Okay. Good morning to all of you. Thanks for attending this call. First of all, let me say that I hope you're all well in this still uncertain environment from a health perspective. As usual, I will go through the results with William, and then our global whole management team will answer your questions, and we'll try to be as short as possible.
Let me first turn to slide number 4, where you see the major elements of this third quarter results, leading to a net profit of EUR 862 million, which is up significantly compared with last year, close to 10% on a like-for-like basis and at constant exchange rates.
We've seen a clear rebound of revenues across all our activities versus the second quarter, but also when you compare with last year, even versus last year, there's a slight increase by 0.5% on a like-for-like basis and at constant exchange rate. It's particularly true, of course, on the capital market after the first half and the impact of the dislocations we saw on the market.
In terms of cost, we pursue with the same discipline, minus 5.6% versus last year. A strong increase of gross operating income as a result, plus 14.6%, and we confirm our guidance for this year, underlying operating expenses at EUR 16.5 billion.
On the cost of credits, and I'm sure that we'll have different questions on this, but you will remember that we had initially, three months ago, guided for a guidance of 70 to 100 basis points, then confirmed the capacity to converge towards the low range. This guidance is more than confirmed.
We have set the third quarter at 40 basis points. Of course, up compared with last year, which was extremely low. It was a low point with some write-backs from insurance in Romania in particular. Of course, we have a strong decrease compared with the second quarter, and we confirm our guidance around 70 basis points, including factoring, of course, this additional uncertainty with this second wave of contagion. Regarding the capital, we stand at 13.1%.
If I add the 10 basis points, which comes from the sale of our Scandi financial leasing business, which has closed on the 1st of October this year, we are actually at 13.2%. That gives us a very strong buffer above our regulatory requirements and 420 basis points, clearly giving us flexibility for distribution to our shareholders beyond the position which is already included in this quarter one ratio, which correspond to 50% of our underlying net profit and which is EUR 0.21 per share. Let me turn to two pages then.
I will be brief, but can I say that beyond looking at the very short-term impact of this crisis, as we prepare our next five-year trajectory, we have to think about the structural trends that this crisis is actually accelerating. The first regards the energy transition. You know about that.
Usually, it's of course, a long-term process, and people talk about 2050. What I can say in the shorter term, first, we confirm our status of a worldwide leader in renewable energy financing. Actually, according to IJGlobal, this agency puts us number 1 in the world at the end of September. We have definitely an extraordinary expertise in that field.
Second, in terms of realignment of our credit portfolio, we have said we would, in the coming months, align our credit portfolio with a methodology that we have designed with 4 other banks, European banks, BNPP, Standard Chartered, BBVA and ING. We have now this methodology, which is actually available for other banks, and we will align all our portfolios alongside the scenario of the International Energy Agency.
What we are doing, very concretely, taking, of course, a portfolio which is probably, after coal, the one which is the most questionable, is to commit to cut by 10% in the short term, 2025, so the horizon that we have in mind for our strategic roadmap, our footprint in terms of extraction of oil and gas. We will do that by also accompanying our clients in their own transition.
There are some major companies which are doing the job. I have in mind Total, for example. We will accompany them, including in the financing of gas that we see as a useful energy for the transition phase. Of course, giving a priority also to the financing of renewable energy.
As part of that plan, one of the significant components is that we are going to stop any new financing on onshore gas and oil extraction activities in the U.S. Let me turn to the next slide. It's around, of course, also the client centricity in that period of time. Let me just say, we have tried to illustrate different things.
First, that we have been able to maintain or even expand some significant market share in our core markets. I have in mind wholesale in Europe in particular. We are, of course, mobilized to help the economies to steer this crisis. In France, it's now EUR 20 billion of guaranteed loans that we have validated for our clients. Of course, digital transformation is at the heart of what we think going forward.
I have to mention the extraordinary success of Boursorama, which has validated its business model in this crisis, and which has now 2.5 million clients, and which will reach, as you know, three million next year, with a very high level of satisfaction, and which is definitely the number one online bank in France.
Can I also mention, beyond the fact that we will be the first half retail French bank offering open architecture in terms of asset management product from the first quarter of 2021. I will turn now the floor to William, who will enter into more detail for our third quarter results.
Thank you very much, Frédéric. Good morning to all. Thanks for the attention you pay to our company, I do hope that you are all safe and healthy. Starting with page eight, as Frédéric said, the main takeaway of this quarter is clearly the strong increase in the group gross operating income, both on a quarter-to-quarter basis as well as on a year-on-year basis.
As you can see, gross operating income is up close to 15% year-on-year, adjusted for perimeter and for an exchange impact. It's up 42%, adjusted for the same factors Q on Q. That is based on a satisfactory performance or improving performance on revenues, very strong Q on Q, but also adjusted for perimeter and foreign exchange. You can see a growth in revenues by 0.5% in the third quarter. That combined with a strong decrease in cost, 5.6% like for like.
As you can see, as performance is across the board, you can see the strong increase in gross operating income across businesses, in all businesses, I should say, with a very normalized corporate center performance. As a result, net income stands at EUR 862 million in published terms, which is close to 10% increase relative to the same period of last year.
A key element, of course, of that performance is the achievement on the cost target. Let me remind you that this will be the second year in a row that we are decreasing our cost base in absolute term. The cost base was EUR 17.6 billion underlying in 2018, EUR 17.4 billion in 2019. We're heading towards our commitment, which we reiterate today, of EUR 16.5 billion by the end of the year 2020, which is about 5% decrease.
As you can see, for the first nine months, we are at -5%. We accelerate that path in Q3 with a 7.3% decrease. You also know that we are committing to decrease further that cost base through various efficiency initiatives, some of which we have already announced. You know the EUR 450 million commitment in Global Markets by 2022 and 2023.
We will be back to you with regards to the French Retail Banking study we are undergoing now, and that will encompass, obviously, both commercial ambition and efficiencies. As we already discussed with many of you, we are on a constant improvement mode as far as transversal functions, processes are concerned. We should also benefit from the closure of some of the key remediations beyond 2022. Cost of risk is down, and that's obviously a major element also of this quarter, as Frédéric said.
It is down relative to Q2 to EUR 518 million, 40 basis points annualized cost of risk to be compared with EUR 97 million in Q2. I would like, however, to point out that we keep a cautious stance as regards cost of risk. First of all, it's up year-on-year, up to 57%.
Second of all, we have added, again, some stage 1 and stage 2 provisioning, forward-looking provisioning in this quarter, particularly pertaining to international retail, a bit in French retail. We are in a capacity to confirm on that basis that our cost of risk should be at around 70 basis points for the whole year, as Frédéric stated.
One comment to finish on that, on NPL, our NPL ratio, it compares very well relative to peers in Europe, as you know, including the gross coverage rate. We have been able to sell some exposure in the third quarter, and I can confirm that when we sell exposures, we are able to complete that at a profit. The next page gives you more detail on the asset quality. I will not go into the details.
We also have some additional information in the group supplement. We are at your disposal, with Journey, to answer any of these questions. In a nutshell, we consider that we have a very solid portfolio, both on the corporate and retail side, very diversified. The EBA stated that our exposure to the COVID, the most affected sectors is lower than the average of European banks, as we already said.
As you can see on the right-hand side, we have a hefty inventory of provisions of EUR 2.6 billion for the first nine months. One comment specifically on moratoria, because we know this is an area of questioning on your side. Just to remember you, we had an inventory of EUR 35 billion outstanding as far as moratoria are concerned. Those are down by about EUR 9 billion in September.
We expect that 70% of moratoria will have expired by the end of October. In France, 63% for the rest of the group, and we should be done with the bulk of the moratoria at the end of the year. Very important to note that we haven't seen particularly specific abnormal casualties as far as this moratoria are concerned. Tier 1 is obviously a very important element in the way you look at our company.
We continue to increase the strength of the balance sheet. Tier 1 is up 60 basis points in the third quarter to 13.2 pro forma for the sales. SG Finans, as Frédéric said, this is a good 420 basis points above MDA. You know that what we consider is the right level, in terms of management buffer, is around 200 basis points. We are very well above that number.
What makes it increase is a number of factors, some of which, or I should say most of which we had already announced. We have organic capital generation, 15 basis points through net income, net of hybrid coupons, and dividend provisions of 50% of the underlying results, as you know. We have, secondly, a decrease in organic RWA for about 35 basis points, most of which we have already announced because we have the reversal of state-guaranteed loans temporary effect.
We also have a normalization of market risk RWA coming a bit faster than earlier expected. We benefit this quarter from the removal of the capital deduction on IPC, that's own funds element. Important to note that we have the regulatory headwinds that we had talked about pertaining to regulatory operational risk for 15 basis points this quarter. I will not comment the other ratios.
They're all up and strong, again, very well above the mandatory threshold. Just to mention that on liquidity side, which is not on the page, we end up the quarter with an LCR at 279%, and NSFR remains above 100%. The liquidity buffer is up again and stands at EUR 233 billion this quarter. Next page, I usually don't comment. We leave it for questions. A few comments on the businesses now. Page 14, you have some key elements pertaining to French retail.
Boursorama, I wouldn't say they are on the rebound. We continue on a very strong path, both in terms of client acquisitions, as you can see, plus 22% year-over-year for the first nine months and the third quarter, combined with record level of brokerage orders. That obviously translates into an improved profitability, which Boursorama is securing its position as a clear number 1 in online banking in France.
In the rest of French retail, you see a marked improvement in production across the board relative to Q2. You can see that relative to the same period of last year, we benefit from improvement in core client basis, net inflows in private banking, increase of the unit-linked share in our outstanding life insurance, and P&C has a good quarter as far as bank insurance is concerned. You see the outstanding are up.
Clearly, the key element of the third quarter is that production has normalized as far as individual client is concerned. It's not necessarily back to 2019 level. As far as corporate is concerned, still a strong boost in the context with a key element pertaining to PGE and deposits are up, strongly up actually. Sight deposits are up 20%, which translates into, obviously, some pressure on the NIM, which I will now comment. You see the overall result of French retail.
First key point, the return remains resilient. We keep saying that quarter after quarter, that's a very key element, and when you compare it to others, this is a strong performance, I would say, overall, in the context, 9.2% return for French retail in the context. That is made of a combination of improved revenues, certainly quarter-on-quarter, both from the NIM side and the commission side.
Although we continue to see a strong pressure from negative rates, combined with marked increase in sight deposit, leading to the NIM being in negative territory still. In that context of improved revenue performance, although strong pressure on the NIM side, we see ourselves improving the gross operating income. Thanks to a very strong cost discipline, costs are down 6% year-on-year, translating to positive juice effects.
International Retail Banking, again, same pattern. You have a very strong improvement relative to Q2 across the board, across all geographies, and of course, including consumer lending, where you know we have very strong positions, particularly in car finance. I'd say, however, that on a year-on-year basis, situation is contrasted between geographies, with Eastern Europe continues to suffer from a decrease in interest rate environment.
You see Russia up 3%, you could see that we're in the page that sub-Saharan Africa continues to be up, revenues continues to be up year-on-year, particularly Western Africa. In financial services and in insurance, very resilient business through the crisis, both in the three of them. We see yet again, marked improvement relative to Q2, and overall, we are in positive territory in some businesses relative to the same period of last year.
Insurance, I don't repeat what I've just said on the life insurance, but let me focus on P&C Premier. We have the protection premier as the whole on the page, but the P&C Premier for the first nine months are up 13%, one three, which obviously reflects our strong efforts to increase the penetration of our client base there, and this dedication to the growth profile of this business.
ALD has revenue up by 3% in the quarter. Leasing, resist well with slower production compensated by higher margin. As a result, the IBFS pillar, which is the next page, proves again, fairly resilient at 12.3%. That's usually below the historical 17%-18% return for that business. In the context, this is satisfactory, we think.
Given the fact that particularly in IBFS, we did increase the provisioning pertaining to Stage 1 and Stage 2 cost of risk, as I said before. As you can see, cost discipline remains strong in a context where you have naturally more inflation than other geographies or areas in the business. Global markets and investor services. Generally speaking, GBIS is obviously the very bright spot of this quarter. You see when one focus on markets, revenues are up across the board.
Revenues are up for market operations 7%, equities plus 5%, FICC plus 9%, in the context, and we will come back to this with the team, in the context where we are in the process of de-risking a portion of the business, as we had said in Q2, particularly on structured products. In the context where we continue to integrate the EMC acquisition, which has proven successful, and in the context where we managed to decrease costs, I would say this is a strong performance overall this quarter.
When turning to financing and advisory, resilient overall with constructed performance. Of course, as you would expect, asset finance is a bit under pressure in volume terms. Also, the margins are holding well. There is less to do in aircraft and real estate finance. On the other hand, infrastructure finance is very strong.
Frédéric alluded to renewable energy financing, where we are number 1. I'd say in CIB, in general, we benefited from strong volumes in corporate bonds, ECM, and advisory are strong, particularly in France this quarter. Let me point to, in asset and wealth management, to Lyxor, which had a very strong quarter, particularly in ETFs. You see the Lyxor revenues are up 10%.
As a total, as you can see, revenues being on the increase for GBIS, both Q-on-Q and year-on-year, with cost decrease very materially as a result of the execution of our clients. You can see 10% for the first nine months of the year, adjusted for an exchange in perimeter, 8% for the quarter. We have very strong positive to effect. Reported net income in that division is up 50%.
Return on a reported basis is 10%, underlying 8%. Corporate center, not much to mention, except that as we had said, it is normalizing after some volatile components that we have seen in first half. It's coming back to a very normal pattern and actually absorbing some of the volatility that we had in H1.
As you see, the gross operating income does converge to a more normal level for the first nine months. Nothing to mention particularly there. I leave it for questions. With that, I hand to Frédéric for the conclusion.
Well, thank you very much, William. Just a few words of conclusion, slide 24. We are, as you see, working on optimizing the competitiveness of our franchises. Let me first start with GBIS. Obviously, the business in which you had most of the questions, and I think we are showing that, yes, we have definitely a certain specific franchises where we work on the de-risking, but it's a business which is able to compete with a very strong expertise, well-suited for the transformation of the world in which we operate and where we work for further cost efficiency.
More work going forward, but I think we are confident there. Second, the French retail, obviously, the study on the combination of the two networks is a very important milestone for us.
I would like to highlight again the strength of Boursorama, and I think we'll be able to offer a very strong overall franchise in our domestic markets. Regarding international retail and financial services, we have completed the refocusing, and I think beyond the current situation, we consider it a growth pillar with good opportunities going forward. Next slide, please, 25.
In terms of capital and dividend policy, we are not changing our dividend policy. The % payout ratio on the underlying group net income, and we have provision for that for this year. As you can see, the high level of capital we have gives us flexibility in terms of shareholder return in particular. Let me just tell you, slide 26, that we would like to have a series of presentations with you. KB is presenting today also its roadmap for the next years.
ALD will present next week its projections. Again, you will see we really believe in the capacity of this business to develop with all this mobility sector, which is changing so much. We would like to have on the 7th of December, a presentation on the outcome of our study regarding the French retail.
At the same time, we will present the roadmap for Boursorama. Beyond the fourth quarter results in 2021, we would like to have the new management team for GBIS presenting, probably in the first quarter, the perspective for our business and what we want to achieve. I think that in the coming weeks and in the coming months, you will have further clarity beyond what we are presenting in these first quarter results. Now let's turn to your questions.
Please let me remind you the nice discipline, which is to have two questions per people so that all of you can have the questions they want to ask. Let's start now. Let's kick off with the Q&A session.
Thank you, sir. Ladies and gentlemen, if you wish to ask a question, you may press zero one on your telephone keypad. We have one first question from Mr. Stefan Michael Stalmann, Autonomous Research. Sir, please go ahead.
Yes, good morning, gentlemen. Thanks for taking my questions. I have two quick, please. The first one on GBIS. You very helpfully provide a geographic breakdown of your GBIS revenue every quarter, and it looks like you had a fantastic quarter in the Americas, about EUR 550 million revenue, where you typically are closer to EUR 350 up to EUR 400 in recent quarters. Could you maybe add a bit of color on what went right in the Americas this quarter?
The second question relates to what you say on slide six about the open savings architecture in French retail banking. Could you add a bit more color of what you expect to achieve there and what this could mean for your distribution agreement with Amundi? I was also curious whether this idea of open architecture also captures your unit-linked products and the funds that would underlie your unit-linked policies, please. Thank you.
Yes, Stefan, hello. I will leave the floor to Séverin on your first question, then Sébastien Proto is in charge of the French retail. Séverin.
Yes. Thank you, Stefan, for your question. As you know, our exposure in the U.S. is mainly driven by two businesses, Global Markets and Finance and Advisory. It's fair to say that globally speaking, global market performance in this quarter in the U.S. has been significantly good, and specifically both in fixed income and in equity.
In equity, all the flow activity has been good, and even the investment solution also made strong results. The good news is that, globally speaking, our FICC activity, as you saw, is growing by 9%, but it has been driven mainly by the U.S. dynamic really. On the global finance, we are more or less in the same than the usual, if I must say. The real product performance, if I must say, is coming from global market activity in the U.S. Thank you. Sébastien?
Yeah. Good morning, Stefan. As you mentioned, our objective is to provide to our clients an open architecture in terms of savings in January 2021. As of today, we have renegotiated with Amundi our agreement, which was supposed to expire at the end of November 2020. Negotiation is over now.
We would welcome other asset managers before year-end in order to be able to provide the best offer for our clients starting 2021. It would be something very important for our clients and a key differentiating factor on the French market because we would be the only bank able to provide an open architecture on the French market. You mentioned unit-linked product.
This is clearly part of our strategy and one of our key focus with a lot of success this quarter, because as you can see in the slide, we had in Q3 a strong increase in terms of unit-linked products. Clearly, the objective is the following, being able to offer the best products for our clients based on asset managers, which will be Amundi plus other names, which will be disclosed before year-end.
Great.
Thank you very much, Frédéric.
Next question.
Next question is from Mr. Jacques-Henri Gaulard from Kepler Cheuvreux. Go ahead.
Yes. Good morning, everyone. Two questions. The first is probably on the cost side, and I realize that your priority now is probably to reduce the volatility on the P&L. For the two measures you've announced, the EUR 450 million plus potentially on the French retail, can you commit that there will be a decrease in absolute term of your cost base?
That would be the first question. The second question is on the energy transition. Thanks, Frédéric, for being one of the very few CEOs to actually talk about it more than in passing for 30 seconds. You're number one in renewable financing, but you can hear some horror story, in particular on windmill finance.
I was wondering if you could maybe give a bit of color on the asset quality currently on your renewable financing portfolio and how it looks like on a maybe three to five-year view. The PACTA initiative in terms of climate, when do you think you guys will be able collectively to present something to the market? Thank you.
Jacques-Henri, hello. On your first question, I will let William answer. I think Séverin can answer more specifically on your question on the quality of the portfolio. Really, I think I just would like to say on the renewable, we've made first a very strong progress in the methodology with this PACTA methodology, the Katowice group.
We have been working 18 months, and that's the idea to now implement the methodology if you wish, in the alignment. We have in mind to present something this year, and with what happened also, we were not able to do that. Maybe next year we do something specific to explain further, because I think it's important that the market gets more understanding of what it means, and it's something which is relatively complex, and I think it's worth spending some time on this.
I really believe it's going to be, in the long run, something very important. We might organize an event on this topic. Certainly, as you can see, we are moving ahead significantly, and that's the message with this very short-term, very concrete objective that we have taken. First, that on the cost. William.
Hello, Jacques-Henri. Yes, we confirm what we have been saying for some time now, that the idea is to continue decreasing the cost base in absolute term in the midterm. Second, particularly about CIB, which you are leading to, we had said, and we have done it so far, we had said that we would decrease the cost base by a good EUR 500 million between 2018 and 2020.
Actually, we'll probably do more, as you can hint from where we are now. Allow me for not being more specific on French Retail. We will come back to you with potential numbers in a few weeks' time. Let me finish by saying that the effort we're doing on cost is across the board.
It does encompass some of the businesses you just mentioned. It does obviously comprise all that we do on processes, functions, IT operations. It's also a big endeavor in the areas where we continue to invest, or where we face some inflationary pressure.
For example, in certain jurisdictions, you have to increase the salaries. We can see that across the board. Case in point, look at Russia in Q3. Despite the inflation, the CPI number, Russia has been able to decrease cost by 11% in Q3, year-on-year.
Thank you. Séverin, on our exposure on the renewable finance.
Good morning, Jacques.
Good morning.
I am not sure to have completely understood the question. If you speak about the specific credit concern regarding the windmill exposure we have, I am not specifically on that for the time being. We don't see any specific risk issue for the time being in this exposure.
Okay. Thank you.
Next question.
Next question is from Madame Flora Bocahut from Jefferies. Madame, go ahead.
Yes. Thank you. Good morning, and thank you for taking my questions. I have two questions on cost, please. The first question is regarding the cost-cutting that you have announced in the GBIS division. You target there to cut costs by EUR 450 million by 2022, 2023. Could we already expect some progress on the cost base as early as 2021, or should we expect that the bulk of the cost savings will be back-end loaded towards 2022 and then 2023?
The second question is regarding a potential restructuring charge. I would say, especially in GBIS, maybe also for French Retail, given the ongoing study you have in the networks there. If you could just give us any information on the potential magnitude or timing of a restructuring charge, that would be helpful. Thank you.
Yes, Flora. Hello. Séverin, on your first question, and William, on your second.
Yes. Good morning, Flora. After the big cut and the big impact we had this year, for the last year, we show this quarter specifically, we have not to expect a significant decrease next year. To be clear, it will be more in 2022, more 2023 for the full impact.
William?
Flora, thanks for your question. Yes, it is to be expected that there will be a restructuring charge or, more generally speaking, cost to achieve in order to decrease the cost base, be it businesses or functions or processes. There are some related IT investments and then sometimes the case may be some severance.
Just to be very clear what it entails as far as shareholders are concerned. First, remember that we pay a dividend based on underlying. Underlying will be retreated from this cost. Second, this is not a once and for all provision that we may see.
It will be sequenced over a certain period of time, depending upon the project and how they mature and how they develop. Third, more specifically for 2020, we may see some very manageable number, probably pertaining to what we have announced in some areas, not necessarily a very big number.
Thank you.
Thank you. Next question.
Next question is from Madame Giulia Miotto from Morgan Stanley. Madame, please go ahead.
Yes. Hi. Good morning. A couple of questions from me as well. On French Retail, revenues are actually holding up pretty well, and I was wondering what's the impact from TLTRO that is booked in there, and what is the outlook for the top line in French Retail in your view? That will be my first question. Then, a quick follow-up on the restructuring cost point. The total cost guidance for 2020 is 16.5 underlying, but did you clarify what restructuring charge you expect actually in 2020? Thank you.
Giulia, hello. I will give the floor to Sébastien on your first question on French Retail. On the second one, William said there might be some elements of CTA in 2020, but relatively moderate, and it is not included in what we call the underlying cost, as well as in underlying net profit, which is used to calculate the dividend. It is a one-off that we consider not part of the underlying. It is actually the item that we take out to calculate the underlying. First, Sébastien.
Yes. Good morning, Giulia. On your first point regarding TLTRO, I can confirm that there is a positive TLTRO impact on the third quarter, but keep in mind that On the opposite, we granted PGE without any commercial margin. All of this should be put in a broader context. Regarding revenues in the coming months or years, as you know, we don't give guidance on this point.
Just keep in mind that in a context of low rates for longer, combined with a strong increase of deposits, and especially sight deposits, with an increase by 20% in Q3, i.e., EUR 23 billion, with 75% on commercial clients.
The impact of low rate and this strong increase in deposits, obviously, is pressure on deposit margin, and this kind of pressure could last because we are talking about structural trends, at least for the low-rate environment. In Q3, the positive impact was recovery in terms of credit volumes, combined with the positive impact of TLTRO and Tier 1, as mentioned.
For the coming months, obviously, the level of activity will be key, and especially to sustain fees, both service fees and financial fees in that context where, again, there is pressure on deposit margin.
Thank you. Next question.
Next question is from Madame Delphine Lee from JP Morgan. Ma'am, please go ahead.
Yes, good morning. Thanks for the presentation. I just have two quick questions, actually. Just on moratoria, the sort of the EUR 26 billion that is still left. If you could provide a little bit of a timeframe of when they expire, and also on the EUR 9 billion that already expired, can you just comment on the default rate on these?
My second question is on cost of risk. You confirm your guidance for 2020 of 70 basis points. Just wondering if you still expect, at this point, an improvement next year. Any comment in the context of obviously the lockdowns that we're seeing, and if you expect any negative implications from that for your provisioning trends in 2021. Thank you.
Yes. Hello, Delphine. I will give the floor to Jeanie on your two questions.
Yes, good morning, Delphine. On moratoria, the bulk of the remaining will expire before year-end, actually before end of November. It is mostly in France and some European countries, a very small amount which goes to 2021 is in Italy, where there is a government-led moratoria request across the board.
Nicole.
Can you hear me? Yep. In terms of cost of risk for next year, yes, we confirm cost of risk will be lower than this year as a consequence of more Stage 3 provisions that take back results from the significant S1, S2 results we have built, and this is fully in line with the updated scenarios.
I think. Yep. Please, Delphine, go ahead.
Yes, sorry. I was going to say, on the EUR 9 billion of moratoria that expired, you didn't see much default. What kind of default rates did you have?
Yes. It's 1%. It's really very limited.
I think, if I may, it's really very important to understand that beyond the crisis impact on the GDP, there is also a very strong support from governments to help the most impacted sectors. Again, we saw that in the first quarter, for example, there is no increase of NPL from end of June in absolute terms, in EUR. No increase of NPL between end of June this year and end of September.
We remain very confident in the quality of the credit origination. What I find personally remarkable is, again, this trend is true whether we are in France with guaranteed loans, but also in other economies which have been adapting differently. It's true also in Russia, it's true in Africa, in Czech Republic. I think it shows we have a quality of asset, which is, as a starting point, pretty good. Next question.
Thank you very much.
Next question is from Mr. Matthew Clark from Mediobanca. Sir, please go ahead.
Good morning. I was hoping you could give us a bit more clarity on why the operational risk-weighted assets went up this quarter. What was the change? Why did it affect you this quarter?
I think a couple of your competitors saw this kind of increase a year or two ago, so I am curious why this is happening now. Second question is back to the TLTRO. Could you confirm that you are already booking the benefit of the 100 basis points negative bonus rate this quarter, or are you waiting until the observation period is over before you recognize that benefit? Thank you.
Matthew, I will turn to Jenny on your first question and William on your second question.
Yes. Hello. Yes, on operational risk, it's really technical. It's a new evolution of the regulation of the calculation of capital under advanced model related to some correlation factors, and this is what we implemented.
Okay. That was the regulators and the catalyst here rather than it being any change.
Yes.
Yeah. It's an EBA standard.
It's EBA RTS on this one.
Matthew, it's an EBA standard. Let me just say, of course, it's a kind of anticipation of Basel IV. It means that the Basel IV impact, which will be just proportionate to the net banking income, will be reduced by these 15 basis points in practice.
Thanks.
William? It was on TLTRO, the benefit of the 100 basis point.
I think we stated we are now at EUR 62 billion borrowings. We account it over time. Just to be clear, it's not exactly 100 basis points because this is pro rata temporis. Some of it is at a lower rate at 100 basis points. In aggregate, it's around 67 basis points.
Thank you.
Thank you.
Next question.
Next question is from Mr. Tarik El Mejjad from Bank of America. Sir, please go ahead.
Hi, good morning, everyone, and thank you for taking my questions. First on GBIS and more specifically on global markets, can you give us an update on your progress in terms of de-risking of the equity derivatives? Maybe in the same context, do you feel you've been actually taking conclusions very quickly and decisions to de-risk this business?
Now it's tempting to say derivatives are recovering a bit in the U.S. and whatever happens in the elections in the U.S., maybe the appetite for clients will come back. Would you be willing to revise your decision to actually change the structure of these products? If you can quantify how much have you de-risked already or the impact of the EUR 250 million on revenues, how much you've done already so far?
Second question would be on international retail banking and specifically on the outlook you would have there, because we know that profitability has been down because of rates in Czech Republic and so on, but asset quality as well will probably take time to recover. What's your outlook in there in terms of returns? Is it 12% we see now could come back to 18% from year two, or which will probably take longer? Thank you.
Yes. Hello, Tarik. I will turn to Jean-François Grégoire, our head of capital markets, for the first question, and then to Philippe Hervier for international retail. Let me just say we are not changing our stance because of the election. The strategic decision we made to adjust the portfolio looks at the long term, and we are not switching. Jean-François, could you give some color, please?
Yes, sure. Good morning. We're talking about the specific exotic products that we have in the broader investment product offer. For example, in the U.S., we are still developing our offer with QIS indices or such, or in the listed products. As you know, we are developing our offer specifically on the exotic equity products.
We spend a lot of time to define our strategy for the long term, which is to de-risk first by changing the mix of our portfolio when we analyzed it product by sub-product. There are some products where we will be smaller than before, and we will push the innovation that for the last even years, and especially quarters, were geared towards products that are much more sustainable for us to manage. This shift of portfolio, this shift of franchise, obviously cannot happen overnight.
We engage in it, and actually it is happening quicker than we were anticipating. It depends partly on the exogenous factor and the fact that the equity market rebounded, triggered some calls on these autocall products, and so we are able to replace that with some new products. It's a medium-term effort. It's happening quicker than could have been the case, but it's not over.
However, because we complemented that with additional macro hedges on the trading side, we are close to being at the minus 50% risk in this specific area if we consider The main risk metrics to follow this business. Again, which is quicker than what we had anticipated. Having said that, we will remain in this business as leaders in innovation, and we could gauge in this quarter that the customer had a very strong appetite for this differentiating product. We stick to this plan.
Thank you. Philippe, perspective of international retail, please.
Yes. Hello, it's Philippe. On international retail for this quarter, I think that we are facing two kinds of situations. The first one, it's for Russia, Africa, and I would say consumer finance with four trends. The first one, it's definitely growth recovery following the lockdown and the slowdown of the second quarter. Two, for these banks, revenues increase, all revenues are almost flat compared to the last quarter.
Three, it's an ongoing cost-reduction effort. As mentioned by William, there is an impressive -11% cost reduction in Russia, which we are definitely bearing the fruits of all the optimization efforts which have been implementing during the last year. The fourth comment on this 1st category, it's a cost of risk, which is increasing, but with a big component related to forward-looking. The 2nd category is Czech Republic and Romania.
Again, I would say four comments, a good level of activity. You see the numbers for KB, for example, there is a +5% regarding loans outstanding, +7% regarding deposits compared to last year. The second comment is, yes, NDI for this quarter, it's down. I would say there are three components.
The first one is, of course, impact of the decline in the market rates with the same kind of impact that we have now in France, notably on deposits. The second component, it's a lower activity compared to last year. We have for these two banks, a kind of price effect relating to the payments, the fees on payments, because now we have to align the prices for euro payments and local currency payments.
The costs for this quarter are up in these two banks, because we are still investing a lot to reinforce these banks and to prepare them for the next transformation phase. All the other costs are strictly under control, as mentioned by William. Regarding the cost of risk, again, a big component of forward-looking, and just keep in mind that last year the cost of risk was extremely low. For KB, for example, it was only EUR 2 million.
Overall, of course, all these banks will continue to work on the cost base, on their revenues. They are definitely still part of growth story and profitability story. Just as an evidence of that, I want to mention that, as mentioned by Frédéric, KB has an investor day today, and they are confirming a target of 40% for cost income and of 15% for return on equity.
Thank you. Next question.
Thank you.
Next question is from Madame Lorraine Quoirez from UBS. Madame, please go ahead.
Yeah. Hello. Thank you for the presentation and for taking my questions. Just two quick questions from me. The first one is, do you intend to extend the date at which the state guarantee loans in France will be repaid? If so, is this going to be systematic or will this happen on a case-by-case basis?
My second question would be, how would you use the excess capital if effectively the regulators tells you that you cannot distribute it all the excess capital, or at least you can only distribute very little because obviously, we are waiting for a regulatory update in December. If you cannot distribute that capital, what options do you have in mind? Thank you.
Yes, Lorraine, I will leave Sébastien perhaps explaining exactly how things will work with the guaranteed loans and to be very precise on what is going to happen and how we want to handle that. Can I say if for any reason we were not allowed to distribute or not as much as we would like, I will keep the money because I consider I owe this money to the shareholders. At some point, we'll be able, I guess, to distribute. Sébastien.
Yes, good morning, Lorraine. As a reminder, in terms of PGE, number of requests in mid-October was 91,800 requests for close to EUR 20 billion. There would be two changes for the PGE. The first one is the decision that a new request could last up to June 2021. That's the first point. Second point, there is a change in terms of amortization with one more year with no amortization.
It will be the outcome of a dialogue between the bank and the clients, not something systematic, but something different. In terms of impact, as it would not be qualified as forbearance, there would be no impact at the end of the day.
The maturity of the loan would be maintained unchanged, i.e., six years, but the amortization profile would be modified. Again, it will not be qualified as forbearance, and it will be the outcome of a dialogue, not a systematic approach vis-à-vis the clients.
Maybe perhaps just to say that a lot of these guaranteed loans have been used just as an insurance by companies, and I think we will see a lot of reimbursement actually, including immediate reimbursement.
Yeah, that's true. We talked about NIM earlier on the call, and clearly part of the PG drawings went on deposit. That's exactly what Frédéric described, a kind of cushion for the clients, which was supposed to help them in this context of the first lockdown.
Next question.
Very helpful. Thank you.
You're welcome. Next question?
Next question is Pierre Chedeville from CIC.
Yes. Good morning. Good afternoon, I don't know. A follow-up question on Lorraine's question on capital. You have a very high CET1 ratio, above 13%. As far as I remember, the TRIM impact would be minus 50 basis points. We can imagine, and I hope that in Q4 you will generate organic capital.
At the end of that, you say you want to be above 12%. I am not very good in math, but I see a high leeway between your internal objective and the level where you could stand at the end of the year. My question is very simple. Can we imagine, or do you let the door open for an extra distribution if, of course, the ECB is okay for that? My second question relates to protection business.
I am a little bit disappointed by your performance in this booming sector of the protection if I look at your revenues quarterly. I wanted to know why you are not as dynamic as other, I would say, players in this area of protection. Is it due to the fact that your mixed product is mainly on creditor insurance, which are penalized by a decrease in mortgages business? Is it another factor? Can you give us a little bit color on your perspective on protection business? Thank you.
Yes. Hello, Pierre. Good morning. Well, no, good afternoon, actually, in France. Just on your first question, I will leave Jenny Leboutte to answer on the insurance side, and perhaps with Sébastien, if he wishes to complement, as he's in charge of the distribution channel. No, no, you are good.
You're still in math, Pierre. I think you are absolutely spot on. Let's say, can I just say on this dividend you approached, it's a question for the end of the year and for the board, and clearly, I would say that the less we speak about this sensitive topic, the better. I think we've written a sentence which says we have flexibility for distribution to shareholders, which I think you can interpret.
Okay. It's also a question of profitability, which is, in my view, the main item for you in the coming years, and accumulating capital is not very good for your profitability.
No, no. Listen, all banks today are in the situation where they have effectively accumulated the capital and have buffers much above their management targets now because, again, of this ban in particular. No, I agree. It's not optimal.
As I've said, let's wait first for the decision of the supervisor. On our side, as I said, we want to remunerate our shareholders at the right level, and this is part of our equity story definitely. Perhaps Jenny, on the protection insurance product.
Yes, on the protection insurance products, actually we had indeed an impact from the COVID, but it was mostly on the international side. We have a good increase in France. We had a very strong increase on property and casualty. It was 13% in France, as said by William. We do have significant growth, and we continue actually to invest in this business quite significantly, particularly in France.
What are your main products in protection?
We have health protection, we have life protection, auto insurance, and credit insurance, of course, related to the mortgages.
Is this the main part, the creditor insurance? Regarding protection specifically, not P&C, but protection. What is the mix between health and creditor insurance?
That would be in protection overall. P&C obviously is a different matter. I think it's important, Pierre, that you differentiate this quarter France International, because there are some technical elements which we have that drive the performance overall in protection. Protection, as Eugenie said, be it personal protection, health, what have you not, plus creditors insurance is up 4% in France.
It is down internationally for reasons I will explain. In France, as Eugenie reiterated, P&C is very strong, 13%, continues to be okay elsewhere. The question that we have is we decided to decrease some pockets of consumer lending in certain areas, particularly Russia. That's risk management, it's profitability management, and as a result, we didn't cross-sell as much.
I would say we are not worried about that because the clear intention is to increase the penetration wherever we want to be, particularly France, and that is more of a technical adjustment.
Okay.
Pierre, maybe in addition to Eugenie and William's comment, let me just say that in the context of the study of the potential merger between Crédit Agricole and BDDF, clearly insurance is a key equation. We know that we can extract more synergies between distribution and the production in terms of insurance.
We have two main focus in terms of world revenues in this context, in that context of the study, savings and insurance. Clearly, we know we can be more ambitious, and especially in terms of equipment weight. That's an area where we need to be very granular to analyze why and when we can do more. That's our objective. Thank you.
Thank you.
Next question.
Next question to Mr. Jean-François Neuez from Goldman Sachs. Sir, go ahead.
Good afternoon. I just wanted to ask two questions, one on French retail and one on CIB costs. The question on French retail is you've noted rightly that a lot of the PGE have been redeposited with you, or let's say not used for cash purposes by the corporates who've taken them.
I'm just trying to understand how much of these loans has been redeposited, because now that you have an excess of deposits in French retail over loans and a high LCR, I'd assume that these deposits are earning probably EUR -50 of the central bank redeposit rate, if you want. I'm just trying to understand that if those corporates either use these loans or otherwise pay them back, what would be the impact on the NII of the French retail, which it doesn't seem like it's insignificant.
The second question I had on the cost savings plans of CIB, we've seen that a lot of peers, including yourselves, it's tough to cut costs in CIB while maintaining the revenues. I just wanted to understand exactly how you plan to do these additional cost saves, what areas of the costs they are impacting,
Whether they are non-comp, comp, whether it's headcount modification or otherwise compensation structure modification, and whether all the desks have been identified and notified so that we can try to understand whether those things that you want to keep is now well-ring-fenced and where the revenues impact could be. Thank you.
Yes, Jean-François. Hello. I will turn to Séverin on your question on the cost. On the first one, yes, you are right. Fundamentally, it is the money which is not used and effectively deposited in the central bank. Which costs, after that, I guess you can make the calculation on the amount multiplied by -0.5. Yes, there would be a positive impact. Let us see how things are developing going forward.
What is the amount, please, if you may disclose?
Sorry.
What is the outstanding amount then, if you may disclose it?
You know that what we are disclosing is.
The outstanding.
No, no. You mean the amount of deposits that we have at the European Central Bank?
No, the deposits that the corporates have taken-
No
PGEs and redeposited them.
We are not that specific. No, we disclose the increase in deposit-
Yeah
site deposits. I told you 20% of those deposits are 14% in France. What we can say is that the increase in the site deposits by corporates is higher-
Yeah
than the increase in site deposits by individuals. Of course, this is, to Frédéric's point and your comment, a type of deposit that we tend to model more cautiously because they are more volatile in nature. Effectively, you know that PGE, we did EUR 15 billion out of EUR 19 billion as we speak. If you assume that a portion of it has translated into deposits, maybe this is not a good way to look at it.
You know we have an increase of EUR 23 billion of sight deposits in the French Retail and three quarters comes from the corporate self-employed professionals. Not all of them have a guaranteed loan. It might give you some indication, again, of maybe the amount which might come from the guaranteed loans.
Okay, excellent. That is very helpful. Thank you.
Sorry, I saw Quention. The second question.
Cost reduction.
Cost reduction. Sorry, Séverin, because I said I was in the middle of this long guaranteed loan. Séverin, please on the cost.
Good afternoon, Jean-François. When I'm referring to what we said in August, in the second quarter, we already commented on the impact on revenues on Global Markets of this reprofiling, if I must say, of our business portfolio and product mix in our structured product activity.
We already commented on the revenue, and we know that there will be an impact due to this redesigning of our product range. With all our management was between EUR 200 million per year, or EUR 250 million per year in terms of impact on revenues of this. Simultaneously, we made this commitment to reduce by EUR 450 million by 2022, 2023, very important to have that in mind, our total cost base of the Global Markets activity.
The way we will do that, we already done last year, as you know, a significant plan, which encompasses all private organization of global markets, and not only markets, globally, GBIS, from the front to the back. We think that on the front side, the main part of the work has been done.
Now the way to get to the EUR 450 million with additional streamlining, automation, digitalization, all the processes from to book, if I may say. Front to book. Having said that, it takes a bit more time. The reason why we put that horizon of 2022 or 2023. It's a bit early. We are building this plan. We have to communicate that when it will be ready with our social partners, with our unions in France and elsewhere in the world.
To be just generally speaking, it will be a global streamlining front to book of our processes. I think we could be in a position to comment more on this specific plan early next year. We have probably a specific presentation. You know, we will have a specific presentation on GBS on the Q1, it will be for me the opportunity to be deeper in this plan.
Thank you. Next question.
Thank you very much.
Next question is from Mr. Omar Fall from Barclays. Sir, go ahead.
Hi there. Thanks for taking my questions. Just as a follow-up to Jean-François's question. I'm just a bit confused at the treatment of deposits. I thought you used a replication portfolio of swaps, right? Is the idea that you're saying that this jump in both household and corporate deposits is very volatile, and therefore you're basically not reinvesting the deposits at the five-year swap rate, whatever, at 50 basis points?
Just to be clear that I understand the benefit from TLTRO to French retail, is that about EUR 100 million this quarter, if I take a quarter of the prorated 67 basis points on the EUR 62 billion of balances? Lastly, could you just update us on your thoughts on Lyxor, please?
Obviously, there's been some press reports on the disposal, and I know you rightly won't discuss press speculation, but, in general, why would you sell assets in this kind of environment? I guess you're not going to get a very good price for anything, and you don't seem to need the capital based on what you're telling us. Thank you.
Omar, William will answer your question on the deposits and the TLTRO. On Lyxor, again, same sense. We don't comment market rumors, and they have been there for some time, but no comments on this. I just will point out the good performance of Lyxor with an increase of revenue by 10%, which is definitely, I think, a nice asset. Back to William.
Omar, hello. Nothing really has changed in the way we model our asset and liabilities, whether this is in French retail or elsewhere. We have the same story. Some of the deposits we collect are considered as stable over time. Some of the deposits we collect will be a model rather short-term.
Let me remember you that contractually this is an overnight commitment. Nothing has changed specifically pertaining to the crisis. What we have been observing ever since 2014 is a disconnect between the monetary mass correlation with GDP and the collection of deposits because of negative rates. That has accelerated quite massively in the context of COVID because of lower rates and also because of factors that you and Jean-François alluded to, which is another supply of liquidity.
It just means that at constant ALM modelization, fundamentally, we have more pressure on the margin because we have technically more outstanding that we would model short-term, reinvest on short-term rates, which usually are negative. That's, I hope, a clarification. In order to have said that, we benefit from two things.
One, you know very well, which is tiering. You know that we have a mandatory reserve of EUR 3.5 billion, times six, times 50 basis points. This is on an annual basis, the benefit we get from tiering. That would go massively into the networks given the fact that they are the main contributor.
TLTRO, the way to think about TLTRO is that you have to take into consideration that we give back everything in the businesses, but gradually as time goes by, and that is pro rata temporis, so it is not exactly a full year of numbers that you have to take in 2020, given when the program started.
Thank you. Next question.
Yes, next question is from Mr. Kiri Vijayarajah from HSBC. Sir, go ahead.
Yes. Hello, everyone. First question, I wonder if I could come back to the government-guaranteed loans. Just curious, does the risk profile of those government-guaranteed loans, do they largely fit with your own risk criteria? I know you're not on the hook for the credit risk, but it'd be helpful for some color there in terms of what proportion are in troubled sectors.
Secondly, on Boursorama, just wondering if the surge in the brokerage orders you had during lockdown means that Boursorama is going to be clearing its cost of capital this year. I'm guessing there's probably some nice positive operating leverage from all the extra activity. On the other hand, you're still adding new customers at Boursorama pretty rapidly. What does that mean for its profitability this year, please? Thank you.
Yeah, Kenny, well, Philippe Aymerich will comment on Boursorama, knowing that we will have a full presentation in just a little bit more than one month. Just on the guaranteed loans, keep in mind, it's not something which is automatic.
There's a minimum rating fundamentally in terms of quality of the counterpart that we have to comply with the Banque de France, and very few exceptions. It goes through our own assessment of credit. We don't provide that without a level of comfort that it will be reimbursed. It meets our criteria in terms of the credit assessment. Philippe Aymerich. Philippe on the Boursorama.
Yes. Thank you for the question. Yes, we'll have the opportunity to go deeper into presentation in Boursorama within a month. I would say that, frankly, all the indicators are really green for Boursorama. As we said, acquisition is still very high. 125,000 clients in the last quarter. Clearly leadership in France. Also clear leadership regarding online brokerage, as you said.
All the other indicators, increase of deposit on loans, are also quite robust. Still, we are also very careful regarding all the efficiency ratios. I can tell you, for example, that the acquisition cost by client, it's reducing, due to all the effort and due to the increase of the critical mass. That's where we are with Boursorama, clear leadership, a very strong operational model. We still believe that there is a great potential.
We have demonstrated during the last two quarters that financially, we can monitor the profitability of this bank. Boursorama was at breakeven in the second quarter and almost at breakeven for this quarter, despite a huge acquisition of clients.
Thank you. Next question.
Next question is from Madame Azzurra Guelfi from Citi. Madame.
Hi. Hello. Two quick question from me. One is on CIB. It's clearly coming back versus what happened in Q1. When I look at fixed income, your year-on-year performance is lacking peers. Is this explained because of your business mix, your geography mix, your risk appetite framework, and can you give us some color on that?
When you talk about restructuring charges, if I understood well, you said there's no expectation of big restructuring charges this year. Could there be coming more next year when you present your updated CIB plan? The second one is on your climate disclosure and energy.
It seems that French banks are ahead of the curve compared to other European banks on the climate and environmental issues. Can you share with us what you think the regulator will do in terms of climate risk, and if whether this will be accounted in capital anytime soon? Thank you.
Okay. Azzurra, I will leave Séverin answer your first question. On the reach of the restructuring charge, I think William was very clear, but he can reiterate what he said. Your question on climate risk and regulator would request some time. I would let just Jenny what is currently being done. Gentlemen, Séverin again, perhaps can you come back to this question of year-on-year comparison?
Yes. Thank you, Azzurra, for your question. We try to say that our performance of 9% growth compared to last year is comparing differently with our peers. The first reason of that, and you mentioned it, is the product mix and geography mix. Clearly, we are less geared on the U.S. and as you saw, and as I already said, the U.S. performance has been very good this quarter.
Our peers, which are more exposed to the U.S., have more benefited from this market condition. On the product side, that's the same. We are a strong house in rates, and this quarter, the credit and commodities have made a specific good quarter. As you know, we exited commodities last year. This business has been transferred for a part to some of our peers who just disclosed their results this week.
There is clearly some product mix and geography mix. There is another point we have in mind that when you look at the capital allocation to our global market activity, is also to say that our competition has probably allocated more capital for this period of time to this business than us. We have taken this view that globally speaking, the generation of Q1 was the first target we have. We put adequate capital than the average. That's it. We have those two explanations in my mind.
William, again, on the restructuring charges.
Azzurra, ciao. Just to come back to what we've been saying. First of all, in 2020, there may be some cost to achieve pertaining particularly to what we've just said and reiterated with Séverin on CIB. When I say a very manageable number, I refer you to what we've done historically.
You can see for the type of savings we've been able to achieve, what type of provisions we've taken, that would give you at least some reference points. For the future, it's too early to say when and what amount. We obviously have some ideas depending as to how the projects would develop.
Yes, there would be restructuring charges, but we consider that the way to manage it is to sequence it, and basically make sure this is to be absorbed by a strong capital base and something that the shareholders should not care about, given the fact that it is not in the underlying. We will obviously be more specific as time goes by and when we have specific projects to announce.
Thank you. Jennifer, on the regulatory side.
Yeah. In terms of analyzing a climate risk, we have internally implemented already two years ago, a measure and a policy where we want to measure the exposure of our clients, in particular corporate clients of the most exposed sectors to transition risk. We give them a rating. It's part of our rating process, which translates into what we call a vulnerability indicator.
This, of course, it's a long-term view we are taking on the way clients are exposed to transition risk and what impact it would have, the fact that they would not adapt to the objective of climate change, and in particular, taking into account a scenario which is the sustainable development scenario. At this stage, for us, it's a way to work on stress test on climate risk.
It doesn't lead into additional capital yet, but of course it prepares us to handle all the upcoming stress tests, which are going to be led by regulators and supervisors. It's part also of our disclosures. It will prepare us also in terms of segmentation of clients, data information, and reporting, when we will have to align also with the various regulations.
Thank you. Next question.
We have one last question from Madame Anke Reingen from RBC Capital Markets. Ma'am, please go ahead.
Yeah. Thank you very much for taking my question. Just on the cost, if you just maybe can explain structurally how you address the cost programs differently from in the past, because clearly there were some in the past, but this time is the focus more on absolute cost, whereas the past was more on efficiency, and that's why it didn't quite work out as planned.
Secondly, on the restructuring of the structured product business, the equities number in Q3, would that already be a relatively clean number or should we expect further headwinds? Thanks a lot.
Anke, hello. On the cost, it's fair to say yes, we have a focus on absolute amounts. Again, we think it's at this stage a good discipline. At the end of the day, it's also very important to, of course, look at cost-income ratio for each business. I think you would admit that if we were to double our revenues, we could also reward the staff also accordingly.
At this stage, we have this objective to really be able to demonstrate, as we've previously answered the previous questions, that there is a capacity to fundamentally decrease the absolute cost level with reasonable assumptions on the revenues in line with the business plan. On your question on equity clean, et cetera, it's a bit complex to answer your question. I guess it's still a transition currently.
We cannot say we are yet, if I may say, on target, having completed the reshuffling of the product portfolio, et cetera. I hope we will be able, going forward, to do better. Already I think it's comforting versus what you saw in the first half.
We are, as Jean-François previously said, probably in the middle at this stage of this transformation, which is moving a little bit more quickly and more swiftly than what we even had in mind three, four months ago. There's still more to be done, and still a transition period, and it will take, I guess, one or two additional quarters to complete the job.
Okay. Thank you very much.
We will give more explanation, as Séverin was saying. It will be the opportunity to see where we stand at the end, in the first quarter of next year.
Okay. Thank you.
Any other question?
We do not have any other questions, sir.
Okay. Well, listen, thank you very much for your attention. Have a very nice day and keep safe. Thank you. Bye-bye to all.