Earnings Call: H2 2019

Feb 27, 2020

Good afternoon, everybody. Let me jump directly on Page 4, where I would like to highlight the key messaging messaging, sorry. First of all, so if you look at the numbers, we had a solid growth in almost all our business lines. Operating profit as well as net profit are up 4%. Looking at the numbers, those are the best this is the best result in the last 12 years. And if we don't take into account 2,005, 'six and 'seven, which were affected by extraordinary products following the recapitalization. 2019 is the best ever profit for BCV since 18/45. Based on those results, we will suggest or propose at the General Assembly to increase the dividend by CHF 1 according to our distribution policy we disclosed, I think, something 2 years ago. And finally, Thomas will highlight also the 2nd proposal, the German assembly, to go from a 1041 stock split. Let me go on Page 6. You'll see the different, let's say, volume growth. So maybe comment on mortgage. We're back at 4%. I think last year, we had something like 3% in the previous 3%, it was inferior to 4%. So 4% is also the growth in the market in content growth. The feed seller is something like 3 point something, 3.5, and growth is growing slightly more rapidly. So I think we are back at a growth rate in line with the market. I'd like to stress that we haven't changed our credit policy or criteria. It's more due to a more, let's say, aggressive sales force approach as well as some commercial, let's say, initiatives and some price reduction that we see then definitely in the margin. After a couple of years where we had a growth which was below the market, we decided that we don't want to lose again market share for the next couple of years. So we want to stay at the market share of roughly 30%, and this is why we decided to slightly decrease prices where it was necessary in order not to lose businesses and to be more aggressive on the sales front side. So site deposits, although there is no, let's say, positive rate on those size deposits since we pay 0, Basically, this is still growing. This is clear that if we want to change that, we would have to pass negative interest rates to retail customer as well as SME, which we don't want to do for the time being. AUM plus 12%, of course, there is an impact of market performance. Thomas will go into more details. The rest is quite stable and net new money, I think you can read for yourself. This is on one part individuals, but mainly institutional and large corporate, but mainly institutional. Okay. Page 7, I'm going to comment directly on Page 8. So our 4 business lines. So the first is retail banking. The growth is 4%, totally in line with the market. Customer deposit is high, plus 7%. This is due to kind of arbitrage from the customer. I see not between banks, between the market and the banks clearly. For many retail customer, they're not happy with 0%, but they are nevertheless quite happy to make sure that they get their money back in 2 years at the same level of or the same amount even though they don't get any interest rate. So this is why and that will continue. I'm quite convinced about that. So and then revenue, quite stable. So you see here the price pressure on the margin. Definitely, you see the volume going up at more than 4% and the revenues only at 1%. I think you have exactly the same trend in every single bank in Switzerland as far as interest revenues are concerned. And operating profit plus 28%, so there is a part which is basically cost reduction in the business line as well as some changes in the cost allocation between divisions. Okay. Corporate Banking, 3 different, let's say, messages. Quite strong growth in SME as well from the customer side as well as the credit side. And the large corporate, this is always volatile. So it's significant volatility here. So the numbers, they are plus 8, but it could be plus 5 in 2 months or minus 2. You know that we just look at profitability in this business. So the volume are not really important for us. And trade finance, slightly down on average in 20 19. Basically, this is due to mostly to the, let's say, the commercial discussion between so the trade discussion between China and U. S, this is clear that today in the world of trade finance for most banks, China plays an important role and this is the same for us. And probably due to the latest health problem in China, we might see trade finance going slightly down in the next couple of months. Actually, we already see some trends going downwards due to the health problem in China and in Asia and now mostly everywhere in the world. The rest in terms of revenue and profit is quite stable. Important to notice here is the quality of the loan book, so very, very low new provision needs for 2019. Wealth Management, here I repeat, this is a bunch of different activities. So you have in the motor company, the private banking onshore, which is the biggest part, the private banking offshore, the asset management business and you have also here the subsidiaries of Piguet Gallant as well as Gerifon. So growth, which is not a surprise given the very good financial market last year, positive net new money, especially from institutional clients. So pension fund being in the French part or in the German part of Switzerland. So quite happy that our, let's say, our office in Zurich is doing quite well. And you see also an increase in revenues and operating profit reflecting the increase in volume basically. We have decided for Essential Asset Management to implement ESG criteria. This is fully implemented, and we will do the same in the course of 2020 for private clients. And also, we have made a rollout of a new application and a new service line for our investor advertising services for the private customer. Next, trading. Trading is again up. You remember, we always said that this is linked also to the volatility in the ForEx market. Since most of revenues are ForEx driven, there is no prop trading. This is customer driven activities. And we had this decrease in the last couple of years. And probably now, we have reached kind of a bottom. So this is roughly stable between 45,000,000 €50,000,000 quite stable in terms of ForEx, but some, let's say, small gain of activities in structured products and fixed income, but this is quite marginal compared to the main activities, which is basically FX trading for customers. So that's it for the business. I'll hand over to Thomas for the detail on the financial numbers. Yes. Hello, everybody. I'm on Page 13, obviously, income statement. Well, the overall picture, you know, plus 2% of the income, 4% operating profit. I will come back to the different sources of income and different kind of charges. At this page, I would like them to insist on the point that starting from 2019, the new tax regime applied with 13.8% as a corporate income tax. Now the difference in tax charges between 2018 2019 actually slightly overstates this change given that there was net extraordinary income in 2018, which also had its tax part. So it's rather kind of €37,000,000 on a comparative basis. With regard to different sources of income, well, I always insist here that we are happy to state that net interest income is only half of our total income, which is the most diversified situation of the Cantona Bank in Switzerland. It is up cheaper than the net terms. I will come back to that later. Our commissions are up 2%. Actually, we must take into account that, of course, on the wealth management part, there was an upside given the higher market valuations. But then there was slightly slowed down increase given, as mentioned, Pascal, the trade finance was a little bit lower than the year before, keeping in mind the trade finance as well interest income as commission income. Now here you have trading total revenues from an accounting point of view across the bank, not from a neutral point of view, what Pascal just has been showing, but the comment is the same. Well, now let's go deeper into net interest income. Now what is obviously I think very important to distinguish is what is happening on the interest on the yield curve side and the commercial pressure, which basically you see in the NII before loan impairment charges. And then I will comment secondly on the risk element, which is the evolution of loan impairments. Now on this growth element, before loan impairment, you see that we are stable. And actually dynamics which are going on here is that obviously there are still mortgages which are repriced now at lower rates, whereas on the liability side, you understand basically deposit prices or the rates we repay don't decrease any further. So this gives us pressure on the income base. And you add to this is also, as Pascal mentioned, with regards to the commercial pressure, we are a little bit more aggressive. So it's not only the yield effect, but also the commercial margin effect, which brings in lower rates on the mortgages. Now this pressure is compensated by the volume increase of 4%, right? So which is, of course, a dynamic, which is a little bit dangerous because more business, same revenue over time, this will provide further pressure on cost management as this goes on. Now, the other element, which is the loan impairment, this is a whole situation with regard to risk, credit risk. And my overall statement here is if you take a more broader view on that, is that for years now, this is low. Have been minus 6 of new provisions, net provisions in 2018. And now in 2019, we even see reverses, right? Keeping in mind that there are gross new provisions every year of something like €10,000,000 €20,000,000 or €30,000,000 and they are reversed every year of something like 10, 20, something like that. And now if it turns out that year, the matching of those two gross numbers brings in net reversals, right? So it's overall reflecting the positive economic cycle in which we are living. And it's even it turns out to be a pretty high number in terms of net reversal this year. So taking those elements together, we then have the net interest income increasing by 3%. With regard to charges and some comments, right, other operating expenses, we were able to increase them, particularly on the IT side. Now with regard to the personal cost, I would like to draw your attention that there's still the same rigorous cost management. But actually the increase you see on personal cost, I would even say is a good news, because we in sourced about 20 IT experts, which before basically worked exclusively for BCV, but they're external. Now in sourcing them, we already basically take out their margin and VAT, which is always an improvement. We can even manage them more efficiently. This will work through the bench. I don't want to get into technical elements here. But the overall effect on operating result is positive even if you see a personal cost increase. Depreciation and amortization is slightly up, reflecting our positive development of digital banking. While headcount, well, basically here is the same point I just mentioned before. The 20 people coming, joining us and which explains the increase in headcount. Total assets, while the same story, continued story, right? Increasing cash and equivalents at the Swiss National Bank and liquidity at the Swiss National Bank, given that on the liability side, we have ongoing inflow of deposits, which Pascal comment already. On the business side, we have the 4% increase in the mortgages. And loan and advance to customers were rather flat because on one hand side, we say the very positive developments on the SMEs, But as mentioned, trade finance, which also has a balance sheet part, is a little bit lower. On the liability side, I mentioned the in cash flows on the deposits. And we are even if we see later our distribution policy, there is an ongoing increase of shareholder equity up 2%. Asset under management, right. Well, of course, for all actors in the market, beautiful market performance adding €6,400,000 to our total assets under management. And we were able to do net new money of 3.8, of which there is 1.5, especially on the onshore side, the €4,000,000,000 up and €1,700,000,000 from the private customers and the SMEs. They represent the kind of continuous inflow of net new money. More volatile are the large corporate institutions, which show up at €2,300,000,000 but this is very volatile number. And still a little outflow on the offshore, but the strategic refocusing, which we had mentioned in the previous years is done. Capital ratios, while beautiful, I guess you agree with me, still above 70% and the leverage ratio above 6.3%. Also on the LCR side, I mean, we I can't really say we are above target here with regard to the LCR, given the inflows of the deposits. But it's also the photomixent links on the interest to fill up the our account in Swiss National Bank, because as you know, we have a franchise there, where for quite significant amount, we can put money there at 0 interest rate. With regard to dividends, right? So basically, I mean, most of you follow us annually. And well, you see, we walk the talk, right? We told you that the new tax regime, right, basically means that we pay kind of €27,000,000 €28,000,000 less taxes and that we will bring that back to the shareholder. And actually, this new tax regime means this decreased tax charge means CHF3 per share. So our new proposal is CHF33 plus CHF3. I mean, if you take where we have been before, I'm not looking at 2018, which has been marked by extra income. But I look at 2017, where we are 33, now do plus 3 and 36. That's what we have been explaining for a while. And that will be proposed to the general assembly in a few months. So basically, we live our 30 horizon of our distribution policy, which now is between 34, 34 because it started in 2018 before the new tax regime and 38. Right. So, now we have been reworking our business strategy and Pascal will comment more on this. And we have in that same time also restate our strategic financial targets. So as we go forward, first of all, we continue at the cost income we target at 57% to 59%. Then there comes something which we must admit, we have always been a bit complicated on that point, but it's a very interesting point. Then there comes a point where we say, basically this bank would be perfectly capitalized 13% and we call it kind of minimum equity level or minimum target level, which means that economically speaking, the equity which is above 13% is excess capital, right? You consider the balance sheet of a bank as a production unit, you need those 13% for this bank to be run on a solid base. And basically, the corporate value should include that. But then you could add on the corporate value €500,000,000 for the excess capital. It's very important. I mean, it's a bit theoretical, but it is really significant because annually, we do capital equity, very, very aggressive stress test, not the kind of BCE stress test, but really, really stress test and they always, always confirm that this bank would be perfectly capitalized to 30%. It's important message. Now, the COVID I apologize, but the theoretical game continues a little bit, because then we say that if we had the situation on the accounting side that our capital would be at the level that our CET1 would be at 13%, then that at minimum target, our ROE target is 35% to 45 percent. Now, if we immediately answer a question you might have. Now, if you do that kind of calculation gain by end of 2019, it's our ROE at minimum target equity is 13% right now. Okay. Well, maybe you may have further question on that in the Q and A later. So this was the part of real tough financials. Now we get more into the soft part, right? Because all of you know that the stock split has nothing to do with corporate value or with financials and make no change in the value of the company. But we decided to do a stock split. And as part of the initiatives and the things we have been reviewing, given that we have been reworking our strategy last year. It's not a thing we would have started on its own. And we said, okay, it would be a good point now to do this share and the split in 1 to 10 because basically, if we were in the Swiss market, we would be closer to comparables, banks comparables which are quoted and which are significant as a stock bank stock in the Swiss market. And secondly, there's also an argument that we might broaden our private investor base because of private people, it's easier to do a decision to buy a stock of CHF 80. So it's easier to manage this private portfolio where you can increase or decrease your portfolio by CHF80 instead of CHF800. So maybe this in 5 or 10 years will even create more private investors and more identification with the shareholder approach of VCU within the local media. So, Maile, that's very easy for you, very easy to understand. If accepted by the Annual Meeting, it will be affected by 28 May. So on 28 May, it will not be a stock crash, but a split. Okay. Thank you. Let me go very quickly on the next slide. So as I mentioned in our last call that in 2019, we were in the process of, let's say, checking our strategy, revisiting our priorities. I think it's a sound exercise. The last time, it was 2013, 2014. So 5 years down the road, I think it's not bad. It doesn't mean that we don't think between those 5 years at several initiatives given the changes in the environment. Nevertheless, it was in-depth thinking. But as I told you also that you should not expect huge changes because I mean, I think we have a clear strategy. We are a Continental Bank, so we know what we can do, what we shouldn't do. So the business model is quite clear. So basically, as I told you, there is not a lot of changes. Maybe a couple of points. If I try to imagine BCV 2025, take a picture of BCV 2025, what I would like to see. So basically, I would like to see something very similar compared to today on a couple of strong fundamentals, being the business model, our customer franchise, outsource financial and a very solid governance, a very good well functioning executive Board and Board of Directors. That's basically the fundamentals that should not and will not change. But I'd like to improve to put BCV on the new S curve at a better level in 6 dimension. First of all, the customer service, as you know, this has been for the last 5 years a priority. It will remain a priority. I'm convinced this is a key differentiator for a bank like BCV or for any Continental Regional Bank. So we decided to start this journey 5 years ago and that will continue. 2nd is basically everything which is linked to digital, so multichannel distribution, mostly focusing on digital. This is nothing new, but this is a priority. The third point is I think something that we can do better. So we are basically the largest bank in Cantonvoire also in the French part of Switzerland. We have all business lines, which is not the case of some competitors. This is certainly the case of UBS on Credit Suisse, but this is not the case of half of our funds or post finance of some private banks. And I think we should better leverage, let's say, the synergy between our different business lines to try to tap some opportunities. We want also to, let's say, to increase, let's say, our value proposition towards employees. There is really a war, let's say, for good banking employees. It's amazing to see that young people are not, as it used to be, attracted by banking, by finance, less than before. So it's more difficult to recruit good people. And here, we have to be more attractive to make sure that on a long term basis, we keep the best guys because this is quite key in the service business. And we will also carry on what we did in the last couple of years to do some process improvement, process streamlining, where we believe there is potential for automation, for standardization and to try to get some productivity improvement. And finally, everything which is linked to social responsibility being in the direct manner that we do, that we've done for a long time, climate consciousness, trying to improve our carbon footprint, those kind of things. But also now more and more on the direct indirect part, I. E, trying to support our clients, our customers to do their part also for the environment or for the society through some products being for institutional investors or also for private customer, for example, mortgage, we will launch in the course of 2020 some product mortgage with some advantages in case the client is investing in climate friendly equipment for his or her apartment or flat or whatever or house. So we believe this is a trend. We believe there is the demand is not that strong for the time being for private customer, but I'm convinced that it will come in the next 2 to 3 years, so we want to be ready. And finally, to tell you, although we could imagine that this is a kind of a boring, unsexy firm, This is a company bank, but we have a clear target of growing. We will never grow at 10%, but we will carry on growing 2% to 3% steady growth, very, let's say, sustainable growth like we did, I think, in the last 15 years. So we carry on that path. Now maybe 2nd chart on strategy. We have revisited the objectives in terms of growth or in terms of market positioning for our different businesses. We believe that in some areas, it will be difficult to grow more than the market. I mean, in retail banking, we already have 35% to 45% market share depending on the product, on the business line. So for example, here, we want to grow at the market base, which is already kind of a challenge given some new potential and trends, given the strong competition in mortgage in Switzerland right now. We believe that in some areas, we can target the number of market growth. When I say above market, it means maybe 20%, 35% more than the market. I'm not talking market would make 3%, it will certainly grow by 6%. But if the market is at 3%, probably which we could target 4. And some businesses in terms of volume for us, this is not a priority. Priority is clearly profitability. If growth is profitable, we will grow. If growth is not profitable, we will stay at the same level or maybe downsize if necessary, which is not the case for the time being. But clearly, those 4 businesses that you see here, profitability is the main target. And then the offshore activities, as you know, given the current situation in terms of market access for Swiss banks, it's quite difficult to imagine growing without taking huge risk. So we don't want to do that. So basically, we have an existing franchise. We have some customers. They're all now tax compliant. So everything is fine, is okay. But if we don't get market access, which will probably which Swiss banks will not get for the next 5 years, I believe it's very difficult to grow this business. So the best we can do is to try to manage a normal attrition that will take place every year by, I don't know, 2% to 3%. So there is a trend here, slight decline going forward in those offshore activities. Okay. In terms of economic numbers, so how we see the future, you see here the estimate in January 20 20. So those are the number of December. They were published in January, but they are December numbers by Lausanne University and some economic people. I don't believe that those numbers, given the next the latest news on the coronavirus, I think we will see a decrease in growth in China, definitely also in Europe. I don't know how much, we don't know either how much, but I believe that we will rather be 2020 between 1.2%, 1.4% instead of 1 point 5% or 1.7%. But I don't expect, at least as of today, being below 1%. So that means this is basically kind of, let's say, continuation of the current situation, plusminus0.5%. In terms of real estate, this is the same picture as 6 months ago. It means basically prices went up again. They are quite high, I believe. They are pushed by the low rates, below interest rates. So as long as interest rates will not go up, I don't think that trend will change. You would agree with me that probably interest rates will remain low for a couple of years. Negatively, we don't know, but certainly low for a couple of years. So I don't think that here there is a risk short term or even mid term of a problem. If there will be a problem in the real estate market, it will become in the, let's say, residential market where we see pricing going up, many potential from buying large house for private people. And here, I expect that if the trend carries on like that, that means we beat quite a lot and the number or the growth of population is flattening. In the last 10 years, I think we have an average growth of population around 1%, 1.2%. 2019 it was 0.7%, I think. So you can imagine that the vacancy rate for this market, the housing for rents will go up, is going up. You see that in the numbers, probably also the, let's say, the promoters, so the people trying to buy new houses, we also noticed that. So that means there might be also a flattening effect going forward. But nevertheless, in some areas, we can already see that the vacancy rate is above 2%. And if there would be a problem in the real estate, it will come from a too large supply and not from an increase in interest rate. I think that's important to notice. Basically, we will carry on the same policy, target growth 3% to 4%, no change in our criteria. And this market, which as I believe is quite dangerous, which is the housing so the house for rent, we don't finance that. I mean, this is mostly 80% equity finance today by insurance or pension fund. So far, this is not a problem. The only problem is an induce an effect on the rest of the prices of the market, but we don't have any position in this in those segments of the market. This is basically equity financed by pension funds mostly. So the outlook for me, 2020, similar to 2019, difficult to say today whether we will break the record or have a new record in our results, but I don't expect to be very far off from 2020. Thank you very much for your time. The first question comes from Andreas Venditti from Vontobel. Please go ahead. Yes. Thank you for taking my questions. Maybe first one on net interest Maybe first one on net interest income. If we look at half yearly numbers, we see actually quite a difference between H1 and H2, roughly €8,000,000 or 3%. Could you maybe explain a bit this move in by the way, net interest income pre provisions, obviously, and maybe provide some guidance what would better reflect a run rate going forward on this number? And in this context, maybe you could also help us understand a bit better what impact BCV might have from the increased threshold by the SMB from 1st November onwards. Then maybe on the strategy update, thank you for this as well. You mentioned growth of 2% to 3% that you would imagine or would you expect to keep on going? My question is how easy or difficult is it to achieve in your view given or assuming that interest environment will not change? And also I think you mentioned as well, new entrants coming into the market. So maybe if you could elaborate a bit more on this. Finally, on Trade Finance, you mentioned some impact you're seeing already at the beginning of the year. Maybe you could also elaborate a bit more, provide more details on what exactly you see there? Thank you. Okay. Maybe I start with the last two questions. So the first one on trade finance, the second one on trade finance. I mean it's difficult to be more precise. My point is that we already see a decrease in the number of transaction. This has nothing to do with price. It's really the sheer number of transaction. We have also decided to be quite careful with China because when you send goods to China, you don't know exactly I mean, the boat is coming at the harbor. And then for the time being, there is nobody to take the goods out of the boat because people are confined at home. So we have to be careful. So I expect that if nothing changed that our business volume with China will not be 0, but will decrease by at least 20% to 30%. And China is an important part of our portfolio. It's not the majority, it's not 50%. But nevertheless, I could well imagine that a decrease roughly, I don't know, over the year of 10% to 15% in trade finance would be possible due to the problem in China. Being more precise on that is ridiculous for the time being. But my point was just to say, we can already see something, okay? Whether this is 5% or 2% is not a discussion, but people pretend that there is no impact on the economy and on the trade of goods for the time being due to the China has problem. This is not true. We can see it. So that was the question on trade finance. The other one was the 2% to 3%. So I was more referring maybe it's a very good question that you asked. I was more referring in terms of volume growth in our main activities. Now you're right. If I translate that into revenues, for the interest revenue, that's difficult. That's quite tough to be very precise. What we want to achieve in the minimal terms is to try to offset the, let's say, the pressure, the reduction on margin by volume growth. But we will not change our criteria, loan policy, because that would be completely wrong. But also, as you mentioned, the SMB has modified the threshold on the basis for the threshold calculation. That will help us as well. So I expect rather here kind of a stability in the coming months. But when I was referring about 2% to 3%, it's a kind of strategic growth. I mean it's clear that this is totally influenced by interest rates. But if you don't take, let's say, a pure financial analyst view in the next 12 months, if I may say so. But I take a more strategic, let's say, CEO perspective for the bank. I wanted to mention that I don't expect BCV making a 10% growth, but I don't want also BCV to make a 0% growth. We are committed to have a sustainable growth of around 2% to 3%. I hope that answer part of your question. Maybe Thomas? Yes. Okay. I'll take the first question. The decrease in net interest income in the second half of twenty nineteen was clearly linked to the slowdown in trade finance. And then, I mean, going forward, in Pascale, I gave part of the answer that effectively they see positive impact of an increased threshold of the SMB, which is slightly up. But we don't communicate those numbers, but it has a positive impact, but it's a 1 digit number. And then of course, I mean, the uncertain variable, which is the trade science income is difficult to comment. I mean, the comments have been made. Currently, there is pressure which is coronavirus, but these things can also change in 3 months. So it's an open question. So, well, I mean, all in all, you see there is a positive effect coming from the threshold, which makes us confident on a continuous development of reduced income. Thank you. The next question comes from Stefan Stalmann from Autonomous Research. Please go ahead. Good afternoon, gentlemen. I have 3 questions, please. The first one, starting with your strategy slide number 20 7. If I look at the businesses that you discussed there, is your approach in any of these businesses changing compared to what you have done in the, let's say, the last 5 years? Or is it basically business as usual in most of these businesses? The second question goes back to the point on the deposits where we have seen quite remarkable growth in the second half of the year. And it seems that a lot of them are actually coming from corporate deposits. And also if I look at the LCR disclosure from less stable wholesale deposits, so basically large corporates. And I'm wondering whether this signals that you are less aggressive than your competitors in imposing negative interest rates. I don't know if you could comment a little bit on this. And also I'm wondering I mean you basically took in about €1,500,000,000 more deposits in the second half of the year than you granted loans. I was wondering if these €1,500,000,000 of additional excess deposits in the second half were actually losing money effectively. And the final question is regarding credit quality. You have seen quite a remarkable decline of your impaired exposures during the second half of the year. And a lot of this has come from well, portfolios with a lot of small exposures like retail, SME. And I was wondering if there's any particular cleanup effort going on or if there's anything changing definitionally that would explain this? Thank you very much for the moment. Okay. So let me take the first question on the different businesses. No, this is business as usual. We want just to put more emphasis and to put more resources where we believe we can grow faster than the market. But in terms of activities, product, market approach, this is business as usual. The second question, I think you've got the point here. Probably, we are slightly nicer than some competitors in terms of negative interest rates. The application or the transmission of negative interest rates, I can tell you, we look at that every 2 months. We are right now in the process of pushing that further. This also helps to achieve, let's say, revenue without without losing revenue due to market pressure in terms of margins. But overall, I think you're right. We could be a bit more aggressive. This is right. Then you have a third question. What was the third question? Credit quality. Great. No, great. That's the 4th one, Credit Suisse. All the less aggressive. I guess the question 3b was whether you actually lost money on these excess deposits that came into the bank in the second half of the year. No, I think those are, let's say, I cannot it's difficult for me because we have one important client. You could imagine who that makes huge volatility in our business. So that comes, it comes back and it's a AAA canton. So there is no risk, but those huge swings are due to this single customer, which by the way pay negative interest also. And the last one for Thomas, the credit quality. Again, it's Helane. With regard to credit quality, very, very clear answer. No change in definitions and policy, no cleanup action. I mean, this is really due to the match of what happened with regard to new provisions or increased provisions on a gross perspective. And what happens with really kind in terms of reverses on a growth perspective and adding those things up together turned up to be a net reversal. Now, I mean, I want to pinpoint you to one element, right. That is that when we have a credit loss provision on off balance sheet exposure, It is on the operating provisions line, because we cannot put it on net interest income, right? So if you look down on the P and L, there is an effect which kind of diminishes a little bit this net reversal. But it's still marginal. I mean, as a matter of fact, it's still a net reversal, right, which is, I mean, honestly, if you think in orders kind of magnitude, right, where we have RAS provision needs additional kind of €30,000,000 €40,000,000 a year or sometimes €25,000,000 And in front of this, we have net reversals, which can be 15, which can be 25 or 30, right. So these are independent numbers. And by the end of the year, you add them up and you get the distribution, which is somewhere between minus 10 and plus 10. The bottom line of this whole story is this economy is evolving very positively. We are in a positive cycle here. This economy is doing very well. That is really the key message. 2018 already was very good, minus 6. 2019 is very good, plus 10. And I always comment that the over the cycle number is a credit loss cost, net cost of kind of 10,000,000, 50,000,000. So, we are in a very positive cycle as a matter of fact, and this was now a particular outcome. Yes. Could I maybe just follow-up on this, Thomas? I was actually mostly curious about the fact that your impaired loans went down so much during the Yes. And that came from portfolios which typically don't move around so much. I mean, if you have a large exposure in a corporate and goes impaired or not impaired, that makes a difference. But if you have a retail portfolio where your impaired loans go down by 30% in 6 months, that I was wondering if there's something else at play, whether you had a particular I mean, as a matter of fact, even in the retail portfolio, right, you have mortgages, which even at one provisional level had almost no provision because the real estate in front was really enough in value. But the workout succeeded, right? And the impaired loan, right, can then be €5,000,000 to €10,000,000 and was resolved. And then with regard to small numbers already, this is quite significant. The point is also that in the impaired portfolio, we have a couple of large position. So if you clean 1 up, then you have the impact. I mean, looking today, I mean, private customer, so basically mortgage customer in their loan, this is almost nothing. It's mostly SMEs, corporate and trade finance. So if you just clean up one part of a position or the whole part of this position, that has an impact on the numbers. The last question comes from Javier Lodeiro from ZKB. Please go ahead. Yes. Hi. My name is Javier Lodeiro. I have a couple of questions. First of all, on the strategic objectives you have said. I mean, as I understand, it's more like evolution rather than revolution. But could you maybe elaborate if there will be some related costs to which should be taken into consideration with these strategic objectives? And as well if at some point in time, you could see some kind of revenue impact as well? Then the second question would be on the expected loss regulation for which has been launched in November or December. I don't remember the month, but I mean, as I understand, there is really a large time frame until that becomes really live. But maybe you have some first considerations you can share with us. Then the third question would be, if looking at the funding situation, and this goes back to the other questions on deposits and to stuff, but bond fundings have actually declined by 2% throughout 2019. And I've seen a lot of cantonal banks, a lot of retail banks launching bonds at really low launch yields. And I was wondering if this is more a coincidence or if you or what is your just your view on that funding on funding with bonds, if that could be more of an issue for 2020? And then the last question, if I may, would be on your anniversary, your 175 years anniversary. I was more thinking if there could be any chance to have a special dividend in the current year. So objective in terms. No, you see, it's a good question, but everything is included in the target. So I expect really a continuous development of BCVE in the same trend as we had in the last 10 years, And we will get some new initiatives that will bring revenues. At the same time, probably revenue on mortgage will decline due to competitive pressure. We don't know exactly what's going to happen with negative interest rates. And cost on the cost side, we will increase our investment in digital that you can see in the amortization, but at the same time, reduce our cost in the physical network in branches. So basically, this is a whole. And if I take everything consider everything from a non stick point of view, we will carry on with the same kind of economics. That was my statement when I said, if I take a picture of BCV 2025, I don't believe that we will get a cost income of 50%. We will be roughly in the same numbers as today. We have the same kind of financial performance as of today, I hope, with some growth due to the 5 passing years. That was the question. Then for the anniversary what was the question? Anniversary, that was a Dividends. Dividends. Good question. We thought about it. And at the end, we said, no, I mean, there is no direct link between basically the dividend, the anniversary. We will do something for our employees, for our customer, for our clients and some also the public in Cantonvo. But from a shareholder point of view, don't worry. We will not spend much money. We will not build a kind of cable car above the leg. I understand. We're talking about a couple of millions here. So this is in the number. So it will be low profile, but nevertheless, we want to be festive. We want to thank our customer for being faithful. We want to thank our employees for working hard. And also we want to thank the public of Contango to help BCV every day basically. So nothing special. Okay. So I come back to more technical stuff. Expected loss regulation, that's big fun for us because basically it doesn't change anything for us. I remember you that we are an IRB bank. I remember you that our CET1 ratio is built on equity, which already has a deduction for expected loss on the total loan book. So, this doesn't change anything, which I'm saying is the CET1 ratio actually takes less equity into account as what is our balance sheet published. So, we think this will happen is our published balance sheet will show slightly lower equity and more provisions. And for the CET1 ratio, no change. So we have on the technical side, we are fully prepared obviously. So this will be very smooth and with no impact on the results. Okay. Then the third question is with regard to the funding. Well, marginal fluctuations, no change in style. Okay. No change in style. So I basically saw that I interpreted more than the like 2019 was a little bit a rather exceptional year with where bond funding actually decreased or is it I think we didn't issue a bond, I think, a public bond in 2019. I think we did it 2018. We might do it in 2020, depends on the condition of the market. So nothing to worry about or nothing to notice. Okay. Okay. Thank you very much. Thank you. I think we can end the call. There are no other questions, sir. Okay. So I think we can end the call. Thank you. Thank you very much. Thank you very much everybody. Bye bye.