Ladies and gentlemen, welcome to the Société Générale conference call. Gentlemen, please go ahead.
Hello, everyone. Thanks for participating in this conference call. We are delighted to present in the most synthetic way both the Q2 results and our financial targets for 2025. With a very strong performance for the eighth consecutive quarter, the Q2 results commented in the first part of the presentation conclude two years of strong execution and solid financial performances, with underlying return on tangible equity above 10% for the last three semesters. On the back of these strong outcomes, we are highly confident to deliver on the 2025 financial targets that we will present in the second part of the presentation.
The objective of this second part does not aim at making a complete review of the strategy or providing with detailed commercial targets, but to put into perspective the various strategic initiatives presented so far and give a view on the return that this business model can deliver, even in a more uncertain context. Before digging into the Q2 figures, I'd just like also to highlight that we've made, again, a good progress this quarter on our various strategic projects in line with our objectives. Let's now comment on the Q2 results with EUR 1.5 billion underlying net result. The group hosts once again a double-digit return on tangible equity at 10.5%. It's up 16.3% for the first semester at EUR 3.1 billion on net profit, i.e., a 10.6% return on tangible equity.
Both the gross operating income, which is up 18.5% in Q2, and the underlying net results significantly progress in Q2 and H1 compared to already high levels in 2021. Revenues are up nearly 13%, reaching a level above EUR 7 billion as in Q1, and all the businesses contributed to this excellent performance with a record quarter for several of them. The customer risk is low. We still have prudent provisioning, which confirms the quality of our portfolio and leads us to confirm our annual guidance. Let me remind you that we have accounted this quarter the impact of the disposal of the Russian subsidiaries for an amount of EUR 3.3 billion before tax, without any significant impact on the Core Tier 1 as expected. Our Core Tier 1 remains solid and well above requirements at 12.9%.
With this new strong performance in Q2, we have almost absorbed in just six months the negative impact of the Russian disposal, which is removed from the underlying results. In line with our distribution policy based on 50% of the underlying results for the group, we have thus provisioned at the end of June a distribution provision of 1.44 EUR per share. In addition, we can confirm that we will start in the very few coming days the share buyback program, which was included in the 2021 distribution and which has been approved by the SSM. I now leave the floor to Claire to enter into more detail.
Thank you, Frédéric. Slide five. As you just pointed out, the group established a very solid underlying earnings, as illustrated the growth of nearly 22% of the gross operating income. This performance results from positive yields at group level of around 3 percentage points and leads to a 61.8% underlying cost income ratio, excluding SRF in Q2, significantly lower than past years. Slide six. The solid performance is the continuity of the Q1 . Since the beginning of the year, underlying revenues have increased in all businesses compared to last year. They are up almost 15% versus H1 last year. In the meantime, costs remain under control with a decrease of around 7%, mostly explained by the contribution to the SRF, variable compensation item, and negative Forex impact.
On that basis, considering an economic slowdown in H1, we adjust downwards our guidance of cost income ratio, excluding SRF, between 64% and 66% in 2022. Moving to the customer risk, slide seven. It's low for all the businesses. On average, it stands at 15 basis points in Q2, and 7 and 27 basis points since the beginning of the year. It includes the customer risk and the Russian exposure, on which we have cautiously booked another EUR 140 million overlay this quarter. The NPL ratio is further decreasing to 2.8%, and the growth coverage rate slightly increases at 50%. For 2022, we maintain the guidance between 30 and 35 basis points. Looking at the next page, slide eight, the trend remains similar to past quarters.
Still limited defaults, which leads in Q2 to a contained level of stage 3 provisions at EUR 156 million. At the same time, we maintain a prudent provisioning approach by further increasing our stock of stage 1, stage 2 provisions to EUR 3.4 billion to factor in a more uncertain context. Let's now turn to liquidity and capital, slide nine. Thanks to a strong organic capital generation in Q2 by 16 basis points, the CET1 ratio ends at 12.9%. It fully compensates, on the one hand, the negative impact of -7 basis points linked to the disposal of our Russian subsidiaries and on the other hand, the continued widening of sovereign debt, which generated a contained OCI impact of -11 basis points. The buffer to MDA remains very strong at around 360 basis points.
Regarding the other ratios, they are also all comfortably above requirements and the funding program is very well advanced. I will not comment slide 10. Let's now look at business performance and start with the French retail activities, slide 12. The momentum remained good this quarter in France, despite more challenging environments. Deposits increased by 4% versus Q2 last year, both in regulated savings and high deposits. Loan growth continued in Q2, with outstanding up 3% versus Q2 last year, notably thanks to a growth by 4% in home loan outstanding and good production in mid-long term corporate loan production, which is up 42% while state guaranteed loan outstanding continued to amortize.
On savings, we continue to see growth both in life insurance with a 1% outstanding growth, of which a record high 34% in unit-linked and plus 0.4% in assets under management in private banking despite market environment. Premium on P&C and personal protection continued to rise by 4% in line with our strategic objectives. Moving on to Boursorama, slide 13. Client acquisition remained strong in Q2 with almost 360,000 new clients. This enabled Boursorama to reach 4 million clients as of July, thanks to both continued strong organic client onboarding and the first effects of the offer to ING clients. This offer is progressing very well in line with expectations, with already 50% onboarding rate, mostly composed of premium clients.
As of July 22, around 250,000 of clients have joined Boursorama from ING and transferred around EUR 7 billion of savings. On client equipment, Boursorama continues to make rapid progress on monetization. Loans outstanding are up 28% since last year at EUR 15 billion, with home loans outstanding being up 27%. Deposits and financial savings are up 19% to EUR 39 billion, a number which increased even more in July with the transfer of savings from ING clients. In terms of P&L, slide 14, revenues are at 5.9% versus Q2 last year. Net interest margin another 5%, thanks to good commercial momentum and asset reevaluation in a favorable environment, and despite the negative impact of the increase in regulated savings rates and still negative rates on sight deposits.
Fees increased by 7.1% with strong growth in service fees. Underlying costs are up 5.5%, notably due to client acquisition costs on Boursorama, including the transfer of ING clients to the FRB and to variable costs related to the product sharing scheme. Note that costs are at just 3.6% on the French network in Q2. Those are positive and the underlying ROE is strong at 14.4% and 18.3% excluding Boursorama. In International Retail Banking, slide 15, this is another very robust performance with an underlying ROE close to 20%. Commercial dynamics continue to be well-oriented with increasing volumes in most regions. In Europe, loans outstanding are up 6% and deposits are up 3% at constant perimeter and forex rates.
In Africa, we observe an improved business dynamic across all regions with growth in both loans outstanding and deposits. On revenues, NII is still very well-oriented in Europe at 21% at constant perimeter and forex rates, still benefiting notably from the favorable rate environment in Eastern Europe. Fees increased by 15% in Africa. European and African retail activities are both posting their record high level of revenues. Specialized consumer finance activities generated a solid performance with a 7% revenue increase. Let's move to slide 16. Insurance and financial services post once again an excellent quarter with an underlying ROE above 33%. On insurance, revenues are up 8% at constant perimeter and forex rate. Life insurance growth in flows further increased and total outstanding reached EUR 131 billion, of which a sustained high level of new business at 55%.
P&C premium increased by 7%, driven by a positive dynamic across regions. Financial Services keep on delivering very positive results with a 45% growth in revenues at constant perimeter and Forex rates. Once again, ALD delivers a spectacular performance with a record semester in terms of NBI and net income. This performance is due to a very strong underlying activity and to a limited extent, slight positive impact linked to the hyperinflation accounting in Turkey, slightly more than EUR 40 million on NBI. Overall, the fleet is still growing well with a 5.4% increase in H1, despite the continuing shortage in car delivery, and ALD continues to benefit from a very favorable remarketing environment with a used car sales result above EUR 3,200 per unit in H1. To sum up, slide 17.
IBFS delivered another strong quarter, excluding the residual contribution of Rosbank. Revenues increased by 21.4% at constant perimeter and Forex rate. In addition, thanks to a strict discipline on cost, IBFS delivered robust positive yield, and the gross operating income is up 33.5% at constant perimeter and Forex rate. Excluding the activities disposed in Russia, the underlying RME is at 26.4%. Turning to GBIS, slide 18. Total revenues are up 25% versus Q2, with still very strong contribution of market activities with revenues above EUR 1.5 billion. Equities continued to be solid, supported by high client demand for equity derivatives and prime services. NBI increased by 8%. This is higher than Q2 last year.
On fixed income, the rate hikes, higher interest for inflation products and volatility on Forex, the environment was favorable to our business mix margin towards rates and Europe. Overall, revenues of our fixed income platform are up 50%. Financing and advisory, slide 19. Registered in Q2, its highest quarterly performance on revenue, which are up 14% versus Q2 last year. In global banking and advisory, dynamics remain strong in natural resources and infrastructure, spurred by our push on ESG products. The activity was good in asset-backed products and resilient in investment banking, despite lower volumes in capital markets. In transaction banking, performance continued to be strong with a 29% increase in revenues compared to last year, notably thanks to interest rate increase. Overall, slide 20. GBIS delivered an excellent quarter with very high positive yields.
This is driven by a strong increase in revenues by more than 18%, coupled with a contained evolution of costs. Excluding the contribution to the SRF, costs are up 4.7% on an underlying basis, which illustrates our continued rigorous management of costs. In Q2, GBIS delivers an underlying RONE above 16.3% this quarter and 20.6% excluding SRF. The underlying RONE for this semester is above 18%. On the corporate center, slide 21. This quarter is marked by the disposal of the Russian activities, which negatively impacts the net results. The resulting loss, which is in line with previously disclosed estimates, is recorded in net losses in other assets for a total amount of -EUR 3.3 billion before tax.
The underlying operating expenses increased by around EUR 110 million, mostly due to the Global Employee Share Ownership program for EUR 44 million, Forex impact, and a normalization of expenses in line with the return to normal activity after COVID. The operating expenses include transformation charges for a total amount of EUR 159 million, mainly on Vision Grand France. The underlying gross operating income stands at -EUR 247 million. Frédéric, I let you conclude this first part of the presentation dedicated to the Q2 results.
Thank you very much, Claire. Slide 23, just to remind you that we have had again two years of intense transformation, simplification of the business model. We launched certain strategic projects that you have on this slide. I will be again very short. Next slide 24, to illustrate that we've had two years of strong performances illustrated on this slide in particular, with for six quarters in a row, a higher return on tangible equity. I will turn now to slide 26 to comment first and to enter into the second part of the presentation on our financial targets and comment on the central economic scenario that we have taken into account.
Of course I know some of you might have different views, but we have taken a central macroeconomic scenario based on the soft landing assumption over the forecast horizon, with inflation progressively back to more normal level as we consider that major disruptions to energy supply is temporary and the shock to global confidence should be contained. In detail, we expect a sharp decrease in annual economic growth as soon as 2023. Annual growth rates are expected, in our view, to remain positive in the coming years within a range of around 1%-2% max, both in Europe and the U.S. from 2023 to 2025.
Note that in the event of a shock to the energy supply in the winter, the short-term growth assumptions could probably be revised downwards between 0.7% and 1%. Regarding inflation, we expect the commodity prices to remain at a high level, at least in 2023, and then progressively decrease. In our scenario, the oil price would remain at $95 a barrel in 2023 and move to $65 a barrel in 2025. In that context, we expect inflation to significantly decrease in 2023 after a peak in 2022, and come back below 2% as soon as 2024.
Accordingly, we are forecasting a gradual decline in government long-term bond yields from 2023 to return to below 1% in 2025 for France and around 2.5% for the United States. Similarly, we expect short-term rates to stabilize around 0.5%-0.7% in 2023 for 3-month Euribor and 6-month Euribor before returning to 0% by 2025. Compared to market and ECB expectations, we can consider these assumptions as prudent, in particular on the level of the three-month rates, that the ECB project at 1.6% in 2024. In light of this context, it's essential for the group to continue the efforts to complete this business model in order to take full advantage of it when conditions improve.
If I turn to slide seven, 27, I will be very quick just to remind you our corporate purpose and slide 28 to highlight that we want to work on three levers where we want to differentiate, meet client needs and priorities, embed ESG in all our activities and processes, accelerate our tech-enabled journey. If I turn to slide 29, let me highlight that we have launched in our different activities specific projects and I must say that from the most significant of them, we have key milestones in the coming 6 to 9 months, in particular regarding the merger of our two French networks, the acquisition of LeasePlan by ALD, and we remain entirely focused on reaching our targets. Slide 30, the key group financial targets.
As you can see, we aim to deliver return on tangible equity above 10% based on the Core Tier 1 target ratio of 12% post tax of 4 fully loaded implementation. In terms of long-term distribution policy, we intend to stick to our present guidance based on a 50% payout ratio on the underlying net result of the group, and with now up to 40% in the form of share buybacks. We think it makes sense to have an increased level of flexibility in terms of share buyback due to the current valuation of European bank shares. I will be very quick on slide 31, 32, but it's a very important thing, of course, for us, ESG transformation.
We had commented previously on the 4 priorities that we have and that you see on the slide, which means, in practice, reallocate resources and shift businesses. We have this EUR 300 billion sustainable finance objective between 2022 and 2025. Educate and engage all our staff. It's a very important element. Foster innovation and cooperation, including with industrial players. Of course, implement the right operational framework and in particular regarding data. Slide 32, you have more detail on what it can mean for each business. I will not comment in detail.
Happy to answer your question, but of course it concerns retail activities, wholesale, where we want to maintain an absolutely clear leadership position in energy transition and take advantage of the need for financing in this area in the coming years, and of course, in the mobility sector. I will now leave the floor to our management team to comment on the different building blocks and to start with Gaëlle Olivier to present you the IT and business priorities for the coming years. Gaëlle, floor is yours.
Thank you, Frédéric. Indeed, regarding IT and digital, we are sharpening our levers to become a tech-enabled company throughout the value chain. That means starting from building a secured, resilient and modern infrastructure, leveraging cloud-based solutions, and continuously reinforcing our cybersecurity. We develop solutions with an ecosystem of partners. We accelerate the usage of data to generate tangible value, and we gain agility and embrace digitalization to better serve and be relevant to our clients.
We are making good progress, and we aim to accelerate further, aiming to decrease our IT intensity ratio towards 14-15% range in 2025, targeting more than 45% of our sales to be digital in 2025. Moving to the slide 34, I want to remind you that one of our specificities in Société Générale as an established and mature player is to nurture innovation within our businesses, capitalizing on our expertise and leveraging new technologies. We continuously embrace innovation in a meaningful and relevant manner for our clients. We have mentioned here a few examples fully integrated within our retail, wholesale, and mobility pillars. Take the example of Boursorama, a well-established success. We are also developing Shine, which already serves more than 100,000 small to mid-sized companies. We are building leadership with FORGE, with the usage of blockchain towards the issuance of stablecoins.
We are building a digital solution, ALD Move, providing digital access to corporate mobility services. These are only a few examples of how we are building innovation from within, with good progress and well in line with our strategic business priorities, which we are going to develop now, starting with French retail with Sébastien Proto.
Good morning, everybody. Our ambition is to create a new bank of reference on the French market, fully adapted to the evolving needs of our retail and corporate clients. As you know, the new bank is based on the merger between our two networks. The merger is progressing well as planned, notably on the IT and HR fronts. Everything is on track to ensure proper legal and IT merger in early 2023. We disclosed two weeks ago the precise timing of the IT merger in March and May 2023. Once merged, our first priority would be to extract all the synergies coming from the merger. We will benefit from this new bank to upgrade the client journey with both fully automated solutions for basic needs and tailor-made solutions offered in our branches.
We also intend to improve efficiency, thanks to the cost reductions that will be activated with one IT system, one network, and 50% less of back office sites. We also intend to further strengthen our strong positioning with high-value-added clients and deploy a more fees-oriented model by enhancing product differentiation and diversification. We are enforcing the bancassurance, ESG and mobility offering. Last but not least, investing in our private bank platform and deploying our strong expertise to mass affluent clients. These priorities aim at positioning our bank in the top three in terms of client satisfaction for our core client base and generating ROAE and a base return of 10% on the back of cost income ratio between 67% and 69%. I give the floor to Philippe Aymerich.
Yes. Good morning, everybody. Let me turn to Boursorama. As you know, Boursorama is by far the leader in online banking in France, with the highest net promoter score and a low churn rate. Boursorama is a powerful, highly scalable business model that the last quarters have more than confirmed. Indeed, the momentum of client acquisition has accelerated with more than 1.5 million new clients acquired since end-2020, allowing to reach the 4 million mark one year ahead of plan. At the same time, and that's very important, the acquisition cost per client and the cost to serve per client have continued to significantly decrease, and they are now 40% and 50% lower than in 2016.
In addition, Boursorama is a real bank that equips its clients with credit, savings, and insurance products, thanks to a fully fledged product offer. Two key metrics to keep in mind: 85% of clients are active, and 50% of them use Boursorama as their primary bank. On slide 37, in terms of priorities, we aim to bring Boursorama to full maturity and establish it as the definitive leader of online banks in France. While continuing as initially planned, a proactive acquisition policy, we resolutely intend to demonstrate the increasing value of the business model and generate, as previously mentioned, a net income of around EUR 200 million in 2025, equivalent to a return on equity above 25%. On slide 38, let's turn to international retail banking.
We intend to further invest in our core profitable markets and leverage our strength, notably with corporates, in order to reinforce our leading position in promising geographies and to maintain a high level of profitability. Digitalization and mutualization will remain key axes of our development, and we want to accelerate them for even better client experience, higher digital sales and improved efficiency. For the latter, we are committed, but it takes an important plan of operation and IT mutualization in Africa. Another important priority for us is to increase the synergies between our consumer finance platforms and the rest of the group, notably within the open banking model approach and the mobility value chain, in full partnership with ALD.
Overall, we aim to achieve in 2025 a cost-income ratio between 50%-52%, and a solid return on equity above 16%, even after the implementation of Basel IV, which weighs on RWA, mostly on operational risk due to the new formula which is used to allocate capital. Now I leave the floor to Jérôme Grivet.
Thank you. Good morning to all. Moving to insurance, slide 39. Our objective is to further strengthen the bancassurance model within the group and extract even more value from this high-value-added model. To do so, we intend to rely on our intrinsic strength, in particular in terms of life insurance, savings and retirement, with a comprehensive product range and a clear focus on ESG. We also want to further strengthen the synergies within the group, in particular the mobility sector and with French retail activities, to further increase the penetration rate in P&C and protection through an even more integrated approach. Strengthening our external partnerships will also be a key focus to continue diversifying and accelerate our growth drivers. Overall, we expect a cost-income ratio around 40% in 2025 under IFRS 4 and below 20% under IFRS 17, and a return on equity above 25%.
Moving to ALD, slide 40. Mobility is intended to become the third pillar of the group, as commented also by Frédéric, and represents a strong area of development with the creation of the leading global player, thanks to the acquisition of LeasePlan. The process is well on track, the integration program is well established and progress is in line with initial expectations. We have submitted the files to all key relevant authorities, and we are discussing with them. We have an ambitious target of year-end closing and working along this objective, acknowledging the timing of decision-making of regulatory bodies is not fully predictable. As presented last January, the mobility landscape is one of the most attractive and exciting growth industries globally.
Some powerful and secular trends are indeed shifting the mobility paradigm, such as the data-driven digital transformation and the development of innovative mobility solutions, or the shift from ownership to usership and towards accelerated electrification. With this combination, ALD will drive and lead these fundamental trends and benefit from unrivaled investment capacity, client reach, and technical expertise to address them. We also intend to increase the revenue synergies with the group, for instance, by creating fully integrated solutions with our consumer finance activities for our clients, as commented by Philippe, or by reinforcing cross-selling with our retail and insurance businesses.
In terms of targets, we still expect fleet growth above 6% post-integration, a cost-to-income ratio around 45% in 2025, leading to a return on equity above 20% at that date, representing a strong increase of more than 80 basis points of SG return on equity in 2025. I now leave the floor to Slawomir Krupa for GBIS.
Good morning. In May 2021, we presented our 2023 roadmap for global banking and investor solutions. A year later, our strong and consistent performance has proven the soundness of our strategy based on a more balanced and resilient business model and an increased capital allocation to our F&A business. At the GBIS level for 2025, we confirm our financial targets, and we do want to point to the embedded potential upside in our trajectory should market conditions be as supportive as they have been, recently. At the GBIS level, we target a cost-to-income ratio between 65% and 68% in 2025, and the RONE of GBIS should range between 12% and 14% on the Basel IV, in line with the new revenue range that we set for our market activities.
More specifically on global markets, our strategic priorities for 25 remain unchanged. We want to continue to leverage our strengths and consolidate our positions through innovation, but keeping a diversified business and a risk profile. We want to continue to deliver resilience in terms of revenues with a stable risk appetite and strong execution. We will continue to improve our operating leverage while supporting our business franchises. As a result of the repositioning and the strategic adjustments we carried out, and thanks to our strong execution, we now expect the annual revenues of our market platform to range between EUR 4.7 billion and EUR 5.3 billion, depending on market conditions and opportunities. Finally, on securities services, we aim at enhancing profitability by further optimizing the operating model while developing our offer on fast-growing segments in the alternative asset management in particular.
If we turn to financing and advisory now, as presented in May 2021, it is a core area of focus and growth for GBIS, in which we intend to further invest and to extract sustained value from, thanks to the meaningful long-term growth trends which we capture because they are well-matched with our franchises and strengths. We have largely exceeded our growth targets since last May, and our priorities remain unchanged in F&A. While maintaining a diversified business mix, we will continue to selectively allocate more capital to the most dynamic sectors and client segments, namely in TMT, healthcare, renewable energy, alternative asset management. We also intend to further accelerate in ESG and to strengthen our leading position there.
The many global awards we received as Bank of the Year for Sustainability in 2021 are, in our view, mostly linked to the way we are embedding ESG in every business' DNA, and as we shift our strategy at a granular level to capture this opportunity. In global transaction banking, which revenues have significantly increased over the last quarters, we will continue to invest to capture volume growth, thanks to sustained investment in technology in a more integrated, modular and open platform. Overall, after several quarters of significant growth, financing and advisory still targets a 3% growth per year between 2022 and 2025. Over to you, Claire.
Thanks, Slawomir. Let's now turn to capital allocation, slide 43. Overall, we intend to continue to support the growth of our businesses by allocating additional organic capital in order to deliver a sustained and profitable growth. We aim to be selective in the allocation policy in line with the business roadmap and strategic priorities we have just detailed. We will allocate more capital to fast-growing and promising businesses such as ALD and Boursorama, which should deliver a very high level of profitability. We also intend to support the growth of established and profitable franchises with important growth prospects. We will allocate additional capital to private banking activities in France to Financing & Advisory, and notably to finance the energy transition, as Slawomir just detailed, but also to core markets in international retail activities, notably in Europe.
Incremental organic capital will also be allocated to our French retail activities, which are core to the group and highly synergistic to numerous other businesses. Note that we intend to maintain overall stable in relative terms, the percentage of capital allocated to Global Banking & Investor Solutions post-SRF. The selective allocation solution to our strongest, profitable, and strategic businesses should allow to deliver a 3% CAGR on revenue over the period, and to maintain our CET1 capital ratio stable while absorbing Basel IV. Regarding the Tier 1 leverage at slide 44, we project an underlying Tier 1 leverage ratio of 62% in 2025, down by 5 percentage points compared to 2021, despite an inflationary context. The strong improvement in operating leverage is the result of three main factors. First, the revenue growth of our businesses.
Second, a continuous cost discipline across the group and the benefits of a success plan related to the various ongoing strategic initiatives, whose related cash liquidity will be essentially accounted in 2022 and 2023. Third, the end of the transition to the IFRS. These three factors are expected to more than offset the impact of higher inflation and of the investment costs in our business, in our conversion projects. Now let's turn to cost of risk, slide 45. Based on the economic tensions and on our resilient business mix, the cost of risk of the group should normalize around 30 basis points by 2025. This target does not expect any significant payback, as we intend to maintain a forward provisioning approach over the period and to build stock of stage one and stage two provisions.
With regard to NPL, we expect the NPL ratio to remain contained, notably thanks to the quality of our assets and to a continued dynamic management of our NPL portfolio. Moving on to capital, slide 46. Going forward, we aim to maintain the group with a Core Tier 1 ratio target of 12% in 2025. This target is totally consistent with the different moving parts which are factored in our capital trajectory, and with a distribution policy based on 50% of the underlying net income, or with up to 50% of the distribution in the form of share buyback. Regarding Basel IV, we now expect the fully loaded impact to be around 120 basis points, and the total impact of around 100 basis points in 2025. Now I'll let the floor to Frédéric Oudéa for the conclusion.
Thank you, Claire. A few words of conclusion. Again, this slide that just presented aims to put into perspective the strategic initiatives we launched over the last two years and give an overview with these 2025 financial targets of the level of profitability that this business model can deliver. For several quarters now, the group has delivered sustained growth in revenues and profitability, making us confident in our ability to achieve our 2025 targets. Several key milestones have already been successfully reached. The coming months will be key to complete the journey and implement in turn all these ambitions in each entity. We are all solely focused on their execution. That's it for the presentation, and now we are ready for your questions.
Please let's try to stick to this with the usual discipline, two questions per person, please. The floor is yours.
Ladies and gentlemen, if you wish to ask a question, please press star one on your telephone keypad. We have our first question from Delphine Lee from JPMorgan. Please go ahead.
Hi, good morning. My first question, I've got two questions. My first question is on French retail. I know you've presented the plan a while ago, but just wondering if on the revenue side of it, on revenue assumptions for this plan, you know, what are you assuming? Has anything changed? Also kind of what, I mean, what rates and increase in rates impact do you have on the plan? The second question is on global markets, where the range for the revenue targets is somewhat a little bit large. Just wondering, what's the thinking behind this? What does it depend on this?
You know, if you could give us a little bit of color, because the cost income ratio range is also somewhat large. If you could help on those two issues, that would be great. Thank you.
Hello, Delphine. I will give the call to Sébastien for your first question and Slawomir for your second one. Sébastien?
Yes, Delphine. Good morning. In terms of revenues, I mean, our forecast is based on the macroeconomic scenario Frédéric has described. It could be seen as potentially a little bit conservative. Should the market be, I would say better than some such scenario, obviously, our revenues would be stronger too, both in terms of fees or in terms of net interest margin, as clearly, there is a link between the GDP growth, interest rates, and our revenues.
Good morning. On the first part of your second question on the revenues range, the thinking is rather simple, really. We have been delivering a performance, we started with five, as you remember, and we have been delivering in H1 in 2022, much higher. I mean, we understand that the rhythm here is, like EUR 1 billion above, this range, right? What we're trying to say here is, in normal market conditions or normalized market conditions, because 2022 H1 was exceptionally favorable to us, I think we captured well above our fair share of what was to be captured with our business mix.
We have to recognize that it was particularly favorable to our business mix, which we have discussed in the past, the mix with rates and levels of volatility without dislocation, et cetera. I'm not coming back to this. What we're trying to say is, in normalized market conditions with commercial activity which is normalized and ability to retain the commercial margin in group value normalized, we believe that we will be within that range. We want to recognize that there is an upside depending on market conditions and market opportunities. That's the thinking behind the revenues. It's probably a fair description of how this works today. The second part of your question, the costs become very simple. It's just mechanical, right? There's nothing specific there.
Mechanically, depending on where you put the revenues, you will end up in the range that we gave, 65-68.
Thanks, Slawomir.
Thank you.
Um, uh-
Yeah.
Thank you.
Please, please Delphine.
Yes. I was just gonna just clarify, Sébastien, if you could follow up. On interest rate increases, I mean, given you have your RWA coming down and rates coming down, does that mean in your plan you have conservative assumption on rates? Just kind of wondering, you know, what we should be assuming here.
Yeah, correct. It can again be seen as a little bit conservative. Yeah, I mean, there is potentially an upside, both in terms of return on equity and cost income ratio.
This is definitely we have factored all the rates I've just been describing in the trajectory, which means that fundamentally we are, on that basis, don't plan for a sustainable support from rates because we are 0% for short-term rates in 2025 and long-term rates at 0.8%. If you wish, it's a conservative assumption versus perhaps other scenarios, of course.
Great. Thank you very much.
We have another question from Giulia Aurora Miotto from Morgan Stanley. Please go ahead.
Yes, thank you. Hi, good morning. Giulia from Morgan Stanley. I wanted to ask a question first on Boursorama. I believe in the prior plan presented in 2020, basically, the bank was expected to turn profitable in 2024. Given that you are now one year ahead of plans in terms of customer acquisition, can we expect also profitability to come through more quickly? If not, why? My second question is on the scenario of Russian gas cutoff. I hear you when you say the 1% GDP impact, but in terms of provisions, have you, I don't know, tried to estimate what that could mean to your cost of risk or NPL assumptions in that scenario? Thank you.
Giulia , hello. I will let Philippe answer on Boursorama. No, we don't think it will change dramatically the evolution of the provisioning in particular, because we consider it to be a relatively a short-term impact, if you wish. We don't think it will deviate fundamentally the cost of this trajectory. Knowing that, as we've said, for the current year, let's face it, S3 is very low. I think personally, it will remain low, which will enable us probably within the guidance we've maintained to further build on S1, S2. I think we are fine, and I don't think it will deflate as long as it remains within the range that we've seen, we've said, which is our economist assumptions.
I mean, again, it can depend on the weather, et cetera, but at this stage, that's what we think. We see all countries in Europe trying to build their reserves as much as possible ahead of the winter. I think they should be relatively successful in doing that. Philippe, back to Boursorama.
Yes, hello, and thanks for the question. No, we stick to the break even in 2024 plus the target mention of EUR 200 million in 2025. In fact, we consider that there's still a significant potential in the French market for Boursorama. We want to take full advantage of it, you know, in a kind of winner takes it all approach. We are comfortable with our capacity to equip the clients. We see we are comfortable with the intrinsic profitability of the model. That's why we want to keep a quite robust acquisition policy in the coming months. That's why we remain with the target of break even in 2024.
Thank you. Next question.
Thank you.
We have another question from Jon Peace from Credit Suisse. You have the floor.
Thank you. My first question is your 10% return on tangible equity goal is slightly on the lower end of peers. Do you feel that's more because you've got conservative assumptions like zero rates rather than reflective of your business mix? Could you just remind us in that context, what's your NII sensitivity to higher rates if it is indeed better than zero? My second question, please, is on the distribution mix, the 60/40 between dividend and buyback. What's your thought process annually on where to land that? Would you prefer more buybacks when the price to tangible book is low, like today, or do you prefer to manage the stability of the dividends so it could move around a little bit? Thank you.
Hello, Jon. I will leave Claire answering your question on the sensitivity. It's difficult to answer your first question. There's certainly a degree of conservatism based on the assumption. After that, you can have different markets, different activities, which can deliver different return. Maybe you are better in a better position than myself to perhaps comment. Again, we think at least it's something which is a reasonable assumption based on what we are currently building. In terms of just dividend policy, the idea, of course, is to take advantage of the low valuation, and at the same time, I would say at least that's what I would propose to the board, is to avoid having the dividend going down. It's really a cocktail.
Let me just highlight that what we did in 2021, having a dividend of EUR 1.65 and a share buyback of the equivalent of EUR 1.1, so it was 60/40. Let's see how the end of the year goes. Again, we will try to find the best balance, I would say. Of course, we've changed, we are adjusting and saying up to 40% as a policy for the coming years because we can think that there are opportunities to make share buy-backs. So in the balance and the increase of dividend will, with the factor certainly where we stand at year-end and entering 2023. Claire, can you remind us the figures for sensitivity to
Yeah.
Net interest margin.
Yeah. For the group, the net interest margin sensitivity at constant balance sheet for year two is between EUR 80 million and EUR 100 million. We have to be very cautious regarding these figures. I had already the opportunity to tell that I will repeat for this call. Of course, this net interest margin sensitivity is at constant balance sheet, and depending on the way rates increase, I mean, the sensitivity is for a 10 basis point translation in the interest rate curve. Should interest rates increase very sharply or more slowly, this sensitivity may be really different depending on the behavior of the clients, of course, and of the new face or profile of the balance sheet.
Just keep in mind that at medium, long-term, of course, rate increase is very good for retail business and for retail revenues. We have a positive sensitivity for year two. In the very short-term, it may put pressure on, for example, credit margins. We have also a lag effect in our capability to materialize the positive effects on the deposits, of course. Once again, this data has to be considered in a very cautious way regarding the fact that they are at constant balance sheet, and you may have, depending on the way interest rates increase, some huge impacts on clients' behaviors and on the profile of the balance sheet.
Thank you. Next question.
We have another question from Jacques-Henri Gaulard from Kepler Cheuvreux. Please go ahead.
Yes, good morning. Just one question on the French retail. Two things. First of all, do you intend to report Boursorama separately at some stage? Because you're really making now a big segregation between the networks on the one hand and Boursorama on the other, and we still have one P&L for both. The second question, I must join in the interrogation of my colleague, Delphine, from JPMorgan, because if I assume that you're gonna have a EUR 450 million cost reduction in absolute term by 2025, indeed, the overall cost-income ratio looks high at 67%-69%. You're already there in a way. So you would really have to assume the situation to deteriorate markedly, or at least not to improve at all.
Just a clarification on those two things. Thank you very, very much.
Hello, Jacques-Henri. First question, Boursorama, maybe at some point we will see, but it might be at some point relevant effectively as the dynamics, of course, are different and it's different business models. On your second question, is it just on French retail or more globally? I'm not sure that I've understood exactly.
Yes, that's on French retail and the impact of the merger, I think. Yeah.
Okay. Yeah, Henri. Sébastien?
Jacques-Henri, good morning.
Good morning.
Let me clarify one point. Again, on revenues, we assume it may or might be seen as a little bit conservative for all the reasons I have explained. In terms of cost, I confirm that all the synergies obtained thanks to the merger will be there. i.e., only one IT system, one network, minus 25% in terms of number of branches, and a sharp reduction or sharp decrease in the number of back office sites. Having said that, you have to take into account the impact of inflation in the coming years. We have on one side, on the one hand, the synergies for the amount you have in mind.
On the other hand, the impact of inflation has, when we announced the target, end of 2020, the forecast in terms of inflation was clearly different from the figures we have now in mind for the coming years. That's why it's not purely mechanical between the 450 and the cost-income ratio. One parameter which is key has changed, the inflation.
Okay. Very clear. Thank you very much, Sébastien?
Thank you. Next question.
Yes, we have another question from Omar Fall from Barclays. Please go ahead.
Hi. Firstly, thank you for the longer term targets, but could you give some more idea on the near-term outlook for French retail revenues? Because there's a lot of challenges now. It looks like clean NII is down 6% this quarter, actually the other line. There's EUR 80 million impact from Livret A to come in the second half. Loan growth should slow, I guess, and you've got this weird taux d'usure issue on mortgage rates. Do you think that fees can stay strong enough to offset all of that? Secondly, just in GBIS, just your financing and advisory business, it continues to have revenue trends that are nothing like your peers, including your closest peer. You know, you're at +14%. Could you explain what's happening there revenue-wise?
Should we be comfortable that you're not deploying balance sheets into a turn in the macro environment as opposed to everyone else pulling out? 'Cause I see the balances have gone up quite a bit in the quarter, the loan balances, so thanks.
Yeah. Yes, Omar, hello. Well, Sébastien and then Slawomir, huh? Sébastien?
Yes, Omar, good morning. On the performance in 2022, what we can expect for H2 compared with H1. As I told you at the end of the Q1 , we expect H2 will be different from H1. H1 was really strong in terms of revenues with a very good commercial momentum, favorable economic context, both for commission and fees. H2 could be more under pressure for different reasons, including the following. First, the impact, as you mentioned, of the rate increase for regulated savings product began in 2022. The Livret A increase in interest rates will represent EUR 150 million in terms of impact on our revenues.
It will be mainly on H2. Second point, there is a margin pressure on credit, and especially on home loans, due to the lag effect between the increase in interest rate and what we can pass on to clients. As you say, with the taux zéro, which is something purely French, and it puts a limit on the way we can pass on to clients the increase in interest rates. Again, it will be mainly in H2 that the impact will materialize. On top of that, we will have the planned acquisition of Boursorama, which will remain strong and potentially lower economic growth due to inflation.
factoring all of this, I think it's fair to say that, I mean, we don't see H2's performance as strong as H1 performance.
Thank you. Just on the Livret A, just to be clear, the guidance is for around EUR 45-50 million for every 25 basis points. Is that right? Just to clarify that.
Yes, that's correct.
Good morning. On your F&A question, the answer is very clearly no, you shouldn't be worried about us deploying capital countercyclically. We have been allocating more resources to this business, as we stated this in May. We have been doing this very successfully for two reasons, and we explained this at length last year, because we chose to invest in sectors that have strong long-term growth trends in which we are particularly you know good at, right? I mean, trends that are perfectly matched with our expertise and our long-term sector knowledge and ability to work in them. What you see is the effect of this extra capital allocation, which mostly happened last year at this stage, which was very well executed with a lot of focus from everyone.
We are, because of that, because the cycle has continued to be strong for us, we are delivering. You have to remember when you're comparing us to peers, and I do agree with you that we are doing better than some of our closer peers, but if you compare to the entire industry, you have to remember that our pure investment banking business, M&A, ECM, et cetera, is much smaller. When you compare year- on- year, our performance is obviously helped actually right now by us being very small in this segment of the market, which is crashing somewhat for some of our peers.
The answer in terms of risk management or risk profile is that we have absolutely maintained the same criteria in terms of origination or risk management that you have seen us doing or applying for the last decades. You see the performance in terms of risk management of this business in the last decades. We absolutely intend on keeping it that way. Two more quick comments. One, in terms of transaction banking, which is part of F&A, we have also a very, very dynamic business there, which has been a focus of investments, et cetera, for years, accelerated recently. We are capturing the growth of the market there. There is a positive impact of interest rates there, which we see immediately.
It's very responsive, very sensitive to this positively. You have some of that upside there.
Lastly, in terms of, and Frédéric mentioned this, in terms of S3, we don't have anything brewing, and we have a very, let's say, at this stage, very comfortable position from that perspective.
Thank you. Next question.
We have another question from Pierre Chédeville from CIC. Please go ahead.
We do. Yes, hello. I have a question regarding the insurance business. You mentioned in your business plan that you want to develop external partnerships. I wanted to know what your activity in insurance can do that you could find externally, what type of products do you have in mind for your customers. My second question, I would like to have a clarification regarding the level of your prudent provisioning. I understand that you want to keep a prudent approach, but I wanted to know if you think that at the horizon of 2025, you will maintain the high level of EUR 3.4 billion of Stage 1 and Stage 2 provision. Thank you very much.
Yeah. Hello, Pierre. I will turn to Jérôme and then Claire for the second question.
Yes. Thank you, Pierre, for the question. Well, we already have quite strong partnerships in terms of distribution of our life insurance products, in particular, towards wealth and retail clients. It's another
RV.
It's already profitable and a fast-growing activity which we will continue to develop.
If I may, you're not talking about acquiring capacity. It's more about distribution when you talk about partnership.
Absolutely.
Okay.
Our life insurance products through these networks. Yes.
Okay. It was not clear. Okay. Thank you.
Claire?
Yeah. Regarding provisioning, we keep, as you say, the quite conservative assumption. We will be above EUR 3 billion regarding stage one, stage two provisions in our 2025 target.
Unchanged?
Yeah. No material change, as we said, above EUR 3 billion.
No significant change.
At least again, in this, computation, if you wish.
Okay. Thank you.
You're welcome. Next question.
Yes, we have another question from Stefan Stalmann from Autonomous Research. Please go ahead.
Yes, good morning, everyone. I have two questions on capital, please. First on the new capital ratio target of 12%. You have moved from an MDA plus buffer target concept now to a fixed ratio. Could you tell us why you have done that? And has there been any quid pro quo here between a new and entire target level and the share buyback approval from the SSM? A second part of the question on capital would be, can you remind us whether TRIM is to come? I think there's roughly around 30 basis points maybe left based on previous guidance.
I don't think you have given this guidance, but could you maybe remind us, what the IFRS 17 impact would be, on the bank ratio, please? Thank you very much.
Yes, Stefan, I will let Claire answer your question on TRIM and IFRS 17. Listen, I think the 12%, to be frank, is the standard. After Basel IV, I think it makes sense fundamentally to communicate on such a figure, at least what I've expected, what I heard from the market, that it's exactly the kind of level the market had in mind. I'm not sure if I understood your comment on the share buyback, but I think it's not related to that. I mean, the share buyback, you know, as I've said previously, the SSM was expecting anyway to see the outcome of Russia. We were on our side also not able to execute before having the shareholder meeting, etc.
We will execute in the very, very coming days, start immediately the share buyback, but we have got the approval. Perhaps, Claire, on the other topics.
Yeah. Regarding the regulatory headwinds, we gave guidance of 30 basis points for H2, and I confirm it right now. Regarding IFRS 17, we should have a very limited impact, manageable, between -1 to +5 basis points. It will be really limited.
Great. Thank you very much.
Thank you. Next question.
Yes, we have another question from Guillaume Tiberghien from BNP Paribas Exane. Please go ahead.
Good morning. I'm still struggling to bridge the gap for French retail. You're at 18% return in H1, excluding Boursorama, and you want to be at only 10, including 25% in Boursorama, in 2025. Maybe Sébastien, my very simple question is what revenue assumption have you booked in your plan? And is it fair to assume that you've got only Livret A at 1% in 2025, given the low rates and low inflation? The second question is about restructuring provision. Can you remind us how much you book for this year, next year and 2024? Thank you.
Hello, Guillaume. I will leave the floor immediately to Sébastien. Just to be clear, the target on the French networks does not include Boursorama. The 10% is just related to the French networks. Then there is a series of key elements, including the capital allocation post Basel. Sébastien will enter into the detail, and then Claire will answer your question regarding CTA.
Yeah, yes. Good morning, Guillaume. As Frédéric just mentioned, I mean, it's not exactly the same assumptions because the one we are talking about 2025, it's a Basel IV approach compared to what you're mentioning for Q2. Again, I will not repeat what I just said, but in terms of forecast, we have put numbers based on the macro scenario we described at the beginning of the call. Should the number be different in terms of GDP, interest rate, clearly trajectory in terms of revenues would be different too.
Potentially, I mean, stronger with clearly when thinking about rate sensitivity, I mean, the impact on the ROE and on the cost income ratio can be significant. That's why I'm saying it's conservative view, potentially based on the macroeconomic scenario. It's Basel IV, so you have to take into account the significant impact in terms of operational risk for our RWA under Basel IV. Again, it's something different. In terms of cost of risk, it's a pretty low level this quarter. Again, the trajectory obviously is based on a more normalized cost of risk, which again gives a picture in terms of amount in euros. Clearly, the picture is different from today.
It's in my view not possible to compare the 18% Basel III low cost of risk with the target we have mentioned, different cost of risk, different capital position and different macroeconomic environment.
Sébastien, my question was what revenue growth do you model? Because I understand there are lots of moving parts. What is the revenue growth you model between 2021 and 2025?
A conservative one. We don't discuss precisely the figure, Guillaume. It's a very conservative one. I just would like to further elaborate just to make it very clear. On the Basel IV allocation, at this stage, if you wish, the idea we have is, as the pro rata capital for operational risk is proportionate to revenue to apply it for all the businesses. It means actually for French retail more capital, significantly more capital because of that, not because of more RWA. We don't see how to do this necessarily differently because actually the rule which is applying to all businesses and we would have a separate French retail, it would be the same. You need to factor also this element in your calculation.
Guillaume, to summarize in terms of revenues between CAGR throughout the period, it's positive, conservative and consistent with a more fee-based oriented model. That's the three elements you can keep in mind.
Okay. Claire, on the other questions.
Yeah, on the CTA. When it comes to 2022, most of our CTA relates to the French retail merger. We expect EUR 350 million in 2022, out of the remaining EUR 600 million over the period. On top of that, for 2022, we will have transformation charges associated with the other initiatives. As a whole, we anticipate the CTA in 2022 about EUR 650 million for 2022. For the years to come, most of the CTA will be related to, first, French retail. I've already disclosed the figures. ALD
Once again, we did communicate about this CTA impact. One last comment about CTA, please keep in mind that it's out of the underlying results. It's booked out of the basis of the distribution.
Thank you.
For 2023 and 2024, what are the CTA?
No, we'll communicate in due course.
Okay.
I mean, if you wish, the bulk will be concentrated, I think, in 2023 for ALD, probably, unlikely. We will communicate, you know, at beginning of each year more and refine the figures, you know. You have the figures for 2022, huh?
Thank you.
Next question.
Yes, we have another question from Flora Bocahut from Jefferies. Please go ahead.
Good morning. I'd like to come back to Boursorama, starting with just a fact checking on a comment you made earlier. Do you actually expect Boursorama to be loss-making still in 2023? Because initially you had stated, you know, that once you get to 4.5 million clients, which clearly you will get, you know, by the end of this year, you would stop, you know, the quite aggressive and expensive customer acquisition phase. My understanding is, you know, the moment you stop that, you swing immediately to profitability, and I would expect that this would be 2023. Just as a first question to clarify, should we expect, you know, Boursorama to be loss-making in 2023, and if it is the case, why?
You know, if the customer acquisition costs are slow. Then another question on the Boursorama still, just to understand the drag short-term from the ING clients transferring to Boursorama, can you just elaborate on the total number that you expect will go from ING to Boursorama? I understand it's 250K at this stage, that the referral agreement starts in September. Should we expect, what, 500, 600K? And how much is that cost? What is the special offer that you are providing those clients with? Thank you.
Hello, Flora. I will leave Philippe answering your questions.
Yes. To make sure we share the right figures. Yes, still, you know, some losses in 2023 are much less than in 2022, of course. A target of EUR 100 million for 2024 and EUR 200 million in 2025. The rationale of that is, as I said before, it's that we consider that there is still, you know, there are still, you know, opportunities in the market, and we want to make sure that we take the full advantage of it. Next year we will continue with a momentum of client acquisition, which will be quite solid because the momentum exists now, we want to keep it.
I think that will be—we think that it will be a mistake not to take advantage of it. You know, we are building a unique clients platform in France and we have need now. Now it's the right time. That's why, you know, we stick with our targets for 2024 and 2025. But yes, there will be, you know, some losses, you know, again, much reduced, but in 2023. Again, we are comfortable with our capacity first, and that's important to reduce the acquisition cost. There is a significant reduction, including this year because we are targeting better our prospect. Also we are taking more into account, you know, the potential value of the clients.
Basically, you know, we are not paying exactly the same welcome premium to all the clients. Regarding ING, I mean, to a certain extent, the number of clients, it's not the key metric. The key metric for the ING deal is the amount of outstanding transfer. We are very happy with that because as mentioned in the slide, we are already above EUR 7 billion with a big component of life insurance. At the end of the day, you know, we are at this stage 250,000, maybe, you know, it will be above 300, somewhere between 300 and 350 thousand. That's fine.
You know, I should remind you that the overall you know client base, which is addressable for us, it's 500,000.
Thank you.
Next question.
Yes, we have another question from Matthew Clark from Mediobanca. Please go ahead.
Good morning. Couple of questions. Firstly, on the French Retail Banking revenues in the Q2 compared to the Q1 , I still don't quite understand why net interest income declined so much, and why the other income increased so much. Maybe you could talk about that specifically Q2 versus the Q1 and update us on what's in that other revenue line within the breakdown that you give for French Retail Banking, because there have been some scope changes in the last few years that feels as if the nature of that line may have changed. Then second question is just on the securities services division. When you had the GBIS day, a couple of years ago, you were quite subdued on that division.
I think the comment was something like it was a break-even activity for you, and you were only forecasting around EUR half a billion of revenues, and you're now tracking well above that. I guess I'm just curious, do you now think that the recent run rate of revenues in securities services is sustainable, and what has changed since the GBIS Investor Day? Is it just interest rates? Is it activity? Is it something else? Just some guidance there would be appreciated. Thanks.
Yes. Hello, Matthew, first Sébastien.
Yes, Matthew. On your question regarding Q2 versus Q1 net interest margin. As you said, excluding fair share, it's down compared to Q1 for different reasons. I will expand on this. You also asked about the other NBI, the comparison between Q1 and Q2. Let me start by saying that the reason why we are presenting the other NBI and the net interest margin, it's because other NBI we are talking about a category of revenues which contains a large part of interest-based revenues, in particular this quarter, with revenues linked to the home loan business or the private banking treasury incomes. It's clearly the main part is related to interest rates.
That's why as peers, I would say we are presenting the combination of both, even if for accounting reasons, these other NBI incomes are not factored in the net interest margin evolution. Having said that, the difference between Q1 and Q2, first of all, the increase in the Euribor interest rate, which occurred last February, which had an impact in Q2 compared to Q1. Second point is the different situation on the credit market for home loans in Q2 compared to Q1, again, and this situation will be worse, I would say, in H2. It's explained by the different lag effect between the steep increase in the long-term interest rates and a more gradual increase of client rates due to the taux d'usure.
The low reactivity of some peers to reprice their loans, their credit policy. Third element, increase in time deposits, again in Q2, combined with still negative short-term interest rates in Q2. Last point, I'm sorry. A good credit prediction and margin for the corporate credits, but it was not enough to offset the different parameters I have just mentioned. That's the reason why we have this difference between Q1 and Q2.
GSS?
Good afternoon, on this GSS some color. We said, more or less what you quoted back then, with the idea that we would focus, a little bit like everywhere else in GBIS, on making sure that we increase operating leverage and that we, you know, gain some value creation capacity by making the potential upside faster and bigger. That's what we've been doing, restructuring somewhat the operating model. As I said during the short comments on the future, investing also very reasonably, but in specific, you know, faster growing segments like assets, alternative assets managers. That's one on the structural side of things. This leads to, you know, a decent single-digit growth, which is accelerated by interest rates.
It's also a business which is, you know, positively skewed towards interest rates going higher. We are benefiting from this, and all of a sudden it becomes potentially a slightly higher single-digit growth on the structural side. What you see right now is also what I just explained, combined with exceptional income linked to capital gain linked to Euroclear shareholding that we have there. I hope this gives you some color. Extra performance purely because of the capital gain, but the underlying trend decent and helped by interest rates, while at the same time, low capital intensity, better break-even points, which should in the near future give an upside from an ROE perspective as well.
Is it fair to assume you're more euro rate oriented than dollar rate oriented in that business? Whatever benefit you've seen from dollar so far should be, you know, bigger if we see euro rates move.
Exactly.
Understood. Thank you.
Thank you. Next question.
Yes, we have another question from Tarik El Mejjad from Bank of America. Please go ahead.
Hi. Good morning. Thank you for taking my questions. First let me have a general comment. I mean, really appreciate the guidance you gave us from 2025. They are quite detailed, but given the uncertain medium-term environment, I think it would have been good to have some more perspective on what's happening in 2023, 2024 or 2022. I think this is why you still have so much question on the French retail. To start the French retail, do you think there could be any bank tax in France given the composition of the current parliament or do you think like the fact that you have put a cap on fees and levies and so on would be enough for actually the government to further putting any new tax there?
My second question is on capital allocation. First of all, can you clarify if TRIM is within your trajectory in slide 46, or should we adjust for that? Secondly, I've done some quick math and see basically the moving part that you don't quantify in your slide. If you take this plan around 40 basis points to come by end of the year, Basel IV 400 basis points phased in, and then RWA growth is 2% if we see your capital allocation in the previous slides. That leaves basically 40 points net of the payout per year in the next two years and a half. That's quite elevated, especially if we know that actually most of the benefits will be back-end loaded with lower costs and higher rates and so on.
How do you think you can generate so much capital in this timeframe? My last question on capital allocation is on the global markets. I see that RWA growth is below 1.5%. I mean, yes, environment was very favorable and you've been growing fast, the revenues, but in normalizing revenue pool and you have big competitor like BNP and others that actually are having bigger capital allocations in this business and growing, do you see that as a weakness to grow in this business? Sorry for the long question. Thank you.
No, no, that's fine. Hello, Tarik. I will leave Claire answering your question on the cascading and the capital generation and Slawomir. Regarding the specific tax on banks, listen, who knows? But I don't think so. I think that's what we see in terms of debates, probably more on the energy sector. With of course, very, very spectacular figures linked to the price of energy. As you know, for the time being, the government has said no. In France, even if there's currently not a full majority, there are ways for the government to stop or oppose initiative from the parliament. For me, it's not the central scenario one. Claire?
Some comments regarding our 12% quarter one target in 2025. It marks all the impacts we disclosed, such as Basel IV, such as some organic RWA growth. It marks also organic capital generation assumptions and some upside and downside regarding several items. Of course, IFRS 17 target. My main comments will be the following. First, we may consider that to a certain extent we have some conservative assumptions. As Frédéric has disclosed, we have some economic assumptions which are quite prudent or cautious.
Second, regarding capital generation, please note that, for example, this quarter, we have 16 basis points capital generation after organic growth, dividend and so on and so forth. Please note, again, that since 2022, we will not have any more the IFRS contribution. Right now we're comfortable with our 12% target regarding cost, quarter one.
What about TRIM? Is it there or not?
Yeah. TRIM is included. Yes, absolutely.
Good introduction. Okay.
Yeah, yeah. Absolutely. Absolutely.
Yeah. Yes, chief.
Slawomir ?
A few things, and let me know if this answers your question. One, it was a fundamental pillar of our thinking and our strategy to diversify the business and to grow on a relative basis more the F&A part of our mix versus the markets. This was not a decision not taken lightly. We believe that, going forward strategically, why not, you know, hastening anything. We want to go there and to have a more balanced business mix between these two major businesses of GBIS. Meaning, we will not increase the allocation to the markets more than what you see. It's basically, you know, somewhat stable allocation.
In terms of what it does to our competitive edge, well, I mean, one, I would argue that no matter whether the environment was conducive or not, on a relative basis we've done very well. I don't think that typically in 2021 or 2022, our constraints, self-imposed constraints on the allocation to our global markets business was, you know, making our competitiveness less convincing. So that's one comment. The second one is, in the end, in global markets, you have, you know, if I oversimplify, the commercial margin and the risk management component, right?
The other piece of our strategy was also to improve the relationship between the two, and also clearly grow our commercial revenues, across a business which we also want to be more balanced. My point being the structural improvements of this mix should prevail over a pure capital allocation and mechanical generation of revenues through capital allocation. I hope this gives you some color on the thinking.
Thank you.
Thank you.
Next question.
Yes, we have another question from Anke Reingen from Royal Bank of Canada. Please go ahead.
Hi. Yeah, thank you very much. It's Anke Reingen from RBC. The first question, apologies if I missed this. In terms of the Basel IV, are we basically still talking about the 35 billion of RWA increase, and how would this split across the divisions? Are you allocating capital going forward at 12% of RWAs under Basel IV? Then, on ESG, you talk a lot about the opportunities in your GBIS business. I just wondered, confirming, I mean, you obviously see this as a net opportunity, but could you also put like, I mean, how much do you think this could add to your revenue growth? Thank you.
Hello, Anke . First on Basel, we do not disclose the allocation, but it will be related, you know, market will go to market, credit to the credit, depending on each portfolio. It's just the operational risk which is changing because today you have a different allocation based more on effectively the risk as we see it, and effectively the problem with the new regulation, it's proportionate to the risk. It seems to us at this stage at least that it tends to allocate to revenues. We stick at this stage in the figures to 11%, then in the case of the businesses.
In terms of ESG, we don't disclose a specific figure, you know, the net between what we renounce and what we develop, but definitely it fits the growth of the F&A as Slawomir.
Yeah, I'm just gonna basically repeat what you just said, it's really clearly substitution, right? I mean, let's be honest. There is a portion of it which is substitution and which we, you know, basically try to get at as fast as we can, right? To be ahead of what is necessarily going to come, which is the end of some businesses at some point, replaced by new ones. This is what we mean when we talk about shifting the mandate of our businesses. It's really this strategic thinking.
Let's not put ESG overlays in terms of our commercial strategy or approach from a product perspective or advisory services perspective, but let's make sure that, you know, a business which used to be entirely focused on something that is basically, if I oversimplify, going to disappear, is actually right now already, you know, I don't know, having half of its revenues entirely linked to new energies or new solutions linked to the transition. So a lot of substitution, but then as you see, actually, to Frédéric's point, it is fueling our growth slightly more than average, I would say.
Okay. Thank you.
Thank you. Thank you. Next question.
Yes, we have another question from Kirishanthan Vijayarajah from HSBC. Please go ahead.
Yes, good afternoon. A couple of questions, if I may. Firstly, can I just pick up on a comment that was made about LeasePlan, that completing the deal by year-end was viewed as ambitious. I just wondered kind of what's changed, what's the bottleneck causing any potential delays that you're alluding to there, and how worried should we be about maybe some slippage there? Turning to asset quality and specifically your residual Russia exposure as you show on slide 64. I'm just wondering on that EUR 500 million residual exposure to Rosbank, you know, what's the timeline of that potentially falling away? Because I was under the impression that the new owner of Rosbank had been placed on the sanctions list. Just some clarification on the tail risk there, please, on that residual half a billion exposure to Rosbank, please.
Hello, Kiri. Very quickly on LeasePlan, it's really, it's just that we make the assumption that with the antitrust, we just stay at phase one. There's no indication, there is no slippage at this stage, but this is the underlying assumption behind the closing at year-end. Regarding your second question, it's fundamentally letter of credit and guarantee that we can see expiring. It's relatively short-term maturity, and there is no impact of the sanction with the UK.
Oh, okay.
It has become a third party situation with the disposal.
Got it. Thank you.
Next question.
We have no more questions, sir.
Okay. Well, listen, thank you very much for your attention. It was a pretty dense presentation, but again, we wanted to comment also on the midterm. Thank you very much. All the best. I wish you a nice summer break for those of you who will take a few days during August, and I'll see each other very soon. Thank you. Bye-bye.
Ladies and gentlemen, thank you all for your participation. You may now disconnect.