BNP Paribas' (BNPZY) CEO Jean-Laurent Bonnafe on Q4 2015 Results - Earnings Call Transcript

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BNP Paribas SA (OTC:BNPZY) Q4 2015 Earnings Conference Call February 5, 2016 8:00 AM ET


Jean-Laurent Bonnafe - CEO

Yann Gerardin - Head, Corporate & Institutional Banking

Lars Machenil - CFO

Philippe Bordenave - COO


Tarik Mejjad - Bank of America Merrill Lynch

Delphine Lee - JPMorgan

Jon Peace - Nomura Securities

Pierre Chedeville - CM-CIC Asset Management

Jean-Francois Neuez - Goldman Sachs

Bruce Hamilton - Morgan Stanley

Stefan Stalmann - Autonomous Research

Alex Koagne - Natixis

Jacques-Henri Gaulard - Kepler Cheuvreux

Anke Reingen - RBC Capital Markets

Piers Brown - Macquarie Research

Robin Down - HSBC

Kiri Vijayarajah - Barclays Capital

Flora Benhakoun - Deutsche Bank


Welcome to the presentation of BNP Paribas 2015 full-year results. For your information this conference is being recorded. Supporting slides are available at BNP Paribas IR website [Operator Instructions]. I would like now to have the call over to Jean-Laurent Bonnafe, Chief Executive Officer. Please go ahead, sir.

Jean-Laurent Bonnafe

Thank you. So today I will comment the first three chapters of the slides that we have published this morning. Yann Gerardin, the head of our CIB division, will comment the part on CIB's results and its new transformation plan that we're announcing today. At the end of course we will be pleased to take your questions together with Philippe Bordenave and Lars Machenil.

So if we start with our key messages for 2015 on slide 3, the first thing to note is that we have showed 9.1% revenue growth in our operating divisions is a positive contribution from all our divisions. In terms of pre-tax income, this translated into 13% gross for operating divisions in 2015.

At group level cost of risk was essentially stable, staying at a moderate level. Overall the group confirmed a strong profit generation capacity with a net result of €6.7 billion in the year which will allow us to propose a dividend distribution of €2.31 per share representing a payout of 45%.

On the back of the solid results, the regulatory ratios has steadily increased during the year. Our fully loaded common equity Tier 1 ratio reached a 10.9% while our leverage ratio stood at 4% at year-end. Globally in 2015 the group delivered a good operating performance with a very solid organic capital generation. This good performance was achieved thanks to the integrated and well-balanced business model of the bank. We generated more than 85% of its revenues in worthy markets in 2015, Europe representing 73% of our revenues.

On slide 5 you can see the main exceptional items of the year which totaled minus €700 million. On the negative side there were many due to the final transformation costs related to our simple and efficient plan, the full impairment of P&L's goodwill that we announced at the end of December and an additional provision of €100 million related to the remediation plan in the U.S. and the contribution to the resolution process of four Italian banks for a total of €69 million. On the positive side gains were mostly related to the sale of Klepierre and to the OCA DVA.

Moving to slide 6 you can see the good performance of our operating division and the €6.7 billion of net income which if netted of the one-off elements I just mentioned actually exceeds €7.3 billion in 2015. On a comparable basis these equates to a 7.3% improvement on last year. Hence the return on equity for 2015 excluding one-offs arrives at 9.2% which is equivalent to 11.1% in terms of return on tangible equity. 2015 earnings per share stand at €5.14.

Focusing now on revenues of the operating division, you can see on slide 7 that they improved everywhere plus 1.6% in domestic markets, plus 14.5% in international financial services and plus 13.2% in corporate and institutional banking. There was the effect of the acquisitions made in 2014 and that of a positive ForEx. On a comparable basis, revenues of the operating divisions progressed by 3.5% on last year, a solid performance for domestic markets and a strong growth for both IFS and CIB.

Advancing to the next slide number 8, you can see the costs of operating divisions were also affected by the bolt-ons made in 2014 and by the ForEx effect. At constant scope and exchange rates, costs progressed by 3.2% while the cost/income market slight improvement. Costs were impacted by the implementation of new regulations and in strengthening our compliance as well as by the new completion of our development plans. This increase was mitigated by the benefits accruing from the ongoing implementation of our Simple & Efficient plan.

If you turn to slide 9 you can see that our Simple & Efficient plan actually exceeded expectation for 2015, delivering over €2.7 billion of recurring cost savings. Transformation costs were as expected at €620 million. I remind you that 2015 was the last year where we incurred transformation costs related to Simple & Efficient.

Thanks to our better-than-expected performance in 2015, we have been able to review and upgrade our expectation for 2016 and we have actually increased our 2016 target by 10%, bringing it to €3.3 billion. This in turn will allow us to offset the anticipated increase in compliance cost in 2016. Shifting to cost of risk on slide 10, you can see that at group level cost of risk remained moderate at 45 basis points. Net of the scope effect link to the acquisitions made in 2014 the underlying trend actually showed a slight decrease. Looking at the single businesses, CIB corporate banking showed very low cost of risk in line with the previous year.

Turning to slide 11, in our domestic markets cost of risk remained low in French retail and even very low in Belgium. DNS cost of risk decreased while doubtful loans inflows continued to reduce significantly during the year. In the other retail businesses, Europe-Med's cost of risk was essentially stable, BancWest remained on the very low level and personal finance marked reduction at constant scope.

Moving out to our financial structure on slide 12, you can see the further improvement of our regulatory ratios that I mentioned. Taking them one at a time our common equity Tier 1 ratio stood at 10.9% with an improvement of 60 basis points in the year essentially on the back of 2015 results net of dividends. Our Basel III leverage ratio reached 4% as it benefited from the higher common equity Tier 1 in 2015 and from the continuing reduction of the leverage exposure in our capital market activities.

Our liquidity coverage ratios stood at 124% at year-end 2015. And the group's immediately available equity results remained huge at €266 million, providing for more than one year of room to maneuver.

On slide 13 we show that our netbook value per share continued to grow as it reached €70.9 at the end of the year. Since 28 it has been growing at a compounded annual rate of 6.5% which clearly illustrates the continued value creation through the cycle. To be noted also that our net tangible book value per share stands at €60.2.

On slide 14 you can see that our full cash proposed dividend payout of €2.31 per share is the highest level since before the crisis in absolute terms. In terms of payout it is exactly in line with our 45% payout target. At last week's price it equates to a very attractive dividend yield of 5.3%.

Turning to slide 15, you can see that this year's good overall performance is clearly evidence that our 2014-2016 business plan is well on track. Our revenues have grown by €4.5 billion in two years with an annual average revenue growth of 1.4% for domestic markets, 9% for IFS and 7.4% for CIB.

Our geographic plans have been successfully implemented one year in advance with 2015 revenues in Asia-Pacific reaching €3.2 billion while in CIB North America they stood at €2.2 billion. Hence within the framework of its 2014-2016 plan the group is confirming its return on equity target for this year which is to achieve 10% return on equity based on a 10% core equity Tier 1 ratio.

This year we started work on our new plan for 2017-2020 that we'll present to the market next year. It seems that the cost of equity of 10% seems to be an anchor point for the market. As such our leitmotif when developing the 2017-2020 plan will be to reach a corresponding return on equity.

To conclude this first part of the presentation please advance to slide 16 where we show the good progress we're making in the implementation of the remediation plan agreed with the U.S. authorities and in the further strengthening of our internal controls and compliance. The last quarter of the year we booked an additional provision of €100 million for the industrialization of existing systems.

If you could now advance to the divisional results starting with domestic markets on slide 18. The gradual pickup in loan demand across the euro zone was confirmed by the 1.6% loan growth of our domestic markets.

Loan growth was driven by Belgian return and our specialized businesses. Growth in France is recovering progressively while in Italy just moved into positive territory in the last part of the year. Deposit gathering remains sustained with a 6.5% increase or plus 4.5% if we exclude the effect of the acquisition of DAB Bank.

We also continue to grow private banking assets under management in our three main markets, France, Belgium and Italy which marked a combined increase of 5.3% in 2015 to nearly €184 billion. In November Arval closed the acquisition of GE Fleet services in Europe which helped further consolidate its European leadership. Beyond this in 2015 Arval enjoyed a strong 7.5% organic growth of its financed fleet.

Looking at the P&L, revenues were up 1.6% at close to €60 billion as Belgian retail and our specialized businesses continue to perform strongly. On the other hand, the low rate environment continued to weigh on net interest income as we're seeing in France and Italy for example. Throughout 2015 all balance sheet savings have developed well, helping to sustain commission income.

Operating costs were affected in particular by one-offs in BNL which were mostly related to the contribution to the resolution process of four Italian banks as I mentioned before. Net of this, on a comparable basis costs were up 0.8% in 2015. Cost of risk in our domestic markets decreased, especially at BNL, leading to a pre-tax income improvement of 6.4% to €3.6 billion which is a good performance.

In our domestic market you can see moving to slide 19 that we're continuing to develop our fully digital mobile bank, that is Hello bank! which is now well established in five euro zone countries with 2.5 million clients. We have accelerated its development in Germany thanks to the acquisition of DAB Bank, but the organic client acquisition is strong with about 400,000 new clients in 2015. Globally Hello bank! has €24 billion of deposits and €80 billion of assets under management and at year-end 2015 generated 8.7% of individual clients revenues.

You can see by advancing to slide 20 that alongside the development of our digital offer we're adapting our retail networks on an ongoing basis. For example, we've been optimizing our footprint in our three main markets for some time. At the same time, we've been adapting and modernizing or branches, rolling out new formats and digitalizing our branches.

Given the changing customer behaviors and expectations as well as the evolving landscape on the back of digital transformation, our domestic markets have developed new midterm ambitions to be implemented over the coming years as you can see from slide 25 to 27. You can see on slide 26 to do this we actually intend to capitalize on our differentiating capabilities such as our integrated multichannel distribution model, the network optimization, I just referred to it which is underway in our domestic markets together with branch formats reorganization, the successful development of Hello bank! and the capacity to swiftly roll out technological innovations, leveraging assets such as L'Atelier by BNP Paribas, our technology and innovation tracking unit active in three continents.

Over the coming years, as you can see on slide 27, domestic markets will focus on more digitalization combined with more customization for all customer segments. Ambitions revolve around our ability to create digitalized and differentiated service models to reinvent customer journeys so that to meet all customers' potential needs, to improve client knowledge in order to optimize our commercial proactivity and reactivity, to boost digital acquisitions and sales especially by increasingly proposing renewed success for our entire product offer and to develop comprehensive service offers such as our recently launched Arval Active Link and in which are offers through innovation and partnerships with FinTechs.

Moving now to the other part of our retail banking and services, that is international financial services on slide 28, you can see that we had good business activity in all the businesses in 2015. Most specifically personal-finance continued its growth drive. International retail banking had a sustained business activity while continuing to develop the digital offering and insurance and wealth and asset management showed good asset inflows in all the business units.

At the same time we're successfully proceeding with the integration of the bolt-on acquisition of last year that is Bank BGZ in Europe-Med and LaSer in personal finance. Looking at the global P&L we saw revenue growth across all the businesses and an improvement of pre-tax income to €4.8 billion.

To go into a bit more detail for each of the businesses, you can see on slide 29 that personal finance continued to expand its reach thanks to new partnerships. Loan outstandings increased by 15% including LaSer and by 4.3% like for like on the back of improving demand in the eurozone. Personal finance revenues exceeded €4.7 billion, driven by good growth in Germany, Belgium, Italy and Spain and delivered double-digit pre-tax income growth to €1.35 billion which illustrates a strong performance.

Moving to our non-eurozone retail activities, let's start with Europe-Med whose results you can see on slide 30. In Poland we're well on track with the integration of Bank BGZ that we expect to generate €94 million of additional synergy by 2017. And business development in Europe-Med has continued throughout 2015 with good volume growth in both loans and deposits and with continued development of our digital banking portal.

On a comparable basis revenue progressed by 10.2% in line with volume growth. Given an essentially stable cost of risk pre-tax income improved by 8.2% like for like to €483 million, marking good income growth.

In the U.S., slide 31, BancWest maintained good business drive as it continued to grow deposits at the rate of 6.1% and loans at 6.7% thanks to good growth of corporate and consumer loans. We also continued to steadily grow our private banking assets under management which topped €10 billion. At constant scope and exchange rates, revenue progressed over 6% on the back of volume growth while costs continue to be impacted by higher regulatory costs. Net of these operating costs were up 5.3% for the year. Cost of risk remained low and pre-tax income came in at a slightly higher €910 million. As BancWest benefited from the strong U.S. dollar position versus last year in euro terms its pre-tax income increased by over 24%.

To complete the IFS overview please advance to slide 32 on our savings and insurance businesses which saw a 6.8% increase in their assets under management to €954 billion. In 2015 we saw good net inflows in excess of €35 billion with all our main businesses contributing positively.

If we look at the insurance business it continued to successfully develop its activities. On the back of this revenue progressed by 5.7% to €2.3 billion and pre-tax income progressed by 6.8% to stand at €1.3 billion. If I turn to Wealth and Asset Management revenues grew in all the businesses and topped €3 billion in 2015. Good cost control meant positive jaws leading to a 4% improvement in pre-tax income to €740 million through 2015 with the good performance across all our savings and insurance businesses.

In 2016 international financial services will continue along its growth path. As you can see on slide 34 and 35 the division will further benefit from partnerships agreements in its insurance and personal finance businesses, especially for personal finance in targeted sectors such as auto and distribution. IFS will continue to strengthen cross-selling within the group, in particular with CIB for Europe-Med and BancWest and with the group's banking networks for the specialized businesses.

Moreover, IFS will seek to optimize the client experience for all client segments as well as continuing to develop its private banking and it will pursue selective growth in specific targeted countries. The division will further implement digitalization and new technologies across all businesses, especially in its digital banks, in order to foster the development including a new countries. Lastly, IFS will continue to industrialize its platforms in order to improve operating efficiency and it will complete the integration of LaSer within personal finance and Bank BGZ in Europe-Med.

I would now like to hand over to Yann who will take you through the CIB results and the new plan.

Yann Gerardin

Thank you, Jean-Laurent. Good afternoon to all of you. First, I will go over the performance of CIB in 2015 and then review the strategic vision and transformation that we will implement over the next few years.

So let's start with CIB overall results for 2015. If you move to slide 36, you will see that CIB achieved a strong performance. Revenues increased by 13.2% compared to 2014, exceeding €11.6 billion and growing in all business lines and regions.

Operating expenses just below €8.3 billion progressed by 11.5% from their 2014 level, generating positive jaws effect. Our cost to income ratio improved at 71%. Overall the CIB net profit before tax jumped by 17.9% in 2015, above €3.3 billion translating into an 18.6% pre-tax return on equity allocated to CIB.

Let's go into more detail about the revenues of our business lines on slide 37. Global market revenues increased by 18.1% with a strong progression in equity and prime services as well as in FICC. Securities services revenues grew by 41% still supported by higher transaction volumes and assets under management as well by significant new mandates in the last quarters.

Finally, corporate banking revenues progressed by 5.7%. All regions have enjoyed growth of our corporate banking businesses. If we exclude the impact of our voluntary downsizing of the E&C business which means in all of the CIB business lines by 11% -- which means all the CIB business lines achieved a double-digit underlying growth in 2015.

Moving to slide 38, our strong revenue progression was supported by good development of our activity. Our global markets business line has continued to gain market share. The business line confirmed its strong positioning of the primary markets as BNP Paribas ranked first for all bonds in euros and nine for all international bonds.

Security services maintained its first -- development ranking as first European and fifth worldwide. Finally, corporate banking continued to grow selectively. The business line maintained its leadership in syndicated loans in Europe and strongly reinforced its position in cash management globally. The downsizing of the energy and commodities financing line is largely completed and the activity is now well positioned.

If you proceed to slide 39, we can say then BNP Paribas today benefits from the CIB which is a solid and profitable platform ready to act out of strength. In the context of retrenching of some of our European peers CIB enjoyed an improved global positioning thanks to regular gains in market share, also leveraging the success of our regional plans in APAC and in the U.S. as Jean-Laurent alluded to earlier.

Our profitability is amongst the highest of the CIB industry in Europe. These successes largely stemmed from the full integration of CIB within BNP Paribas. We have an adequate rate on 31% of the capital allocated by the group to its operational divisions.

In addition, CIB has been very disciplined and agile as proved by many recent actions such as our early adaptation to Basel III. As I said, we're also finalizing the downsizing of our energy and commodities finance business lines.

Last segment but not the least one in 2015 while delivering strong results in our global market business line we reduced at the same time our leverage exposure by €166 billion. Of course, all of this while reinforcing our compliance and control environment and even initiating a conduct program within CIB.

Now on slide 40, I would like to come back for a moment on our strategy and our business model. The question here being what role do we want CIB to play for BNP Paribas future? BNP Paribas is a leading European bank and we know from the financing of the European economy is increasingly disintermediate it.

We think that in the long term BNP Paribas is ideally placed to take full advantage of this growing disintermediation. To achieve this ambition BNP Paribas needs a strong, complete but obviously right sized CIB that is able to bridge the needs of our two client franchises, our corporate client franchise on one side of the bridge and our institutional client franchise on the other side of the bridge.

This is why our business model is centered on the service of both of our balanced client franchises. This also implies that while permanently adjusting our setup we continue to leverage all our regions and business lines.

Our comprehensive product offered from transaction banking and securities of services to financing advisory and global markets which is proposed to both our client franchise is at the heart of our strategy of our CIB in favor of BNP Paribas. This business model deployed within an integrated group with retail networks and international finance services is what makes us fundamentally different from our competitors. In that sense, it also contributes to explain our recent gain in market shares which of course we expect will carry on as our European competitors continue to retrench.

If you now please advance to slide 41 you can see then this strategy which is fully relevant in the long term is only viable if we continue to swiftly adapt to new constraints. Some of these constraints are already incurred by the group but not yet allocated to the businesses like the contribution to a Single Resolution Fund. Based on group current core equity Tier 1 ratio of 10.9% this would reduce CIB pre-tax RONE by about 4 points.

In addition, we know that we will face new regulatory constraints in the future, the calendar and magnitude may still be uncertain, however waiting for more clarity is not an option. We have decided to start a transformation program which we expect will generate an additional 8 points of pre-tax RONE by 2019 on a like-for-like basis. This will obviously be fine-tuned and extended to the 2020 horizon in the framework of the forthcoming group three-year plan.

Moving to slide 42, we can begin to review in further detail our CIB transformation plan which is based on three distinct colors, complementary ones and aims to sell obviously our strategy. First pillar, we will focus our activity to free up €20 billion of RWA. Half of these savings will be reinvested to fund the anticipated market growth and our targeted gains and market shares from retrenching competitors. This will result in an increase by €500 million in CIB revenues.

Second pillar, we will also improve our operational model to achieve close to €1 billion in cost savings. Third pillar, we will selectively grow our business through a series of targeted initiatives that are in full integration with our long-term strategy and let me say certainly if they are in full integration with it. These carefully selected initiatives will generate €1.6 billion in additional revenues for CIB on a like-for-like basis.

We will now concentrate on the improved access on slide 43. Our savings plan is obviously a key element of our transformation program. All CIB functions and business lines as well as all regions will contribute to our mission of saving €1 billion in operating expenses.

The savings plan is based on 200 identified projects allowing and industrializing our operational model and deeply transforming the entirety of our sector. In a nutshell we will simplify our organization, accelerate the development of our mutualized platform, industrialize our IT and operations and finally increase the digitalization of our processes. These cost savings will allow us to keep our cost base flat and consequently to reduce our cost to income ratio by 8 points and the 2019 horizon on a like-for-like basis.

We turn now on slide 44 to analyze our two other pillars focus and grow together to improve our return. On the focus side as we're in a capital constrained world we will relieve our portfolio of €20 billion of RWA that are not productive enough, such as a long-term structured product with a short-term residual maturity. And we will put back to work half of these to fund the natural development of our activity.

As we accompany the growth in the CIB industry and continue to gain market share from retrenching peers. When we take into account our growth initiatives our RWA before advance overall only increase by 1.3% per year between now and 2019. These growth initiatives are indeed targeted on the business line and have a low capital intensity but a high potential of fee generation such as advisory, trade finance and cash management, securities services where we have recently won significant new mandates.

More specifically, we will also leverage our competitive positioning in derivatives, develop our digital platforms and very selectively grow our geographies. Together our focus on growth pillars will result in an increase in our revenues by €2.1 billion in the 2019 horizon.

Slide 45 we can review the anticipated trajectory of each of our main categories of activity. These categories by the way do not reflect organization but more of a typology of activity than I was alluding to earlier. The processing businesses, namely transaction banking and securities services which incur our client relationships with our corporate client franchise and our institutional client franchise, will continue to grow.

They will therefore benefit from increased allocated resources and investments. We aim to keep our current positioning and financing and advisory, maintaining our resource allocation but focusing on the fee business. We will also continue to accompany the disintermediation of the financing of the European economy linked to the development of our corporate debt platform which gathers our loan and bond structuring and execution forces. Finally, we will pursue our efforts in our market intermediation businesses in terms of resource allocation while gaining additional market shares as our European competitors continue to retrench.

Slide 46, to complete the review of our transformation plan we will be able to see the original translation. In Europe we already are a major player of the CIB industry. We want to reinforce our competitive positioning to emerge as an even stronger leader, servicing BNP Paribas European strategic clients as well as our Asian and American strategic clients doing business in Europe. Meanwhile it is in Europe and we also achieve a deeper transformation in terms of cost savings and resource optimization.

In Asia-Pacific in the continuity of our strategic plan that we have completed one year in advance we will leverage on the regional development. For instance, we will continue to grow the Europe-APAC cross-border business for corporates.

Finally, in the United States, where we obviously need to be present, we will reposition our franchise and the service of BNP Paribas clients with multi-products of global needs. This will imply an effort of selectivity, mainly on the small institutional client base which has already started.

So to sum up, if you could now advance to slide 47, what will CIB look like in 2019? On this horizon CIB will have grown its revenues by at least 4% per year excluding upcoming headwinds while reducing its cost to income ratio by 8 points as we saw already on a like-for-like basis all in all generating an additional €1.6 billion in pretax profit.

It will also be a CIB further integrated within BNP Paribas having accomplished its digital transformation and fully dedicated to the financing of the economy with the utmost ethical standards. This is an ambitious project but it will benefit our clients as we continuously improve the way we serve them. It will create value for our shareholders and it will be highly motivating for our employees.

Thank you very much for your attention. Now back to Jean-Laurent for the final part.

Jean-Laurent Bonnafe

Thank you, Yann. The third and final chapter of today's presentation regards the evolution of our regulatory ratios. Let's go first to slide 49. As you know our SREP communicated Tier 1 ratio requirement for 2016 has been set at 10% and we're well above this level. Our anticipated requirement for 2019 including the fully loaded G-SIB buffer of 2% is 11.5%.

Our target is to be at this level as early as mid-2017 thanks to the combination of organic capital generation and active capital management, together the sale or IPO of First Hawaiian Bank. Beyond this, BNP Paribas is targeting a 12% fully loaded common equity Tier 1 ratio as of 2018, including a 50 basis points management buffer which is consistent with our strong and recurring capital generation through the cycle. At the bottom right of the slide you can see actually the steady increase of our common equity Tier 1 ratio over the cycle.

In terms of total capital ratio, you can see by advancing to slide 50 that the requirement stands at 12.5% in 2019 and our target is to be above 15% by that time, therefore providing a buffer of at least 2.5% above the minimum requirement. This will mean that our total capital will exceed €100 billion, as such warranting a high credit quality for BNP Paribas.

Finally on slide 51, you can see the TLAC requirement for January 1, 2019 which is set at 20.5%. Our target is to be at 21% at this date and we will issue some €30 billion of TLAC eligible senior debt over the next three years. This means roughly €10 billion per year to be done within the usual medium-, long-term funding program of the group of around €35 billion per annum.

This concludes the presentation of our full-year 2015 results. So I hope you will return the following.

First, BNP Paribas generated solid results thanks to its client focused, integrated and diversified model. We delivered a good performance in all our operating divisions. We have confirmed a solid organic capital generation, our fully loaded common equity Tier 1 ratio increased to 10.9% and we confirmed our target for 2016 and have started work on our new plan for 2017-2020 that will be presented next year.

So thank you very much for your attention. And we're now ready to take your questions.

Question-and-Answer Session


[Operator Instructions]. The first question is coming from Mr. Tarik Mejjad, Bank of America Merrill Lynch. Please go ahead, sir.

Tarik Mejjad

I have a couple of questions plead. First on BNL, can you please give us the guidance in terms of the evolution of the loan growth from here and the provisioning given that you just mentioned that you've almost completed the deleveraging of the SMEs towards export-driven corporate?

And the second question is on CIB. It's very useful data you give there on guidance. But I just want to have a sense on what's the split in terms of contribution costs and revenues growth and also RWAs growth or deleveraging by between global markets and corporates banking and securities services. That's it for me, thank you.

Jean-Laurent Bonnafe

So for BNL yes, basically we have implemented and finished the deleveraging plan so we're back to growth. We saw at the second part of the year some growth in loan outstandings, so this is very much what's going to happen for the future. And in terms of cost of risk you can expect that this year, 2016, we will see another decrease in terms of cost of risk as we saw this year compared to 2014. So of course bit too early to say what will be the magnitude but this is the cycle that is starting again in the right direction. So we're quite confident on the ability for BNL to push down the cost of risk and to redevelop the business model in the new strategy we have started to implement two years ago. So Yann, for CIB?

Yann Gerardin

For CIB on the if I understood correctly your question of €20 billion RWA effort, it's mainly on the global market businesses, €12 billion out of €20 billion coming from the restructuring of various portfolio asset securitization legacy wind down, etc., €8 billion coming from better usage I would say of corporate loan books. So 60/40.

And as far as the growth is concerned a lot coming from as I mentioned earlier from our processing businesses, securities services for the growth, cash management transaction banking and obviously a complement by the global markets.

Tarik Mejjad

And in terms of cost if I may ask?

Yann Gerardin

In terms of cost, as I said it's a global effort from every business line, every region. And the biggest participant is global markets.


The next question is coming from Delphine Lee, JPMorgan. Please go ahead.

Delphine Lee

Yes, good afternoon. Thanks for taking my questions. Thank you for all the disclosure today, there is quite a bit. I have actually three questions. First of all, to start on the revenue growth in CIB, you have displayed a double-digit revenue growth in 2015 which is very strong. I was just wondering at constant scope and exchange rate how much that is? Because when you look at loan growth in corporate banking it was just 3% at constant scope and exchange rate. So I'm just trying to figure out a little bit the underlying excluding the ED FX impact how much of that is for corporate banking?

And secondly, on your oil and gas exposures which were quite useful, do you mind running a little bit with us on how you think about the credit risk here and if you have any sensitivity that you can run with us in terms of the oil prices at this level, if you need additional provisioning below a certain level or anything that could help us assess a little bit the riskier?

And just the last one is on your ROE target at the group level of 10% which is based on 10% to each one for 2016, I guess this is just a minimum you're targeting? Or because obviously each one is going up and you are already at close to 11%, so just wondering if the ROE will be different based on the higher CET1 or how you're thinking about it. Thank you.

Yann Gerardin

Your first question on constant rate it will be an increase of 5%.

Jean-Laurent Bonnafe

Okay, so this is for corporate banking.

Yann Gerardin

For the entire CIB.

Jean-Laurent Bonnafe

Yes, the entire CIB, sorry. And then looking at the portfolio in oil and gas, certainly we do not need additional provisioning. So this is it. So there was the remaining question on 10%.

Lars Machenil

Maybe Delphine you can rephrase your last question.

Delphine Lee

Sorry, I was just I wanted to clarify a little bit your comments on the 10% ROE for 2016. You seem to be on track looking at 2015 number, but you mentioned that it's actually based on 10% CET1. So given that CET1 is going up towards well north of 11%, is that unchanged or do you consider that as a minimum?

Jean-Laurent Bonnafe

The target of the plan is the target of the plan and we're committed to deliver the target of the plan.

Lars Machenil

Yes but no, your question is relevant because we as we're going to be at 11%-plus in terms of common equity Tier 1, actual common equity Tier 1, instead of 10% we were thinking of when we built the plan and the actual common equity -- the actual return on equity, sorry, will be rather in the region of 9% to 9.5%.


The next question is coming from Jon Peace, Nomura. Please go ahead.

Jon Peace

So two questions please. The first one, just following on from the previous question about asset quality, if you feel quite good about your oil and gas exposure, do you think the group cost of risk might continue to improve in aggregate next year or are there any other sort of hotspots you're worried about? And then the second question is just on the outlook for revenue growth in France in French retail. Obviously a little negative at the moment given the rate environment. When might you hope that that might swing positive? Thank you.

Philippe Bordenave

Yes, Jon, thank you for your questions. I will maybe take the first one on asset quality. If you look through the majority of our businesses you've seen that they are what I would qualify at moderate levels which is good.

The one which might not necessarily be moderate is BNL where we said that the cost of risk is tapering off on the back of the repositioning that we have done and where also the entry in nonperforming has plummeted. So that's the one where you could expect this tapering off to continue rolling into 2016.

Jean-Laurent Bonnafe

And about the French retail, this year we had basically the impact of the low rate environment but also the fact that we have started adapting the network with some branch closures. We believe that this year 2016 revenues should stabilize this year.


The next question is coming from Pierre Chedeville, CM-CIC Market Solutions. Please go ahead.

Pierre Chedeville

One question regarding regulatory cost. We have seen yesterday that ING was forecasting a 35% increase in this type of cost. You talk in terms of points. But could you be more explicit in terms of progression in percentage and in amount, absolute amount ING for instance is talking about €850 million. What would be your number?

My second question is related to your macroeconomic views regarding your CIB plan. Because it's quite ambitious I would say in terms of revenues and when we see that we have the impression that you're quite optimistic in terms of GDP growth. Would you give -- GDP growth or inflation things like that.

Could you give us three or four metrics that you have in mind regarding macroeconomics in the two coming or three coming years? And last question, what would be in your opinion the impact of reaching a TLAC within three years? Considering the five that you have to issue different than your bonds I would say do you think that there will be an impact there that we'll have to implement in our models? Thank you.

Philippe Bordenave

Pierre, I'll take your first question. So with respect to the regulatory costs, indeed what we have seen over the past couple of years is that it has been going up. And what we have tried every time is to try to compensate it as much as we can through our Simple & Efficient network.

If you look for example in next year which is the last year of our Simple & Efficient to deliver the full amount we lifted basically the synergies coming from that plan from €3 billion to €3.3 billion. And basically that lift will help us offset the raise in regulatory-related cost. So that's kind of the order of magnitude in which you should see the cost.

Lars Machenil

As far as I just have the first of the TLAC bonds, I would like to say that a little bit and unknown territory because we're I think through a category of bonds but an extent even the legal framework is not completely unknown from what while you have seen the government, the French government bill that has been made public recently. And that is relatively well designed because it makes that -- it gives a preferential treatment to all the other categories of debt and hence the straightforward senior debt is not characterized as being barely able or whatever but it is just not given the preferred treatment that is reserved to the other debt.

So it remains just normal senior debt. Just because it's not preferred it's available for a bail-in if necessary. So at this point given that way of doing that the premium we're going to be realize to pay for that debt is not going to be too big. The benchmark we have in mind is the cost of the debt of the holding companies, bank holding companies in the U.S. And as you know when the U.S. bank holding companies are issuing senior debt it's at a higher rate than when the operating companies at lower level are issuing. And the spread, the premium which is exactly technically the equivalent of the TLAC premium because precisely that debt of the holding is considered as TLAC.

That premium is limited. It's around 30 basis points, 20, 30 basis points. So maybe you can take that for your models if you want as a kind of first approximation of something while we still have to piece together.

Pierre Chedeville

My question regarding macroeconomic items.

Yann Gerardin

Sorry. We do not expect any major disaster.

Pierre Chedeville

That's good news.

Yann Gerardin

We consider an average between the estimate from the research analysts we had looked between 1% to 2% for both revenue pool of the CIB industry and inflation. So basically on par and we think then the 4% even if it may seem optimistic to you is still under what we delivered recently. So this means when we really trust our capacity in addition to the market growth models, again market shares and again the fruit from our specific development plan.


The next question is coming from Jean-Francois Neuez, Goldman Sachs. Please go ahead.

Jean-Francois Neuez

I had two questions please. The first one is on the CIB us to income ratio improvement. So I guess when I'll back at your plan, from 2014 you had planned an ambitious revenue growth which you are achieving right now. And that was to be accompanied by strong efficiency gains which was in a sense natural to forecast.

But it hasn't really taken place yet in CIB and despite those revenue having come through. And I just wanted to understand essentially what you're planning to do different, essentially now to catch up with what you had as a cost to income target for next year initially? Because in a sense we're talking about a catch-up to the 2016 target in 2019 and I just want to understand the lessons learned and the levers for improvement here in a bit more detail if that's okay.

And secondly, there was a question on your ROE which would be achieved on a 10% capital base and I guess the world has changed, rates are lower, capital ratios are higher and everything and we all understand that. I'm just trying to now would like to understand what you're planning to do to respond to these, whether you believe that essentially you need to sit and wait that the rates at some point go better or whether you think that you will have to adapt in a more structural way and maybe on the cost side somewhere else in retail or whether we will just have to accept that returns will have to stay more or less where they have to be for the foreseeable future? Thank you very much.

Yann Gerardin

On the cost to income ratio to think obviously we have been able to deliver on the revenue side and less so on the cost side. But in time and to increase significantly all the regulatory costs which we're not anticipating and the time of the elaboration of a plan. And in addition to that we did include recently in CIB [indiscernible] businesses which is going benefiting [indiscernible] quote, unquote higher cost income ratio.

Jean-Laurent Bonnafe

And then looking at the next plan 2017-2020, as I said looking at the cost of equity that is around 10% in the market. Of course, one of the first priorities for that new plan will be to reach corresponding return on equity knowing that the bank at that moment will be at 12% around core Tier 1 ratio. So we're moving from basically a 10% on a 10% normalized bank cost core Tier 1 ratio and we're going to move up, this is going to be one of the most important I would say targets to move up to 10% but on 12% core Tier 1 equity back.

So this is basically one of the major targets for the new plan or at least the direction we have to look at knowing that as of today, cost of equity in the market is 10%. So most probably this 10% cost of equity in the market will go down slightly when all the ramp-up in terms of regulatory framework, TLAC everything will be I would say done. But knowing that 10% is the current situation, one of our first priorities is to try to look at how can we deliver that 10% on the bank that will be basically built on the 12% core equity Tier 1 ratio. So this is the situation.

Lars Machenil

So it would mean a 20% improvement over four years which is 5% improvement per year in terms of everything being equal in terms of net result. It's maybe not completely out of reach and anyway this reflection maybe it's too early to fully answer your question because we will try and do that next year when we deliver the path. But clearly it will orient all our reflection and all the business plans or the project that the different businesses are going to submit for that plan are going to be looked at with that, well, that target in mind.

Jean-Francois Neuez

Okay, that sounds very confident actually. I think in your response that you have already some idea as to what you're planning to do.

Philippe Bordenave

We'll take the next question Jean. We have one year to work.


The next question is coming from Bruce Hamilton, Morgan Stanley. Please go ahead.

Bruce Hamilton

Firstly, on the 12% core Tier 1, I mean it sounds as though you're thing you think that because of the resilience of your model you can run with the 50 bps buffer where others are looking to run higher. Or are you taking into account any potential change either in the G-SIFI buffer or around the treatment of buffers regarding MDA? That was the first one.

And that secondly, on the CIB restructuring, in terms of the phasing of the €1 billion cost saves and the cost to achieve, is that going to be fairly similar and fairly level loaded through the period? Or will the cost saves be more back-end loaded? And on slide 43 linked to that where you talk about sort of regulatory costs and inflation, is that again fairly spread out or does that come upfront?

I'm just trying to see [ph] how the cost saves. And then sorry third question, just on how you're thinking about the U.S. stress tests, how relaxed or concerned you are, any changes you need to make to the model ahead of those? Thank you.

Lars Machenil

Yes on the target, the 50 basis points, we think that, yes, on the MDA clearly the situation seems not to be stabilized. You have seen that the EBA has officially asked for clarification on that matter, meaning that the kind of harsh stance that they have taken and that has been followed by the SSM is not well necessarily it is carved in marble. It has been the case for this year. But while it's not completely of use and everybody admits that there is a kind of well when you compare all the text that have been written about the MDA starting with the CRD TR and then the EBA and then the SSM, it's not completely consistent.

So something has to be changed and clarified. So it may change, it's true. The G-SIFI buffer while it changes every year, each and every year because it's a relative positioning, so all this can change. What we have said is just that whatever the target for us we're comfortable with 50 basis points buffer in terms of management buffer because we're keen not to pilot capital up to too high levels because of the previous questions. For you as shareholders it's not ideal so it's our duty to have the strictest way of managing that.

At the same time we need some buffer because when you -- well, you have to be absolutely sure to be above the threshold because we want absolutely want to be able to pay the hybrid Tier 1 coupons whatever happens. So we need to have a comfortable buffer. so this is why we looked at what had happened through this continual crisis starting with 2008 where in the middle of a dislocation of everything and all the markets and the biggest crisis ever seen since the 1930s, we had a reduction of 30 basis points of this common equity Tier 1 on the basis which was roughly half what it is now.

So the stability today is much bigger. And on top of that this is after having reserved for the dividends. So in any case we can always if there is a difficulty we can always decide to reduce the level of dividends in a very big crisis situation. So clearly we would give the priority to the payment of the hybrid Tier 1 coupons and the dividends would be cut first in case. So for all those reasons we think that 50 basis points is enough and we very comfortable with that.

Yann Gerardin

On the phasing of the cost savings to make your life easier and your modeling easier we have made it rather linear throughout the year. Obviously the most difficult things such as reorganization of the IT coming in at the end of the process.

Philippe Bordenave

U.S. assets, Bruce just a clarifying question, I suppose you are talking about the CCAR exercise that our banks are doing, right. So as a reminder we're going to file the BancWest on April 5 of this year and the total IHE is going to be two years later. As you've seen we set all sales in order to provide all the elements needed on April 5 and so yes, that's basically where we stand.


The next question is coming from Stefan Stalmann, Autonomous Research. Please go ahead.

Stefan Stalmann

Just a couple of smaller follow-up questions. Could you please detail which goodwill you impaired beyond the BNL goodwill? I think there was about €75 million of other impairments.

The second question regarding your dividend policy. This year you have adhered very literally to the 45% payout promise. Going forward are you thinking about your dividend plans more in terms of again adhering to the ratio or is it more about protecting and maybe growing a certain baseline dividend?

The final question, one of your competitors in Spain has suggested that there's some SSM nudging to include gains on sovereign debt into CET1. Could you maybe hint whether you are planning to do this and how big the impact would be for you? Thank you very much.

Philippe Bordenave

Yes, I'll take the first one, Stefan. So indeed the main bulk of the goodwill impairment is related to BNL given the increased capital increase. And the other part is mainly related to a participation that we have in an activity that we're looking for sale and having close to an agreement on the sale. We have a price, the price being a bit different than what we have in the books. This is the remaining impairment of the goodwill.

On the sovereign, so your question is on the sovereign. So I remind you all that in the law with respect to the capital definitions, the Prudential capital definitions there is this element which says that as long as IFRS 9 is not adopted by the European Union banks can take the option to filter out the sovereigns. As a conservative stance we and indeed also Spanish banks have done so. We've observed that the Spanish banks have reversed that.

So I understand we're the only bank who is doing that today and for us the impact is 10 basis points. So it would be an increase of 10 basis points more if we would de-filter.

Jean-Laurent Bonnafe

Looking at the payout ratio yes we're in the current plan. We stick to the 45%. Looking ahead at the 2017-2020 plan one should assume that this payout ratio could go up. It's still to be looked at in the global benefit definition of the plan. So, yes, this is a direction obviously we will consider.


The next question is coming from Alex Koagne, Natixis. Please go ahead.

Alex Koagne

I have a couple of questions for my side. The first one is on the CIB, I was just wondering whether we can have kind of a breakdown of the cost to income ratio per division for the capital markets, services securities and corporate banking in 2019?

The second question is related to the capital allocation per division. I was just wondering whether you can share with us when or if you're going to increase the capital allocation from 9% to 12.5% and if so how does it impact the ROE of BNL and then BancWest or if you think that the profitability of those two entities justify to be in your scope again, I mean to verify the profitability?

The other question is a global view, if you can just share your view on the threat. My understanding was that you could have got a lower threat due to the diversification of your model and the kind of stability of the cash flow but at the end of the day interest rate 9.5% which is globally in line with the other bank. So what is your view of the threat that was set by the ECB? Do you think that you should have had a lower number or if you can just share your point of view on that point? Thank you.

Jean-Laurent Bonnafe

So obviously we're not in a position to comment on the threat process. This is it, there is no question about that. This is the process and that's it. Looking at the allocation of capital, we're going to do that this year. So we're going to re-base that 10% that year in a couple of weeks I guess. And for CIB, Yann, if you want to--

Yann Gerardin

On the cost income ratio per division we do not disclose the figures. But obviously the best ranking is on the financing business and the third one is on the BPSS services business. And in the middle of the global market.

Alex Koagne

Okay. If I can just have one follow-up question. There is a kind of increase in autos in the asset management. Is there anything new that has changed from what in terms of dynamic or in terms of strategy from what we saw in the previous quarters? Thank you.

Jean-Laurent Bonnafe

Accordingly to the midterm plan we're focused on the key areas of businesses within asset management. So it is implied that we had to deleverage some businesses that were not totally relevant anymore. So this is done so obviously as a result, we're left with the growth of the more focused areas we have. So this is basically the situation.


The next question is coming from Jacques-Henri Gaulard, Kepler Cheuvreux. Please go ahead.

Jacques-Henri Gaulard

I had three questions please. First of all, on the capital trajectory in the 2014-2016 plan that was actually quite clear we had the dynamics of 100 basis points of earnings per annum which was enabling you to actually get to 11%, 11.5%, 12% of common equity Tier 1 quite quickly. But obviously that was not quite right and you failed, you had to sell First Hawaiian. So the first question is what went wrong? And having followed you for a little while it's not exactly like you to sell an asset to pay the dividend, that's question one.

Question two, you haven't really talked a lot about the digitalization of your domestic market, i.e., you don't have a lot of extra information versus what you said in your 2014-2016 domestic plan. And I was wondering why you haven't announced further branch cuts, for example, compared to some of your competitors? And in particular can you say in the number of clients of Hello bank! how much represents cannibalization of your current plans going online?

And the third question is a follow-up on Philippe's very useful point on TLAC. I think it's safe to say that your senior debt is maturing quite quickly in the next two to three years, so your net cost of funding should not be that massive versus what it is right now. Thank you.

Philippe Bordenave

So I will take them probably been in the order of your question. So on the first one with respect to the capital generation, so you're absolutely right that we've always guided that our yearly bottom line represents roughly 100 basis points of common equity Tier 1 out of which we bang on 45% used for dividend. There is some 20-ish points that we use to cover the growth of the RWAs and the remainder is free. And so that is what we basically always have said.

In the past this free part we used it on acquisitions. Going forward we will retain it in order to wrap up. So if you had 35 basis points to the 10.9% you see that we get there by our own means. The only thing what we look at with First Hawaiian is to see if we can accelerate that trajectory. And that's basically what we do. So there is no change from that point of view.

Jean-Laurent Bonnafe

Looking at the retail I would say it depends on the different countries. So it's not the same just in Belgium, France, Italy and Germany. Of course in which [indiscernible] and Hello bank! are pure digital players.

It can run from one-third to half of the new customers that are coming from the network. And second, looking at the branch network in the way it moves, we have disclosed what we did over the past three years. It shows that we started quite early.

We will continue to adapt the network. There is no need to have a target. We're doing that progressively. The move, the trend is different, looking at the different countries again because the majority of those countries are different. I would say the geography also is different.

So well, we're doing that very progressively. I think we started quite early quite in advance and progressively we will update the market with the numbers. But for sure we're not going to give a target because in our opinion it's not the way it works.

Philippe Bordenave

I will say about our senior debt the average maturity is in the region of five years, a little bit less. And but this is average maturity, so somehow maturing in 10 years and others in two years. So it's average maturity and it's relatively well spread over also the years.

So we're going to replace progressively with the new type of debt. And again while it's true that it will cost a little bit more we have disclosed that already and it will employ the cost the other cost, I would say we'll convert progressively over time as we're going to issue around €10 billion per year.


The next question is coming from Anke Reingen, RBC Capital Markets. Please go ahead.

Anke Reingen

Firstly, on your leverage exposure it came down quite sharply towards the year-end Q4 and I was wondering what your plan is, especially on the leverage exposure in the investment bank? That's €900 billion, if we should expect it to stay at this level or to go at similar rate to the two-year targeted risk-weighted asset goal?

And then on slide 41 on your ROE target for this CIB division I'm not quite sure how I should understand the evolution of your ROE target. So should we assume it stays around the 19% pre-tax ROE considering your regulatory headwinds but also does that then assume, in your footnote it would suggest you assume a 9% equity allocation, but early on you basically talk about increased capital requirements. So what does the 19% actually in 2019 mean? And then just lastly on the CIB transformation as well, would it have a near-term negative impact on your revenues? Thank you.

Philippe Bordenave

First of all on the leverage, as you know and as has been also clearly articulated by the eurozone relevant authorities, the leverage exposure is a backstop. So what that means that we basically ensure that the bank as a whole is respecting it, I mean formally in the text it says 3%.

We do see that some people are enchanted by the UK proposal to add one-third of the G-SIFI to it which would mean 3.7%. We're at 4%. We have done the effort for us now, that's it and we're going to contain it at that level as such.

With respect to your question yes, thank you for allowing me to clarify what we said on the ROE. So on the ROE what we've shown is that today with a 9% common equity Tier 1 allocation we clocked in at 18.6% pre-tax return on equity. So the main thing what we wanted to say is that all being equal starting from that position the three levers that we have identified improve 8 points of RONE. 5 points coming from the improved, 2 coming from the focus, 1 coming from the grow part. So that is what we want to do and that is indeed within the 9%.

And then we guided that there are some headwinds. Some of these headwinds are let's say in the bank, the fact that we're already at 10.9% and that we're going up to 11.5% and 12%. And so that is to guide what it means. So in total what we say is the current status and improve are indeed on the 9% calculation. So in March when we will restate the numbers, taking into account different allocations that number will of course be rescaled depending on the amount of capital allocated.

Anke Reingen

So do I understand it correctly, by 2019 you want to deliver around 19%, 20% ROE in CIB post risk-weighted assets inflation but equity allocation at 9%? It's only illustrative or--

Philippe Bordenave

It's illustrative, yes.

Lars Machenil

It will depend on the actual magnitude of the headwinds in fact. If there would be no what we can say that if there would be no new regulatory news, that would be paradise, then yes, you could add 19% plus 8% minus 4% and it would make 23% because it's what is already known and that would give you -- but there is a red part which is saying that there are negative headwinds that are upcoming and we don't know the magnitude exactly. And this is why we can't completely answer your question.

Philippe Bordenave

We will ask you all to fill in the numbers that you expect.

Anke Reingen

Okay, just on the leverage ratio, my question is actually what do you target, how do you target to grow the leverage exposure in the investment bank?

Philippe Bordenave

I will reiterate. For us it's a backstop at the group level. So the group will achieve the leverage ratio and that's it. We pilot each of the divisions on the metric which is really a front stop which is the common equity Tier 1. That is the one which is allocated to the businesses. That is the one on which they have to deliver.


The next question is coming from Piers Brown, Macquarie. Please go ahead.

Piers Brown

Just a couple of final questions for me. First off, on First Hawaiian could you maybe just update us on the timing of that sale? And also just in terms of the 40 basis points guidance for the capital impact, is that just from deconsolidating the First Hawaiian balance sheet or is there also some estimation of potential gain on sale embedded in that number?

And in the second question just coming back to your G-SIFI buffer, so you're in the 2% bracket. And I mean given the size of your balance sheet, are you more or less resigned to operating at a higher bracket than some of your European peers or do you think there are things you could do to actively manage the balance sheet such that you would potentially drop down to a lower bracket? Thanks.

Philippe Bordenave

Well, on First Hawaiian I think at this stage there is not much more we can say except I mean I think that we're exploring these options. And depending on the pricing we guided to a roughly 40 basis points impact on the common equity tier 1.

On the G-SIB, as you know the G-SIB contains basically five criteria on which you are scored and then you are compared to a panel of 89 worldwide banks. And it's that relative position which puts you in a bucket. So indeed it depends of your relative size versus the other ones, so that is one thing, so these things could evolve.

And then of course there is also the reflection on what are the elements in there. And you do know that there is some reflection about now that the SSM and the SRN are in place for the 19 eurozone countries that means that basically one could consider that zone as one zone which will have, could have an impact on our G-SIB scoring. But that is something I mean which is a reflection which are ongoing, there is not much more that we can say at this stage.


The next question is coming from Robin Down, HSBC. Please go ahead.

Robin Down

I think most of my questions have been answered. But maybe if we could just come back to Belgian retail I think that's the one business we haven't really talked about a great deal. On the revenue side, have you got any particular sort of views on the outlook there going into 2016? Are you concerned about fees potentially dropping away for instance given the state of the equity markets for instance? And then margin pressure also on the deposit side?

Jean-Laurent Bonnafe

Well the Belgian retail is a very well diversified platform. So we expect the bank to continue to grow. There is still a lot to do in terms of looking at the cost base so, well, it should be again I would say delivering in the coming years good results and good improved results.


The next question is coming from Kiri Vijayarajah, Barclays Capital. Please go ahead.

Kiri Vijayarajah

To go back to the CIB extra revenues you're targeting, the €1.6 billion, how much of that is repricing you're assuming in various global market product areas versus how much is kind of assumed market share gains? I think earlier you talk about competitors retrenching, so really just trying to get a feel for some of your assumptions on that. And linked to the extra €1.6 billion on the revenues, how much extra variable compensation should we think about? Because I think that's excluded from your slide 43. Thank you.

Jean-Laurent Bonnafe

How much comes from the repricing, how much from market share.

Yann Gerardin

The repricing, I think the main part is coming from the market share. And to a certain extent from the repricing then we can possibly already observed mainly with institutional client base such as in the repo business or in the [indiscernible] and to a lesser extent in the cash management already. But the bulk of the growth is coming really from the market share gains and as far as revenues are concerned we cannot comment.


The next question is coming from Flora Benhakoun, Deutsche Bank. Please go ahead.

Flora Benhakoun

I've got two questions as well. The first question is on French retail, I mean we all know that there is some weakness on the NII side. I was a bit more surprised by the fee performance and looking at the fees in France over the year they've been decreasing quarter after quarter. So my first question would be whether you could actually elaborate on the performance on the fee side, how it's been this quarter, why it was weaker and what we can expect for 2016.

The second question is on the corporate center where we got used over the past seven or eight quarters now to a very strong private equity performance on the revenue side. This quarter in Q4 if we adjust for the owned gain we actually end up on underlying revenues in the corporate center that are negative. So this is the first time in probably two years now. So I was wondering whether you could explain a little bit why the revenues were weaker than expected in the corporate center this quarter? Thank you.

Jean-Laurent Bonnafe

So in the French retail as I said we have started to adapt since a couple of years the network. Clearly on top of the I would say impact of low rate environment it has some impact. We believe that now the organization we have decided to go for is now well in place, so as I said earlier, revenues should stabilize this year.

Philippe Bordenave

Yes, on the corporate center, as you know I've been saying now for those seven or eight quarters that intrinsically the underlying beat excluding private equity is indeed slightly negative one and indeed we have been having many quarters where private equity has been contributing. So this quarter has been a very calm quarter on the private equity front. That's one thing.

And the second thing also which is you've seen our LCR ratio at which we came out and we came out at 124% which is a bit above where we normally pilot the businesses. So this means that there is some extra costs related to that which is basically sticking this quarter in the corporate center. So that's basically what's underlying it.


Our next question is from [indiscernible], Morgan Stanley. Please go ahead.

Unidentified Analyst

Just two quick clarifications for me please. First question on the €300 million additional cost savings from the Simple & Efficient plan, could you tell us how much of that is already included in your new strategy for CIB? Because if I look at slide 43, the footnote mentions €90 million of residual FX from Simple & Efficient but I was wondering if this is referring to the existing €3 billion cost-saving target or to the incremental €300 million?

And my second question on acquisitions, there are some articles in the press mentioning your potential interest for Rabobank leasing activities. Could you comment on that? And if I run a few numbers it sounds like this could be around 40 basis points of capital consumption. So my question is how do you think about bolt-on acquisitions now that you've got your threat number? And if you were to develop your activities in subsegments shall we assume that you would do some arbitrage within your existing footprint to maintain a stable level of CET1? Thanks.

Philippe Bordenave

I will take the first question. So indeed out of the €300 million step-up next year there's €90 million which is basically foreseen in the CIB plan.

Jean-Laurent Bonnafe

Then looking at acquisitions as we said and as we did in the plan we're very disciplined. These are very focused acquisitions. We did some of them recently including the GE [indiscernible] and we're not commenting on any other [indiscernible] issues. So in any case we're very disciplined and in any case as we did before should something happen we're in a position to manage the situation.

So there is no question about the ability of the bank to deliver the plan in terms of ramping up the ratio. It's absolutely clear looking at the past year and this is the discipline of the company and if one day we come across something that is really value creating then we will have a look but if we can stick to the discipline in any case so this has to be very simple in the company. So this is the last question?


Yes, sir.

Jean-Laurent Bonnafe

Thank you very much. Have a nice weekend.


Ladies and gentlemen, this concludes the call of BNP Paribas 2015 full-year results. Thank you for participating. You may now disconnect.

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