Ladies and gentlemen, welcome to the Société Générale conference call. I now hand you over to Mr. Slawomir Krupa, Chief Executive Officer. Please go ahead.
Thank you. Good morning, everyone. I am pleased to be here with you today on this call to discuss our quarterly earnings, and I thank you for joining us. We have two important topics to cover this morning about the group's performance. The first is the strong and materially improved results achieved during Q3 2024, showing a better progress than originally anticipated. The second is a review of the consistent delivery of our strategic plan. We are moving forward in our group-wide transformation and hitting all the interim targets that we set at our capital markets day a year ago. Among them, and most importantly, our capital and cost-to-income targets. Starting with the quarterly earnings, you can see that revenues are up by 10.5% compared to Q3 2023, and by nearly 6%, excluding the EUR 300 million positive one-off proceeds received in Q3 and booked in the Corporate Center.
These higher revenues are driven by solid business performance in key areas. First, the strong rebound in French NII versus last year, in line with the latest assumptions updated in Q2 and in line with our end-of-year estimates. And secondly, once again, a remarkable performance of Global Banking and Investor Solutions. We've continued strong contributions from our equity and transaction banking divisions. We have also strictly managed our costs, and we see the first benefits from the many initiatives that we have launched. Costs decreased by almost 1% in Q3 2024 compared to last year in a context of higher business performance and despite a base effect related to past inflation. This translates into strong positive jaws and a cost-to-income ratio down to 63.3% in Q3 2024. That's 7 percentage points lower than in Q3 2023. For the first nine months, it stands at 68.8%.
Cost of risk is stable at 27 basis points and in line with the yearly estimate. All of this impacts our operating income, which is up by nearly 40% compared to last year. The Q3 group net income rose 4.6 times to €1.4 billion, which translates into a 9.6% reported ROTE and 7.8% excluding the one-off. For the first nine months, the ROTE stands at 7.1%. In terms of capital, the CET1 ratio is up by around 10 basis points at 13.2% at the end of Q3. That's a level that's consistent with our 2024 end-of-year targets. It is post-distribution provision, which is based, as you know, on a 50% payout ratio. At the end of September, we have already provisioned an equivalent of €1.66 per share for distribution. Liquidity ratios remain comfortably above target levels. And note that we have completed the 2024 long-term funding program.
It is against this backdrop of strong performance that I'd like to give you some additional insights into the management team changes we announced today. Moving forward, we will operate with two members of the general management executive team, Pierre Palmieri and me. Philippe Aymerich will step down from his role today, and I will assume the direct supervision of retail banking activities in France, private banking, and insurance. I have already made key talent moves in those who will report to me. I'm bringing on leaders with substantial experience and a strong track record of growth creation in retail banking. I am certain they will strengthen this area of the bank. I am also pleased to announce the appointment of Léopoldo Alvear as the Group CFO and member of the Group Executive Committee effective January 7th of next year.
He will succeed Claire Dumas, who will remain with us until the end of January 2025 to ensure a seamless transition of the CFO duties. Leo has an outstanding reputation in the industry, and I'm looking forward to working with him. I wanted to highlight these important evolutions because it's always been my belief that strong organizations recognize the need for change when their performance is on the rise. We are on an upward trajectory, and this is the right team at the right time to keep that positive momentum going. Coming back now to our solid Q3 results, they confirm our ability to execute on our strategy. They also show that we are not nearly finished. The bank's profitability continues to improve in a gradual and sustainable way.
At the Capital Markets Day, I presented a three-year plan with deep structural changes to build a rock-solid, simplified, and more efficient bank. This is exactly what we are doing. Hard work has kept us on track to deliver on three fundamental points: one, our capital; two, our efficiency and profitability; and three, the streamlining of our business portfolio. Capital buildup is a cornerstone of the strategy. The CET1 ratio is currently well ahead of the trajectory we presented at the CMD. This is thanks to a strict allocation of resources to businesses and the deployment of a more asset-light model. The capital trajectory, which is already solid, will be further strengthened by the closing of signed M&A transactions. They will offset, to a large extent, the impact linked to the implementation of Basel IV. Efficiency and profitability have started to improve in the last quarters.
The gross operating income is up by 37% in Q3 2024 versus last year, and by 18.9% after three quarters versus the nine-month 2023 print. As you can see, quarterly cost-to-income ratio and ROTE are both improving sequentially and year over year. Since Q2 last year, this improvement in profitability has led to a steady rise in the TNAV per share, which now stands at EUR 64.6 at the end of September. At CMD, we also announced the proactive reshaping of the business portfolio. That led to several key transactions. These disposals will simplify the group structure, improve efficiency, and positively contribute to the capital buildup for about 60 basis points, of which 15 basis points by the end of the year, the rest coming mostly in the first half of next year.
At the same time, this reshaping also focuses on the investments we're making for the future of our core activities. We're doing this by strengthening their leadership positions and by optimizing their cost of doing business. BoursoBank is a unique digital-only business that has the potential to be one of the leading and most profitable retail banks in France. BoursoBank is already outpacing the entire market in terms of client acquisition. The growth is high, the churn is very low, and that's due to having the highest level of client satisfaction in the industry. But we managed to accomplish this despite having the lowest cost to serve by a margin, and it is already profitable. For the second quarter in a row, BoursoBank posts a positive net result while continuing to acquire a large number of new customers, now totaling roughly seven million clients.
We are integrating LeasePlan within Ayvens in line with our plan. We are building a global sustainable mobility leader there, which, post-integration, will generate a sustainable 13%-15% ROTE. Within CIB, we are building with Bernstein a high-quality leader in global cash equities and research. Together with Brookfield, through the partnership, we will deliver a bespoke capital solution to clients that, together, we can scale. And we will be able to do this with an optimized capital intensity on our end. Both are perfect examples of the future we are building. In Europe, we are investing in digitalizing KB, which drives a complete overhaul of the client experience, and it will enhance KB's performance for the long term. In France, the merger of the retail banks is happening. We are now well into the process of branch closures and staff reductions.
The execution of our ESG roadmap continues to move forward. We have reduced our upstream oil and gas exposure by more than 50%, which is ahead of the trajectory presented during CMD. We are also ahead of plan in reaching our € 300 billion target in terms of sustainable finance. Today, we're establishing a new target of € 500 billion for the 2024-2030 period. That number is now mainly composed of loans, which represent roughly 80% of the total target. With regards to the bank's overall performance, there is still hard work to be done. We are moving in the right direction, and I am deeply convinced in our ability to consistently deliver on what we say we're going to do. Our objective remains unchanged: sustainable performance that creates long-term value for shareholders and all stakeholders.
I will now leave the floor to Claire, who will comment on group and business performance.
Thank you, Slawomir, and good morning, everybody. Let's move on to line nine on the group's performance. You can see on the chart the strong improvement of the gross operating income versus last year, both for the quarter and for the first nine months. It is a double-digit growth in both cases, even excluding the exceptional item booked in the corporate center. Overall, the cost-to-income ratio is down to 63.3% in Q3 and 68.8% for the first nine months of 2024, which shows our ability to reach a cost-to-income level below annual guidance. Regarding cost of risk, on slide 10, in Q3, it remained stable and contained at group level at 27 basis points. It's mostly composed of stage three provisions for about €400 million this quarter, a level comparable to Q3 last year, roughly 20% below Q2, and very limited stage one and two write-backs.
In parallel, total outstanding provisions on Stage 1 and 2 assets remain high at EUR 3.1 billion. It's broadly stable, as we stated from the application of the IFRS 5 norm on the new disposals announced in Q3. Since the beginning of the year, the cost of risk amounts to 27 basis points in line with guidance. Regarding the NPL ratio, it's slightly down at 2.95% in Q3, from 3.03% in Q2. As far as the net coverage ratio, it increases to 84%, from 80% in Q2. Let's turn to capital slide 11. The CET1 ratio lands at 13.2% in Q3, around 300 basis points above MDA. It's up by around 10 basis points in Q3 thanks to a strong organic capital generation through earnings represented 16 basis points plus distribution provisions. As expected, business RWAs have increased this quarter.
The related impact was minus 12 basis points in Q3, while the decrease in business RWA during the first half of the year has generated a positive impact of around 15 basis points at the end of June. This is consistent with a maximum increase of 1% in business RWAs in 2024, which means a maximum impact of 15 basis points of capital through the year. I will not comment on slide 12. And let's move to the business performance, starting with French retail on slide 14. In Q3, the market environment was in line with the last assumptions we had factored in in Q2, which means, on the one hand, a still wait-and-see context on loan production. Home loans origination further improved, up by more than two times versus Q3 last year, and plus 15% versus Q2. But it remains lower than in past years.
And overall, loans outstanding are down by 1% versus Q2. On the other hand, we see a continued increase in deposits versus Q2, driven by interest-bearing products. On the savings front, we reached new record highs in both Private Banking AUM and life insurance outstandings at EUR 164 billion and EUR 145 billion, respectively, thanks to continued strong inflows in both cases. Last, we see a steady increase in personal protection and P&C premia. They're up by 5% this quarter, that is the third quarter of last year.
Let's now turn to slide 15 on NII. Overall, NII reaches EUR 1,062 million in Q3. It's up plus 43% versus last year, and sequentially by EUR 170 million compared with Q2. It's consistent with the latest assumptions updated in Q2 and that I have just described on the previous slide. Note that at the end of Q3, interest-bearing deposits represent 56% of total deposits.
Regarding BoursoBank on slide 16, for the second quarter in a row, BoursoBank posts a net positive result in Q3 with a RONE above 30% despite maintaining a high pace of growth through new client acquisition. This shows the strength and the flexibility of the model, which can deliver superior sustainable returns. For the second quarter in a row, BoursoBank proactively managed the acquisition pace of new clients to target 310,000 in Q3. In terms of commercial performance, BoursoBank has nearly reached its end-of-year targets in terms of client base, with around 6.8 million clients at the end of September. At the same time, assets under administration continue to steadily grow. They're up by around 15% versus last year, at EUR 63 billion in Q3, contributing to the 33% increase in revenues realized year-to-date.
At pillar level, on slide 17, the robust performance of the various activities in France leads to a strong increase in revenue by 19% versus Q3, with costs down by 1.4% thanks to a strict cost control. Adding a stable cost of risk versus Q2 at 30 basis points, it translates into a net positive contribution of EUR 368 million in Q3, equivalent to a RONE approaching 10%. In global markets and investor services, slide 18, it's another strong quarter. Global market revenues are up 9% at more than EUR 1.4 billion in Q3, with another strong performance in equities across the board. This is the second-best Q3 ever. On fixed income, revenues are up 6% versus last year, with a good momentum in rates and forex flow activities, especially in the US.
Last, in securities services, revenues are up 1% on a reported basis and up 10%, excluding a positive equity participation in past Q3 last year, thanks to continued strong fee generation and robust business momentum in private markets and fund distribution. Let's turn to financing and advisory, slide 19. This is a robust quarter with revenues at EUR 843 million, stable in comparison to a high Q3 last year. Concerning global banking, revenues are down by 3%. Performance in financing remains, however, good versus a high Q3 last year. Elsewhere, we can highlight another excellent quarter in securitization and more mixed momentum in IBD. Regarding transaction banking, the performance continues to be strong, with a 9% increase in revenues versus last year, driven by strong commercial momentum in cash management and correspondent banking.
Overall, this is another remarkable quarter for GBIS, with a 5% increase in revenues reaching more than € 2.4 billion in Q3. Costs are very well contained. They are only up by 1% at € 1.5 billion. With the cost of risk still very low at 7 basis points, GBIS delivered a very strong quarter with a RONE of 18% and a net contribution of €699 million. Moving on to international retail on slide 21. We continue to see a good momentum in business activity across the board. At constant exchange and perimeter, loans are up by 6%, deposits by 5%.
In Europe, in Africa, loans progress by 1%, deposits by 3%, both largely on the retail side. Overall, revenues of the international banks improve by 5%. Turning to mobility and leasing services. Ayvens revenues are down minus 15% versus Q3 last year, but only down minus 4%, excluding non-recurring items.
This is notably due to the unfavorable base effects versus last year, mostly linked to fleet re-evaluation, which had a positive impact of around EUR 114 million last year versus zero this quarter. In addition, the variation in prospective depreciation and PPA adjustment has a net impact of around EUR 35 million versus last year, while the impacts of hyperinflation in Turkey and those linked to the mark-to-market of the swap portfolio offset each other versus last year. We start from these elements, underlying margins remain stable in euros in Q3 at around EUR 619 million. Regarding UCS results per vehicle, it continues to normalize as expected. In Q3, it amounts to EUR 1,420 on average per car versus EUR 1,480 last quarter.
In a context of deep transformation, which is progressing as planned with a strict cost discipline, the underlying performance of Ayvens remained overall solid, as illustrated by the underlying cost-income ratio at 64.3% for the first nine months. In consumer finance, the environment remains challenging. Revenues are down year-on-year, but they are stabilizing compared to the previous quarter, and last, equipment finance recorded stable revenues and outstandings compared to last year. Slide 23. Overall, the contribution of the PLR to the group net income remains high at EUR 367 million in Q3, which is equivalent to a RONE above 14%. Finally, let's move to slide 24 with the corporate center. In Q3, the corporate center posts a net result of minus EUR 67 million. In addition to structural items related to the management of the group of structural risks and scale resources buffers, it includes both positive and negative one-offs.
On the one hand, around EUR 300 million in revenues closing out the remaining exposures in Russia linked to past local presence through Rosbank. On the other hand, accounting entries related notably to announced disposals in accordance with IFRS 5 rules. I will now let the floor to Leo for the conclusion.
Claire, as you can see, we have made further progress in Q3 2024 towards our annual and 2026 targets across all metrics. The figures speak for themselves, and they are compelling on their own. We remain committed, focused, and determined to do better. So let's start now the Q&A with our usual kind request to stick to two questions per person. The floor is yours.
Thank you, sir. Ladies and gentlemen, if you wish to ask a question, please press star and one on your phone keypad. Please ask your question in English.
The first question is from Tarik El Mejjad of Bank of America.
Hi, good morning, everyone. Yeah, many questions. Stuff to limit to two, but I'll try. First, on the management change. I mean, yes, first time in my career I see French banks appointing non-French speaker, non-internal management. So it would be interesting to hear more from your perspective, what's the incentive for that, and what's the added value you should see in that? Second part is on the French retail. Do you see volume growth in France speaking up? What's the level of applications you see? And more importantly, are you still in the wait-and-see stance, or are you ready to grow and expand your balance sheet on the French retail? And still in there, in BoursoBank, is the management change means that we could expect a change in the strategy of client acquisition in BoursoBank?
So now you're already at €7 million by the year-end. Would you stick at eight? Would you actually aim for a higher number, or you would limit yourself to the current level and start to book positive contribution? So I will limit my questions to that. Thank you.
All right. It's a three. You squeezed in BoursoBank under French retail. Well done. Okay. So management changes, non-French speaker, non-internal. Listen, I mean, this is obviously not how I think. I've never thought in terms of who speaks which language. Leo speaks good English and Spanish, at least. So that's good enough for me. And what it is all about is constantly, right?
Right now, we announced something today, but it's a constant effort and duty for the leadership of the team and for the CEO to think about the ingredients that are necessary at any point in time when things change, contexts change, dynamics change, and what is the best possible team to take it forward, right, in the end? And so that's the only thing that was guiding my choice here. And I think Leo will bring a fresh perspective from outside. I mean, you've noted that all the other appointments are from within, from our internal talent pool, which is very deep and of high quality. And it's just like, how do you try and make the best and the best composition, the best dynamic for the team to take things forward, right? That's the only thing that's at stake.
And I want to reassure you, everybody in the bank speaks English. So it's going to work. So that's for the management changes. In terms of French retail, the volumes, the growth. So what happens is you have, from a macro standpoint, you have obviously still a bit of a wait-and-see environment. So on the corporate side, you see actually in France some growth in the investment on the investment loans side and rather something downward by a few percentage points in terms of the short-term loans. And we expect this to more or less remain the same thing. So broadly stable, maybe slightly down, slightly up, but broadly stable in terms of volumes on the corporate side.
In terms of the retail, definitely the compression of rates offers an opportunity for buyers to pick up their investments, buyers of real estate to pick up their investments on the individual client side. Now that the overall context is more normal in terms of ALM, in terms of margins, in terms of competition, etc., we are indeed ready to support this dynamic, which has picked up significantly, but is still obviously much lower than the volumes pre-rate hikes. Again, stable on the corporate side, and we're obviously willing to do our job, and we're a major SME bank in France. In terms of the individual clients, fairly stable and also wait-and-see, except for the retail, which is real estate, which is picking up, and we are definitely ready to support that.
And more generally speaking, yes, we are ready to put our balance sheet at work in the French retail and do our job. In terms of the Boursorama strategy, no. I mean, the strategy for Boursorama ultimately is proposed by general management and validated by the board. So these management changes don't change anything to the strategy. The only thing is, and you've seen that in the results, we're trying to steer to optimize the path we believe firmly and deeply, and you know that, Tarik, in the future of this business, and it's extreme strategic relevance in the French market. But we want to optimize the path, and you see this in the figures between growth and contribution to the bottom line, which is positive, not high, but positive. And right now, that's the way we want to go. Thanks. Next?
Thank you.
The next question is from Delphine Lee of J.P. Morgan.
Yes, thank you for taking my questions. So just two on my side. So if I go back to French retail, just wanted to see if you could, I mean, we have a decent momentum clearly with Q4, and your full-year basically implies significant decline in NII in the fourth quarter. I mean, is that just conservatism on your side, or how should we think about kind of sort of NII trends quarter by quarter? And also, if it's possible to get a bit of color around what you expect for 2025. And then more generally on French retail, if I may.
So when you look at your business plan for 2026, and you're clearly on track for 24, as JB spoke and we really well, how far off do you think you are on French retail compared to not at the group level, but just on that division versus your initial expectations? If you don't mind commenting on that, please. Thank you.
All right. Thanks. Good morning. Listen, so when I do the math, I don't see what you see, right? When I do the math, remaining at the same pace in terms of the French NII would lead us to something to the tune of €3.84 billion, which doesn't lead me to change anything to the outlook on the end of the year, which I wouldn't have done anyway because we don't have the habit of changing the guidances so late in the year.
Again, my math give me 3.84, so something clearly in line with the previous estimate. In terms of the color for 25, again, we don't provide any formal guidance or color for next year in Q3, but which we will do in February. Well, the moving parts are what? In the end, this is a business which is, as you know, NII plus fees, right? On the NII side, it's a little bit what I said to responding to the previous question. It's fairly stable in terms of volumes on the corporate side. That's our outlook and fairly stable overall on the individual clients with the exception of the mortgages, which may not be extremely highly priced in France, but they are carrying a risk-reward which is probably very high. On that side of the business, we expect growth.
Now, on the deposit side, which is obviously a very important component, we expect as rates decrease, we expect some form of stability, stabilizing behaviors. But again, right, it is fair to recognize that the entire year for the entire market, we have all in France been subject to a significant shift between sight and interest-bearing deposits. So for this reason, fairly stable outlook with a pickup on, in particular, mortgages, but with some caution as far as the behavioral dynamics are concerned, certainly abating, right? It's logical with the rates going down, but not completely, let's say, behind the market in my view. So what you can infer is since we won't have the drag of EUR 400 million linked to the hedges, that's the upside that we will obviously have. And beyond that, something fairly stable with an ability for some pickup.
In terms of the 2026, I don't want to comment too much, but basically, mix is different, right? Definitely, we had a different vision in terms of how the NII is going to behave and what the composition of it is going to be. In terms of the fees, the dynamic is decent, very strong on the financial savings perspective, as you know, in terms of asset gathering within the life insurance wrapper in France, and we're probably the best performer in the market. So this will most likely continue. So the mix is different, but there is somewhat of a drag on the deposit side. And at the horizon of 2026, there's a number of things that we can do in terms of commercial policy, in terms of client acquisition and client retention, etc. There's a whole bunch of things that we intend to do to support this trend.
But in the end, it will also mean that we will have to be very mindful of what we need to do in terms of cost control, right? I mean, it's a reality that is out there. So I'm giving you some insight into how we think. Thank you.
Great. Thank you so much for the color.
The next question, sir, is from Guillaume Tiberghien, BNP Paribas.
Good morning. Thanks for taking the question. Two, please. One is on cost. And it's a bit of a vague question, and I apologize. But number one, your costs were very well controlled in Q3. So we always have the concern of a true up in Q4. And I know Q4 is always more volatile, or there's always a pickup in cost. So should we expect a worse pickup in cost?
On that same subject of cost, I'm a bit concerned that you're shrinking, which is good for the capital, but then we're going to end up with more corporate center cost, structure cost, unallocated cost. I know you did a bit of a cost-cutting exercise in the corporate center last year. Should we expect another such cost-cutting exercise? Otherwise, I'm a bit concerned you're going to have to reallocate some of those losses to the other divisions. The second question is on French retail. Could you quantify how much NII and fees we will lose from the disposals of the Swiss and UK private banks? And is it going to be spread over H2 2025 and H1 2026? Thank you.
All right. Thank you. In terms of the cost and the Q4, clearly, there is a seasonality. You pointed to it, and it's made of mostly two things, actually.
Some sort of a true-up, if you will, of the bonuses, right, and the variable compensation, which is basically adjusted to its fair value, if I may say so, in Q4, which usually resulted in years of improving performance, which clearly is the case this year, resulted in a higher cost, so you could expect something like that. I can't comment further, but happening in Q4, and the other thing is that there's also some sort of dynamic in paying all the providers of outside services, external services, which usually picks up as people are wrapping up the year, and that's the other driver up, so you should expect these phenomena to happen. On the other hand, you should expect us, as a matter of strategy and structural intent, to be extremely conservative and strict in terms of cost management.
In terms of the shrinking in Corporate Center, you're obviously theoretically right. And we actually have one, as we dispose of assets, we have a specific subprogram, if you will, in the bank to make sure that we extract fast and as much as possible the previously allocated costs to the businesses that we disposed of that were previously in the Corporate Center, not only Corporate Center per se, but also the head office, right, more broadly. And I'm not going to tell you that this is easy. And we know that from past experience as well, that it takes time.
But once again, from a strategic intent perspective, you can count on us, you can count on me to make sure that over time, we go to zero in terms of what used to be allocated to the head office because of the presence of the businesses that we disposed of. So that's one. And in terms of management, because there's a management dimension there, as you know, we have already increased the allocation of capital to the businesses from 11 to 12. And we are going to increase it once again in the future to 213, in line with obviously the group objective, which is going to sustain our efforts to have the Corporate Center. It's always going to be there.
It's always going to be significant in a bank, but there's a whole bunch of costs linked to liquidity buffers, for instance, which we manage very conservatively, as you see in our ratios. So some of these costs are still always going to be there. But again, from a management perspective, making sure that as much as we can is allocated directly to the businesses is something also which we are committed to. In terms of the French retail and impact of the private banking, so in terms of NII, it's roughly EUR 270 million in terms of revenue. Sorry. In terms of cost, it's EUR 250 million, and the net income, roughly EUR 20 million.
Thank you very much.
Okay. Thank you. Next question.
The next question, sir, is from Giulia Aurora Miotto of Morgan Stanley.
Yes. Hi. Good morning. I'll ask two questions, please, both on French retail.
So, Slawomir, the first one is strategic. Today, you're assuming direct supervision of retail banking activities in France. And I'm wondering if there is something from a strategic perspective that you would like to change. For example, one thing that I keep wondering is about the merger with Crédit du Nord. We essentially had a merger, and we can barely see it on the cost line because it keeps going up. So I don't know if there are some strategic measures that you're thinking about. So that's my first question. The second question is about Livret A and/or any other sort of political development, because sometimes in France, we have been surprised by changes. Do you foresee any changes to the way the deposit rate is calculated or any new instruments in the market, any new savings instruments that could be introduced that can affect the profitability there? Thank you.
Thank you. Good morning. Listen, on strategy, let me put it this way, right? And I'll address specifically the merger question in a second, but can we keep on questioning ourselves, keep on reassessing both our business performance, our cost management, our structure, our organization, the way we manage the capital at the client level? I mean, yes, of course. And to some extent, and I want to make this perfectly clear, it's never going to stop, right? In an organization of our size and our diversity, we have to reassess these things constantly. So do we have some further work to do beyond the merger horizon and beyond, let's say, these previous core features of the strategic thinking? Yes, of course, right? And I think it's both a matter of cost, but it's also a matter of revenues.
It's also a matter of efficiency of the capital allocation at the client level. It's about a lot of things that we can do better. I mean, the dynamic is strong. You're talking about the cost. The cost of the pillar are actually down. If you look at the nine-month-to-nine-month figure, for instance, we're talking about costs being down 2.2%. So it's not entirely true that nothing's happening. A lot of things are happening, and people are working extremely hard to improve, and they are. Now, versus the assumptions from 2020, but who can blame people from 2020 not to have foreseen the inflation explosion and all the impact it had on the cost structure of all the companies? And so from this perspective, yes, the net-net of this whole endeavor is much less than what was expected.
But on the other hand, it only highlights how important the merger was. And clearly, it needs to continue. It needs to be finished. And in the future, we'll continue to look at how we can optimize the cost to serve, but also how we can optimize revenue generation, how we can optimize client satisfaction, which is absolutely key in these businesses. And so we will continue to work on improving strategically the performance of French retail. In terms of the French context, Livret A and other regulated savings, listen, I think the innovation capability in France is high. We've invented a lot of things, the high-speed train, the A380, a number of things. And so sometimes, yes, the country has an ability to invent some new financial products as well, especially in terms of regulated savings.
I don't think right now that there's anything material that would destabilize the structure of our revenues that is going to happen there. One. And two, in terms of Livret A itself, I mean, I don't know, but I see no reason for the formula not to be applied. And the formula seems to point to rates going down and the served interest on Livret A going down next year. Next.
Thank you.
Thank you.
The next question, sir, is from Joseph Dickerson of Jefferies.
Hi. Thank you for taking my question. Just a couple of quick things from me on the relationship with Brookfield. I think about a year ago, this relationship was formed. And I think you talked about scaling into a 10 billion fund relationship. Is this starting to contribute to GBIS revenue? Because I noticed you called it out in your slide. So any color there would be helpful.
Then second, just in terms of the implications of the French budget, any commentary on where you see the tax impact landing, but perhaps more importantly, how you think about capital allocation if things like buyback taxes are going to be a permanent feature. And pretty soon, in 12 months' time, you'll be in a pretty attractive capital position, I would have thought. So any commentary around implications of the budget would be welcome. Thank you.
Thank you. Thank you very much. In terms of the relationship with Brookfield, it's progressing. It's, again, a real partnership. We share an investment company together, etc. This is not just some lightweight piece of paper where we stated the willingness to cooperate. So meaning it takes some time to put that together, which we did during this year.
And so we are in the process of scaling that up to something around EUR 4 billion by the end of the year, which is already material. But it's fair to say that it's something which is close to some form of a seed asset, if you will, extracted from our balance sheet and going there. So the fundraising and the expansion, right, of the investment dynamic is going to be happening mostly, most profoundly, if I may say so, next year. But definitely, the EUR 10 billion mark in terms of AUM is something we keep as an objective, hopefully end of next year, but we'll see. And as we grow the size of this common endeavor, we will grow the P&L, which right now is not material at the level of GBIS.
Again, it's the final stages of the initial formation with some transfer of our own assets into the venture, but a few primary deals, so to speak, already as well. So in terms of the tax impact and the tax on buybacks, listen, the current project points to we'll see where it lands, but the current project points to something which will be manageable for us. We're an international company, and so this impact should be manageable for us. In terms of the buyback and distribution policy, again, as it currently seems to be envisaged, it's something which would be costly. But may I say, unfortunately, it would not affect the quality of the financial equation for a buyback at Sogen, if you know what I mean. So I think, obviously.
Well, yeah, you're on point three of books. So I would hope so.
So if you do the math, you would have to have a very, very high tax rate for this to be a problem for us. So I'm leaving this at that, although I do hope that very soon I will have to tell you we need to stop the buybacks because the tax rate is too high. Thank you.
Thank you.
The next question is from Flora Bocahut of Barclays.
Yes. Good morning. So two questions also on my side. The first is talking about actually the CET1 trajectory from here. Obviously, you're ahead of the target. You're ahead of consensus expectations also today. So just wanted to check if there's any regulatory charges or anything else that could come and undermine this in the coming quarters, obviously beyond the disposals that you have already communicated.
So anything else that we need to be aware of in terms of CET1 trajectory from today's standpoint? The second question is actually on French retail revenues, but talking about the fees here, because the fee growth had been quite lackluster in previous quarters, which had to do with the client acquisition cost at Boursorama. And this quarter, you have like 5% year-on-year growth in your fees despite Boursorama having over 300K new clients, despite the seasonality of Q3 as well. So anything you could tell us on why the strength in fees and how sustainable that is? Just one clarification, if I may. On Boursorama profitability, you mentioned it's a slight profit. Are you okay to give us a number there? Thank you.
I'll start with the last question. I'm not, sorry. But again, it's a small profit.
Remember, when we spoke about this at the CMD, we were targeting a substantial negative GOI throughout the trajectory. This year, we are executing the plan basically with no drag for the last two quarters in terms of not only GOI, but even net income. That's how we want to work on the trajectory there in the next couple of years. I'm going back to fees. The strength is the idea that in terms of the financial fees, we had already a stronger track record for quite a few quarters. Now the service fees are also picking up. It's lower than the 5%. The financial fees are up 9%, and the service fees are up 2.5%. So this is the dynamic. It's positive. We attribute it to, among other things, the starting benefits of the merger, but also the merger stress, right?
I mean, there's obviously a merger stress from an organizational perspective, etc., etc. People need to get used to the new setup. Well, things are moving forward there, right? So how sustainable that is, I mean, we'll do everything to make sure that it is sustainable in a macro environment, which carries some uncertainties. We have been talking about that a bit today. Then in terms of CET1, so no regulatory impact this quarter. We had spoken about 35 for the year earlier. We already took 20. So there's 15 basis points to go. Next year, listen, the only thing I can say is that here again, the ECB, as you know, is constantly present in all our banks throughout the system and works and reviews all kinds of things.
The statement that you should stick to is we have built levers and approaches in the way we manage the capital to make sure that the trajectory that we committed to will never be at risk, right? So should something happen, we'll deal with it. There's no reason right now to think that something would happen.
Thank you.
Thank you.
The next question is from Pierre Chedeville of CIC.
Yes. Good morning.
Good morning.
First question is regarding your strategy on private banking. We can see that it's quite dynamic in France. But I would like to know what is your view globally on this business following the sales of UK and Switzerland? Do you want to only be in France, or do you have any other plan there? My second question relates to cross-selling between divisions of your business model.
I wanted to know if you, as a manager, is something that you look at carefully. Do you think that your business model has a strength there in terms of cross-selling potential between the three pillars, or do you think that it could be a weakness in the future regarding organic growth? Thank you.
Thank you very much. So on private banking, let's say global international strategy after the disposals, let me put it this way, right? The way we work on this, we've worked on this so far in the last 18 months, is really through the lens of strategic review of the portfolio of businesses, of the business portfolio. Meaning we went through and we are going through and we will continue to regularly go through the entire business portfolio.
So not only, I insist, not only subs, so not only subsidiaries or countries which are subsidiaries, but also individual businesses within GBIS, within this or that other activity. And as we go through this and the strategic review, we apply the criteria, right? So ROE, ROE versus cost of equity, market positioning, and in particular, the synergies. Synergies because it's very important in the business portfolio, which is diversified, that the cost of complexity that you create by having the diversification is paid for by something. And the only way to pay for this are synergies. So from this perspective, and I don't want to pound that, but I gave you the figures a little earlier. The contribution on the net income of the two assets was EUR 20 million. So you can see that from that strategic review perspective at our shop, right?
It's always the matter, are you the right shareholder? Are you the best shareholder for something, right? I'm totally convinced that others can do much better. But in our case, the structure, the level of synergies to your second point that you made more broadly, and I'll come back to this in a second, the synergies there between our private banking in France and these two entities were not high enough to justify maintaining them in the business portfolio given the standalone performance, right? It's as simple as that, right? So from a strategic perspective, do I think and do we think at the firm that private banking is a good business, that we know how to do it, etc.? Yes. We think it's a very interesting business.
We think that in particular in France and in particular at the heart of this very material synergy between the traditional retail and private banking, we can operate this. We know how to operate this. Yes. Right? Do we think that some of the other, we have Luxembourg in particular, has strong ties to France, makes sense in terms of product offer and so on and so forth? Yes. And so this is why we maintain this. Internationally today, right? First of all, we have many other things to do. And today, I don't think that we are in a position to think credibly about reinvesting in international private banking.
And I think when you do these things, you need to make 100% sure that you understand where the specific value is, the one that you are going to create because of your involvement in that particular value chain, which is very much me making your second point, which is there's no point in multiplying presence internationally if you don't generate something extra because of you doing this, right? And so I am extremely. I'm answering your second question here. I'm extremely focused on the cross-selling between divisions. It's a fundamental piece of analytics when we look at the portfolio. And let me go through this. So French retail and GBIS, massive, massive synergies at the heart of what the bank was historically and how it historically developed. It's true in France, but it's also true internationally, right?
So the content that we have from a client perspective and relationship perspective in the French retail is something which generates money within GBIS, not only in France, but also all over the world. So very at the heart of the group synergies. But KB and BRD, significant, significant purveyors of synergies, mostly through GBIS, but not only, also with the French retail directly, but very, very important crossroads of synergies for the group. We definitely want to foster this. And in terms of Ayvens, we basically share the same clients across the entire client base of Ayvens. And it is an important synergy already. To be honest, it can be increased. It can be increased. I think the level of integration and dialogue will increase versus the past there. So we need to do better, but it is the same client base again.
The second thing, if we look further into the and farther into the future of Ayvens, we are thinking about some developments in individual, in retail, etc., etc. This is not something we're doing hastily. Again, you need to do it seriously. But this could be another major, as you can imagine, major synergy spot for the group.
Okay. Thank you. Just to follow up, could you give us with synergies, or is it something you don't want to communicate?
I'm sorry, you broke up for the most important word you were saying. So could you repeat, please?
Sorry. I just wanted to know if you could give us a number of sales made and based on synergies within the three pillars, or is it something that you don't want to give?
We don't.
Well, I mean, we don't usually communicate on this, but listen, I can give you just a hint, right? For instance, between GBIS and the rest of the group, we're talking billions, billions of business worth in terms of synergies.
Okay. Thank you very much.
Thank you.
The next question, sir, is from Anke Reingen of RBC.
Yeah. Thank you very much for taking my questions. The first one is on the payout ratio. You guided 50%. Are you already able or willing to give an indication where you were considering to land for this year? Is it 40 or 50%? And if you're not quite confident yet about moving to the 50%, what is the area of uncertainty? And then secondly, on global markets, your results continue to come in very strongly. Are you sort of over-earning or there are structural factors why previous guidance is too conservative now?
Thank you very much.
Thank you. Thank you very much. So on the payout ratio, let me put it this way, right? Why did we set this distribution policy to indeed support, right? Not by an incredibly high margin, but to support the capital buildup, right? So today, clearly, in terms of our capital trajectory, we are ahead. The FRTB being postponed by a year is also obviously helping. And so today, right, from that perspective, going to the 50% payout ratio because of the trajectory and where we are, there is a valid option, obviously, right? It's just obvious because this was designed to support the capital trajectory. Now, it remains formally a decision of the board in January, and the board will decide, but you have my color on the topic.
In terms of the global markets, listen, I've been saying this for a while now. We've gone through years where literally every single year something happened that was a positive from a revenue generation environment for the business. Actually, to some extent this year, it's slightly less true, right? There were less specific things happening, but for all kinds of reasons, the market's moving up, actually, on the equity side, for instance, where obviously supportive. So do I think that there's still some exceptional performance there? Yes. Do I have to recognize that that exceptional performance with different drivers each year has happened now for basically plus years? Yes, I have to recognize that. But I want to point you to one figure, which is when I communicated the GBIS roadmap in May 2021, if I remember well, the guidance was 4.5-4.7 or something like this, right?
More or less. Excuse me if I missed it by $100. But we have already improved the guidance with also the acquisition of Bernstein, but not only, by basically almost EUR 700 million. So we are recognizing that indeed everything we've done in the last four years to reposition that business, to make it both more resilient, more stable, and more able to capture the right trends and the right extra revenues opportunities. Yes, we have done all that, and it has increased structurally our ability to make money in this business.
Thank you very much.
Thank you.
The next question is from Chris Hallam of Goldman Sachs.
Hi. So just two quick, I guess, clarifications really for me left over. So first, and it's a follow-up to Anke's question just now. So would you say that that repositioning of the markets franchise is now effectively sort of complete, right?
The platform's sort of in the right place. You talked about the sort of conducive backdrop that's been there over the last few years, but actually performance was super strong in the quarter. So is that repositioning complete? And this is the kind of base level that we can move forward with? That's the first question. And then second, super simple housekeeping point. Are there any changes on the anticipated closing timings or capital tailwinds on any of the disposals that you've announced over the last couple of quarters? Thank you.
All right. On the global markets, as I said, I'm not going to repeat everything since, by the way, you said it all again, but I do believe let's think about it like everything else being equal today, right? So do I think today that there is a little cushion in the performance that is somewhat exceptional, right?
Not one-offs or whatever, but somewhat exceptional? Yes, I think that there's a slight cushion in the current performance that is slightly exceptional, right, but it's true that it becomes more and more difficult to talk about normalization or what is the normal context, etc. In the current circumstances, next week we'll have a pretty significant event happening in the U.S. All kinds of scenarios could come out of it, very positive ones from a business perspective. I'm not making any political comments, obviously, here, but from a business perspective. You could also imagine scenarios where things are more subdued or more negative, and so with that big pinch of salt, yeah, I mean, the repositioning is complete, and it's a division which both from a revenue generation perspective and cost for that matter and risk management delivers a very strong performance and will deliver a strong performance.
In terms of the if I got well because the line wasn't perfect, you were talking about the closing of the disposals. So Morocco normally happening before year-end and with an impact, positive impact of 15 basis points roughly, and the remaining 45, which are basically assigned to happen in the first half of next year.
Okay. Thanks very much.
Thank you.
The next question is from Matthew Clark of Mediobanca.
Good morning, so two questions from me. Firstly, on interest rates, I mean, is interest rates, the short end coming down faster than was maybe expected, good for you? Is it bad for you? How do you think about that just in big picture terms? And if it is good or bad, which parts of the group determine the balance of that? And then second question on French retail costs and the Crédit du Nord integration synergies.
I mean, how far through that process are we? Is there still much left to come through, or should we think that the synergies benefit is now embedded in the third quarter numbers, and from here we should be back to more normal levels of cost inflation going forward? Thanks.
Thank you. Thank you. Listen, on the interest rate, there are a few things here. And I'm going to state a few obvious things. Forgive me, but just for clarity. So obviously, if everything is stable and most importantly, the outstanding of deposits and loans, obviously, interest rates going down is a negative in the long run, right? We have now a hedging policy which works. And the purpose of a hedging policy is not to protect you forever from market changing. The purpose of a hedging policy is to help you smooth, right, the trend upwards and downwards, right?
So forget about the hedges because your question is more fundamental. So if you forget about the hedges, everything else being equal, interest rates going down in the long run is not something positive. Now, the subtle thing about the French market is, one, you could see, but we don't know, but you could see rates going down as a positive from sight deposits outstanding. And so paradoxically, right, given the sensitivity numbers that you have in the presentation, you see that the sensitivity for one billion is extremely high of sight deposits. So you could see something where rates going down are actually in the French market could be a positive from that perspective if it were to stop, reverse the trend of that mix changing. So that's one component.
And the second component is, unlike basically any other known market, so to speak, in retail, we carry 20-year, 25-year maturity at origination on our mortgage book. So even if the average duration is obviously smaller, it's still a very long duration where we carry mortgages at fixed rate originated at times where the rates were zero or negative. And so from this perspective, even if rates are going down, if they don't go too far down, we are actually going to slowly reprice our mortgage book at better levels.
And so from this perspective, independent basically of everything else, the idea that we can over time reprice our loan book in terms of in terms of the rate is also a positive, which is why I believe that the French retail market in general and for Société Générale as well, and we hope to make the best of that, but is going to be supported for a longer time in terms of positive trend of the NII, but slowly, right? Slowly. And in the end, of course, right, if rates were to go to zero, eventually it would be a wash. One last point, rates going down are also a positive, and we see it right now, obviously, for loan origination, right?
Because the demand for loan on mortgages obviously has picked up in our view mostly because the rates went down and the purchase capacity, if you will, for customers, for consumers has gone significantly up. So this is how you should look at this. The second question in terms of the French retail cost, etc. I mean, we're past clearly the peak of the merger, but there's a number of branch closure and staff reductions still to happen, even if some of the position elimination had been anticipated. So you should see this as a mild positive in terms of costs going down, but yeah, abating.
Okay. Thank you.
Thank you.
The next question is from Azzurra Guelfi of Citi.
Hi, good morning. What is the slight fix? I see that lots have been done since the presentation of the plan.
Now you have a new also additional role if you want as head of the French retail. May I ask you what is high up in your to-do list at the moment in terms of initiative at group level in addition to the French retail? And the second question, if I may, is on the mobility division. That is the division where we are still seeing pressure on revenue because of the industry trend. Can you give us some color when you expect this to have any inflection point if possible? Thank you.
All right, so I'll talk about what's high on my to-do list. I cannot outsource that answer, I guess, to anyone, and I'll have Pierre give you some color on where he sees the inflection point in this business, which to your point is still going through a number of changes.
We believe positively, but through a number of changes. So what's high on my to-do list? Obviously, the first thing is to continue across all the topics that are the pillars of our roadmap, of our plan to deliver, right? To deliver. And I think while capital is well advanced and it was an important part of the plan, some form of a cornerstone, as I said, you still need to make sure that you continue to have the right tools, that you have the right policies, that you have the right approach in terms of making sure that you allocate this in an optimal way. I'm just giving you this example, meaning it's not because we're kind of a little ahead that capital is now moving to the last bullet point on my to-do list. No, it's center, front and center.
Now, I'm still going to give you a real answer. So one, costs across the entire company remain an important focus because as much as we're progressing and as much as we're delivering on the initiatives that we have had already designed, there is still a lot to do, right? It's not like inflationary pressures have completely disappeared, right? They're still around depending on the kind of service that you talk about, etc. They're still around. So you still have to fight at least that. That's a matter of, let's say, sanity, everyday sanity. But more profoundly, I do believe that we still have value creation opportunity within the cost structure and within the efficiency or lack thereof or not enough inefficiency in the system today.
And so this is very high on my agenda because the most tangible value in the end is created when you are able to lower your break-even point. I'm stating the obvious. And now the second thing equally important to me right now is, yes, French retail has gone through a very profound transformational project of the merger, right? There are not many, many there are, but not many examples of something like this happening in the French market. It's a true merger. You're taking two different firms from A to Z, different head offices, policies, blah, blah, blah, and you're making it one, truly one, right? And so that's a big endeavor. People have been working very hard to make it happen. But the performance is not entirely there.
Some of the reasons are totally exogenous, and it's this whole deposit mix shift in the French market that we discussed many times. But there are things that we can do better, right? And there are things from a commercial, from a technology perspective, from a digital approach perspective that we can do better. And I am very focused with the team on making that happen. Some things are going to happen fast. Some things are going to happen over a longer period of time, but they will. Pierre? Good morning. As far as the mobility sector is concerned, I will focus on Ayvens. I think we're at a point where the integration of this plan is moving forward as expected. It is true that we had to wait for the declaration of non-objection, which took place in March before implementing the mergers in each of the countries.
But this is taking place, and there are already five countries that are really merging operationally. The targets that have been set by Ayvens in terms of cost income for the whole year between 65% and 67% are well on track to be met, and rather on the closer to 65% than 67%. Yet today, they are at 60%, a little bit above 64%. The margin is at a level that we believe higher than our competitors, and that has increased since the end of last year given the different actions that we have taken. And we are still on track to deliver the 2026 targets as announced during the CMD. Thank you.
Next question, sir, is from Jacques-Henri Gaulard of Kepler Cheuvreux.
Yes, good morning. Just one observation and one question. On the observation, I just wanted to thank Claire for her hard work over the years.
It's been fun, good interactions. And having followed Spanish banks for about five years, congratulations on the hiring of Leopoldo, who's absolutely great. Just one question. I mean, I find you really fighting to the Slawomir. It's fantastic, very enthusiastic. And it reminds me when you announced the allocation of capital for your capital growth, which were exclusively, if I remember well, Ayvens and BoursoBank, at this point in time, would you be happy to mention it a little bit in French retail, but not officially, to redeploy the balance sheet a little bit more aggressively and viewing that your cash generation, which is more important than you thought? Thank you.
Thank you. Well, thank you for the observation. I'm going to echo your comments about Claire in a second, but let me address your question.
Listen, the idea when you run a company, and I'm being very personal here on some level, you need also to sometimes make things simple, right? And I think what the company needed to hear was, no, we're not going to throw capital out there at every single organic growth opportunity that obviously in banking, on some level, we always have, right? You tilt your risk appetite a little and you do some customer acquisition with some price dumping and you're going to make money, right? You're going to generate revenues, right? But the message, which was absolutely key to, I think, the transformation was, no, we're not going to do it this way, right?
At the time, clearly, because of the very specific opportunities, both in Ayvens and in BoursoBank, we wanted to simply say, well, these two businesses intrinsically today where they are with the opportunities that they have, we believe that they deserve right now, even at times of savings of capital throughout the firm, they deserved that allocation. But then, and this is what's great about our business, it's subtle, it's changing, and you have to follow what's happening. Clearly, in Ayvens, the marketplace, some of the changing dynamics in terms of the fleet, in terms of the pricing of contracts, like the margins, etc., were different, right, than what maybe people expected, say, three or four years ago, right? So you have to adapt that.
I think only logically, we did our job and made sure that at the, let's say, more fine level of allocation, we were doing what was right. In terms of Boursorama, BoursoBank, we clearly understood with the teams that, well, you could be a little more subtle once again in terms of how you're going to generate this growth. In the end, the overarching objective is profitable, sustainable growth, right? Yeah, we try. We don't manage to do it all the time, of course, right? Don't get me wrong. It's a tough job that we have, but we try. We strive to make sure that we optimize things depending on market conditions and the reality of how a given business behaves at a certain point in the cycle. Addressing the last part of your question, I somewhat said that at the Barclays Conference, right?
If we have capital available above our target and we feel that there is room from that perspective there, we will use it for a combination of shareholder return and meaningful, meaningful, sustainable, high-quality growth with high marginal ROEs. So yes, yes, of course, and that would be very good news because indeed, part of the pressure, strategic pressure on ROE, only part, but part of it comes from obviously a much more constrained organic growth allocation.
Thanks a lot.
Thank you very much. Listen, thank you very much, everyone. It's been a real pleasure to discuss with you this morning.
I do want to take this opportunity to thank Claire for a long, distinguished career at this bank with a major contribution in each and every job that she held over these two decades spent tirelessly serving the group and its customers by doing her job well in all these positions. So thank you very much, Claire.
Ladies and gentlemen, this concludes today's Société Générale conference call. Thank you for your participation. You may now disconnect.