may say so, the specialized consumer finance model, which is quite distinctive at Société Générale. Altogether, consumer credit represents outstandings of EUR 44 billion for Société Générale. 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 have a strong predominance of B2B2C models, so they work in open architecture models through partnerships. They are quite focused on leading franchises. Some names are very well-known and very well-positioned in terms of market share in their respective markets. You take the example of Germany with Medika or Hanseatic. These are very strong brands. In France, Cetelem or Rusfinance in Russia would be in that case, and they're also very innovative. These are areas where the processes are almost fully digitized for almost all geographies.
This is EUR 25 billion outstanding, out of which 61% is in the attractive car loan segment. The loan outstanding grew 10% year-on-year, 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%, adjusted for foreign exchange impact. Operating expenses are up 5.4%, adjusted for foreign exchange. Positive jaws, clearly, again this quarter for the division. Cost of risk is in check, and we make further progress on the return on normative equity, which stands 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 Market and Investor Services posting 8% growth year-on-year, with a strong rebound in equity, +19% year-on-year, which, as you can see or you may have seen, is probably on top of the pack amongst peers. Same for FIC, 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. This is a key component of our CIB business. It is close to 30% of the total revenues in CIB. We have a very strong quarter again, after an already strong quarter in Q2.
We posted in Q2 a growth year-on-year of 6%. We post now a growth of 9%. This is the highest level in two years, and this is very broad-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 had restructured our Global Transaction Banking steering, and the component that is booked within the CIB pillar grows double digits at close to 20% year-on-year. AUM for Lyxor and private banking were up for the quarter. So in a nutshell, the results for Global Banking and Investor Solutions are up, revenues up close to 8%, 7.7%, with a rebound of Global Market and a good momentum in financing. Positive dose for the quarter.
On a nine-month basis, operating expenses increased by 1.6%. The return on normative equity stands for the quarter at 7%. For the first nine months of the year, it is 9.5%. Last comment on my side is on the corporate center. As I said before, we have two exceptional impacts to consider in the corporate center. One is a positive. This is a revaluation of our shares in Euroclear, yielding a positive NBI of EUR 271 million. The other one is a negative. It's a further allocation to provision for disputes for an amount of EUR 136 million. The bank booked in its financial statements as of the 30th September 2018, a provision for disputes amounting to EUR 1.58 billion, which includes the disputes that Frédéric referred to, i.e., the U.S. sanctions, amongst others, in compliance with IFRS.
Let me just stress that for the nine months of the year, should you adjust for the EUR 336 million provision for disputes that we incurred to date, as well as for the positive impact of EUR 271, which is linked to the European revaluation, the operating income for the corporate center stands at +EUR 3 million.
Thank you very much, William. A very brief word of conclusion. As you know, we have fundamentally five strategic objectives. I think that this quarter, we are delivering performances consistent with these objectives. First of all, grow the revenues. They are up 4.4% if I exclude this exceptional capital gain. We see the positive development of our growth initiatives. Pursue the transformation of our businesses, in particular the French retail banking. We are in line with our objective. Of course, pursue the transformation of our balance sheet risk profile and the funding structure. On the costs, we are also in line with our guidance for the French retail business, and we have positive growth for the two other 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.
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 of 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. Now we are ready to answer your questions.
Ladies and gentlemen, if you wish to ask a question, please press zero and one on your telephone keypad. The first question comes from Stefan Stallman from Autonomous Research. Please go ahead.
Good morning, gentlemen. I'm surprised I'm number one in the line, I'm going to enjoy it. Two questions, please. The first on global markets. If I look at the nine months performance, not the third quarter, nine 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. 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 break even? If so, what are you intending to do about this business? 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.
Hello, Stefan. I will let William answering on your second question. Perhaps Séverin and Frank on your question on the capital markets.
Yes. Good morning, Stefan. This is Séverin speaking. It is fair to say that in our global market, the equities franchise has a higher return on equity than the fixed income one. We cannot say that we are breaking even. We are still profitable in our fixed income activity, but less than in equity. 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.
William?
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. Take it that the 12% target includes the implementation of IFRS 16 as far as we are concerned.
Great. Thank you very much.
Next question. Next question.
The next question comes from Maxence Le Gouvello.
Hello. Good morning, everyone. Two questions on my side. The first one, are you confirming your target of a Core Tier one of 11.5 for the end of 2018? The second will be on the foreign retail. It's been three quarters in a row that we are seeing some great performance. What is the next step, in term 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 services, absolutely confirming its capacity to grow in a very profitable manner. Regarding our target for Tier one, we have in mind to be at this target or at it very close. We are generating organic capital as we reflect this quarter. There is an element of uncertainty potentially on the closing of first acquisition, first 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, international private banking, so the vertical line between Russia, Eastern Europe, and Africa, is delivering both growth and profitability. You see that the top line is moving at a pace of 10%, but we continue to deliver profitability of around 17%, between 17%-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 is that we are rolling out across the board strategies to implement a digital platform in Russia, in Czech Republic, and in Africa. Just to give you a few examples, under the leadership of Didier Valet, you know that we have implemented a digital store in Russia. Already today, 60% of mortgage origination is done online.
We are moving very fast in Russia. In Czech Republic, the objective is to have by 2020, 40% of the headquarter in Agile at Scale mode. This is also moving fast. In Africa, you know that we have opened SG ABS in Casablanca. We are developing through our digital factory, digital services for Africa. We have located expertise, talents, resources, in two regional headquarters, Abidjan and Douala. The plan is to capture the growth in these vertical lines, Russia, Eastern Europe, and Africa, and to deliver the objective we have in the strategy.
Thank you. Next question.
The next question comes from Jon Peace, Credit Suisse. Sir, please go ahead.
Yeah, thank you. The first question is on international retail banking. Your growth rate of revenues this year and for the nine 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 sustain this outperformance? Or perhaps as the interest rate rises come into the base, the revenue growth slows a little. My second question is, with the 23 basis points of disposals that you're planning, roughly what is the revenue and the net income impact that will leave the bank with those? Thank you.
Jon, I will turn the floor to William, if he's able to make the rough calculation on 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 strategically, we are, as you mentioned, in regions with good economic activities. If I may say, a level of interest rate curve, which are more normal or sometimes which are normalizing, and ahead of the Eurozone. We are very positive given the quality of the franchises. I would say after nine months 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.
Second, on the disposals, while William is making the rough calculation, I just would like to highlight one thing, is really we have 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 do not have enough synergies to justify us to keep them. I think we have selected the right moment to sell. We are selling to industrial buyers, which have good synergies, and I think it's really positive. That's why we want to do that as smoothly as possible currently. William, have you been able to make the calculation for Jon?
Yes, because there was some degree of strategy in the thing. Let me tell you first factually
If you add up for the 2017, results for what the entities we have already announced that we were about to sell is a 23 basis points equivalent. The net income altogether is a bit less than EUR 50 million.
50.
50.
50.
I'd like to stress two things that goes with this. One, if you take the 23 basis points, you're short of EUR 1 billion of capital. Make your own calculation. If you reallocate that capital, theoretically, to our best businesses, which are yielding above 15%, obviously this is not a bad call. Second, we have not commented so far upon the prices and the valuation that we strike these deals at, but on average, they are significantly above one times book.
Great. Thank you.
Thank you.
Next question.
The next question comes from Jean-Francois Neuez from Goldman Sachs. Sir, please go ahead.
Hi there. I just wanted to ask a quick question on CIB. This quarter there was, as you said yourself, a run rate of revenues where the growth outpaced that of peers. 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 a cost growth in the global market business ahead of that of the revenues. 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. My second question was just on the quarter one target again of 11.5.
I heard your answer before, I think it would be helpful if we could understand in more detail how you could bridge the 11.2 today to 11.5 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 Séverin answer the question. Again, there is a positive job now for GBIS this quarter. It's important. Again, our fundamental target is 12% Core Tier one 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. There might be, depending on that, something slightly below, but fundamentally, the key question, is this bank able to generate capital? It's 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. When I look back, beginning of this year, and we will look back at the year, one of the great achievements that it will be that we will have put behind us the financial cost of the three litigation, which we are still pending.
I think we are very confident in our capacity to meet our objective of 12% for 2020. Séverin, on the cost.
Two points to Jean-Francois on your point. It's fair to say that on the third quarter, we had a cost rise, nevertheless, we have a positive job, but which is higher than we have seen for the previous quarter. The first point is last year, we had a very low point on the third quarter of 2017 in terms of cost base for seasonal, non-regular, I would say it's not a structural question. On the nine 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 GBIS, and it's fair to say that we're investing in our market activities to deliver the growth initiative that we have announced in our Investor Day, and secondly, in our financing and advisory business as well, also investing there.
The cost evolution for the time being is related to this investment, and we expect to have better return next year. It's in the Investor Day presentation we made.
Next question.
Thank you very much.
The next question comes from Guillaume Tiberghien from Exane. Sir, please go ahead.
Yes, good morning. The first question relates to the comment made by the ECB member following the publication of the European EBA stress test, whereby banks below 9% after the adverse scenario would be scrutinized particularly. Would it be fair to say that you should have the nine 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 Cum-Cum and Cum-Ex 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? The final point is not a question, it's just a clarification on an earlier question.
You said that the target of 12% equity Tier one included your expectation of IFRS 16, can you actually give us the impact of IFRS 16, please?
I think you should not at all over-interpret the comments which was made on this 9%. I don't think at all it will be a threshold, you should think in the way you have thought. What I mean by this, it was part of our plan before the stress test, to increase our capital ratio at 12%. I can't help thinking that it is absolutely the right level for us when we look at our risk profile. When I just compare with U.S. banks, which are fundamentally and the largest bank in the world, are managing Core Tier one 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. A little bit rudimentary for some elements, I'm convinced that the SSM will further refine this methodology.
Again, 12%, I think is the right target, we are confident to reach this target, we are acting on all front to do this. Your second question is around Cum-Cum and Cum-Ex. 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 Cum-Cum in France. Second, the press article related to What's the word in English? Perquisition, which was absolutely not related to that. It's just a wrong information. Regarding the Cum-Ex in Germany, there is just a very limited litigation, nothing which could distort our P&L. Let me just mention from that perspective and take the time to comment again about litigation, because it's an element I'm sure of potential comfort in terms of P&L going forward in the next two years and capital generation.
As I said, we have put behind us in this quarter the financial impact of our three U.S. litigations, we have no litigation, again, going forward. I remain very humble, but which again, can have a significant impact going forward in our P&L. These issues go back to the pre-financial crisis, sometimes, as you know, more than 10 years ago, as well as this Cum-Ex issue that you mentioned. Clearly, when we will add regarding Société Générale 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. Let's say I'm remaining very humble. What I mean by this, we are drawing, we have drawn the lessons, 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 CIB activities and our own one did not pay enough attention to certain businesses, the robustness of control infrastructure, and we probably had a too short-term approach regarding profit generation. What I've tried to do in the last years is really to build a stronger bank. A bank with the combination of skill and entrepreneurship spirit mindset, also with a much more longer term, if I may say, sustainable approach of the businesses. It's also fair to say we live in a very different world, and a more demanding, a stricter one, with much more diversified requirements of regulators on the different topics which impose all banks to invest.
When I say this, my conviction is that the only way is to comply, and is to have, again, a robust control infrastructure, and also take advantage of the new technologies, and to invest in information system. 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. 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.
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 have a lot of very diversified litigation, that going forward, we will have a clean P&L, in particular in the next two years, which are important for the capital development. I was a little bit long, but I wanted to make that point on the litigation. As you know, our litigations are permanently disclosed in our different yearly and half-yearly reports. Be careful with the press, which might have also sometimes not necessarily 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 Hamilton from Morgan Stanley. Sir, please go ahead.
Hi, good afternoon. Thanks for taking my questions. One on French retail and one on sort of international. I guess, on French retail, obviously the fee growth is pretty encouraging. I was just trying to get a better sense of how you think about the net interest income line. In terms of front book, back book replication pressures, when might we expect that could see stabilization? Obviously then you've got quite a decent top-line story, theoretically. Linked to that, in terms of the Boursorama contribution, can you share anything on the revenue or profit contribution, or is that still around sort of breakeven and in investment mode? 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 sufficiently benign environment that we should be modeling continue reversals? Thank you.
Thank you, Bruce. Philippe Aymerich for the French retail and Philippe Heim for the international retail, more specifically Czech Republic and cost of risk. Philippe Aymerich.
Yes, thank you for your question. Regarding the fees, the momentum was quite good actually on the third quarter, notably the fees related to services, which is a good satisfaction because of course it's also related to the increase of the number of clients and more especially of core clients. Regarding the net interest income, 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 rate which remains, and we mentioned during the second quarter also. It's basically two-thirds of the decrease, and it will continue with the situation on the interest rates.
The second one is related to the lower prepayment penalties, which is going to stop because now you see the situation, we have much less prepayments. We had a bad impact, quite important compared to last year, which is not going to continue. Regarding the last part of your question, yes, we can say that Boursorama is close to the breakeven.
You may remember we had made a focus in Q2 on Boursorama and already mentioned clearly that we were profitable pre-marketing costs, marketing costs being 2/3 variable linked to the client acquisition, and that also this net income adjusted for marketing costs had grown two and a half times over the past three years.
Philippe?
Yes. Good afternoon, Bruce. Just to confirm that the outlook and the sentiment we have on Czech Republic and Romania is still very good. It's positive to see that in those countries, we managed to avoid the situation of overheating, let's say, momentum. 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 will stop sooner or later. What we expect, and this is consistent with the local disclosure of KB, we expect the cost of risks to start to increase in 2019. What could be, the question, what could be a normalized rate of cost of risk in Czech Republic? It will be around 30 to 40 basis points.
Thank you.
Thank you.
The next question comes from Anke Reingen from RBC. Madame, please go ahead.
Yeah, I'm not sure if there was an answer outstanding. I just had some questions on your previous guidance. Can you maybe just on French retail banking, obviously you've given some previous comments about the expected revenue decline and also your cost growth, which I guess from the comments and the slides would now suggest you're more looking at potentially +2% year-over-year. On the impact of disposals, I remember you said EUR 50 million loss last time, and now you obviously sold more assets. Is this because Poland was loss-making? I was wondering about the EMC benefit. I think you said EUR 150 million cost operating income benefit. I think looking at the Commerzbank numbers, obviously the performance there has come down, but I'm just wondering if you reiterate your expected benefit.
Sorry, lastly, on the corporate center, can you please update on where your guidance is, given where you already are at the nine-month stage? Thank you.
Yeah, Anke, the line was not perfect. I hope I have understood your question. First, on the guidance of the French retail, we don't change this guidance. We've said an evolution of net banking income this year between -1% and -2%. It happens we stand at -0.6% for the first nine months, when you exclude the PEL/CEL provision. On the cost, we also stick at this date to the guidance of below 3%, knowing I think we are at 2.1% for the first nine 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 +EUR 50 million, Poland was making some profit.
As I said, these are good assets, but strategically, fundamentally either too small in their market with not the capacity to become a leader. I think strategically that it makes sense to make a choice. When the level of synergies is not sufficient to justify, to have to absorb all the constraints of a global city. It's businesses which makes profit. Fundamentally, the disposal will be beneficial to the group, either through the reallocation of capital or the increase. Is the priority of quarter one. Regarding the EMC business from Commerzbank, we have already disclosed that nothing changed regarding the benefit and the reduction of the profitability of the CIB. Perhaps on the corporate center, William, because here we could elaborate. Anke had the question on the guidance of the corporate center. Perhaps you can elaborate a little bit.
Okay. Yes, as you may remember, I'm sure you're referring to it, the previous guidance or the guidance for the corporate center that had been given previously is minus EUR 400 million GOI, underlying GOI for the year. It is true that for the first nine months, as I said, that the underlying figure is rather positive with a + EUR 3 million. Let me remind you about what we have in the corporate center fundamentally, the policy we have generally speaking. I'll come back on the guidance. First of all, the policy of Société Générale has been consistently, in the past years and quarters, to build everything we can to the businesses. We don't keep much cost at the corporate center level. As a case in point, restructuring cost of the French retail or the CIB activities are fully taken by respectively French retail or CIB activities.
This is a general policy that also applies to the liquidity cost for the group. When you look more into the details, the main reason why we over-perform is linked to the liquidity cost. Especially, we had effectively this year, a little less cost than we had budgeted in the way we allocate budgetary, the liquidity cost to the businesses. We don't adjust quarterly on a quarterly basis the cost we bill to the businesses. As far as the liquidity we raise at group level, being cost of anti-transformation, the spread, and the subordination cost. There is an element of difference. Clearly we over-perform, if I may say so, in terms of our whole cost of liquidity.
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 EUR 200, EUR 300 maximum of head office cost at the corporate center level. We can say that this minus EUR 400 is conservative. We may be in a position to beat the figure for the full year, as you hinted 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. 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.
Diony Lebot, Deputy CEO.
Yes, Flora. The TRIM process has been ongoing now for almost two 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. Anyway, our trajectory of 12% takes into account regulatory adaptations or requirements.
Again, I would like to insist, 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 Vijayarajah from HSBC. Sir, please go ahead.
Yes, thank you. Kiri Vijayarajah, HSBC. 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? What's driving that, and is there any distortion coming in from local authority lending? Because I think in the past that's been quite lumpy for you. Then on the insurance side, some of your peers have actually posted some pretty strong insurance numbers this quarter. First of all, are you happy with your 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 Aymerich again comment on the financial performance. 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 certain of our peers in the P&L to compare our return on capital. I must say, I'm pretty happy in relative terms of the resilience of our profitability. On the other aspect, insurance and all this, Philippe.
Yes, regarding commercial activity, there is no specific trend related to lending to local authorities. The commercial momentum in the last quarter has been overall quite good. Quite satisfactory regarding individuals, especially on consumer finance. You have seen the number. Also, we continue to be very selective in terms of credit origination with corporates and professionals. The quarter was quite good, again, focusing on our core clients. Yes, a good quarter. Again, I repeat on the commissions, it was quite satisfactory services on financials.
I think that we have a 4% increase of NBI in French insurance. We tend to think it's a good rhythm. For the first nine months, it's a good rhythm. Beyond the quarterly figures, it's a good yearly rhythm for this kind of business. Can we move to the next question?
Yes. The next question comes from Delphine Lee from JP Morgan. Madame, please go ahead.
Yes, thank you for the presentation. I've got two questions as well. Just to 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 the new run rate that we should assume, or does that include some regulatory impact which won't be repeated, given that you seem to suggest that TRIM impact won't be that large? 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. Obviously this was based on rate assumptions on OAT, which are significantly higher than current levels.
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, Delphine, 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 year-end with the yearly figures. Let me just again highlight on the risk-weighted asset, that the way we project our 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, et cetera, with the idea to comply with the capital levels. This is the way we are currently actually 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 NII.
Next question.
Thank you. The next question comes from Nick Davey from Redburn. Sir, please go ahead.
Yes. Good morning, everyone. Thanks for taking my questions. Two, please. The first one perhaps for Séverin on this ongoing debate around cost investment in the markets business. Sorry for the trip down memory lane, but if I look down the last 15 years or so of revenues in the markets business, it does seem to average to EUR 1.4 billion a quarter, pretty much whatever the weather. It averaged that between 2002 and 2007. It averaged that in 2007 to 2012 with a bit more volatility, and these days less volatile, but still EUR 1.4 billion since 2012. I'd just like to understand better really what makes this finally a source of revenue growth for the business.
I understand we've been through 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. 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 front book 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 base run rate for net interest income next year? Thank you.
Nick, I will give the floor to Séverin and then Philippe.
Thank you, Nick, for your question. 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 and to deliver, if we may, market share gain. We are not betting on the growth, global growth on the market in our view. We're investing today, and visible in our cost evolution, but it's for a while to continue to take market share. We see specific area of opportunities for growth, specifically today in Asia, for example. 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, very important, is to stabilize, to lower the volatility of our top line in the global market activity.
We are pursuing also diversification. In our plan, in the end of today, we have some growth initiatives which are really done to continue to stabilize the top line and to progressively continue to take market share.
Philippe?
Yes. You're right. I think 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 points in the euro interest rate, means for French retail banking, an increase of EUR 35 million of the net interest income.
Next question.
We don't have any further question.
Okay. Well, thank you very much for attending this call. I hope we have answered all your No more question? It's very clear?
No. We don't have any further question.
Okay. Well, again, thank you for your attention. Have a good afternoon. Thank you.