BNP Paribas SA (OTCQX:BNPQY) Q3 2012 Earnings Call November 7, 2012 8:00 AM ET
Good afternoon, ladies and gentlemen, and welcome to the presentation of BNP Paribas Third Quarter 2012 Results. For your information, this conference is being recorded. Supporting slides are available on BNP Paribas Investor Relations website, www.invest.bnpparibas.com. [Operator Instructions] I would like now to hand the call over to Lars Machenil, Chief Financial Officer. Sir, please go ahead.
Thank you, operator. Good afternoon, ladies and gentlemen, and welcome to our third quarter results presentation. As usual, I would like to give you a flavor of our quarterly results by selecting a few of the introductory slides and focusing on selected topics before, of course, handing it back over to you for questions.
So if I could ask you to peruse our presentation and start on Slide 4, which gives the synthesis of the third quarter, and which basically confirmed a solid profitability for BNP Paribas with good performance of all our operating divisions. In particular, I would say the revenues of these operating divisions showed an 8.4% rebound compared to, what I would call, a subdued third quarter 2011.
This quarter 2012 also saw a continuation of the deposit growth trend seen in previous quarters, with an acceleration for the whole Retail Banking where deposits were up 8.1% versus previous year, as well as for the domestic markets, which saw deposits increase by 5.3% with growth in each network.
Once more, also this quarter, our strict risk management approach allowed us to keep the group's cost of risk at the low level of 55 basis points compared to the 55 basis points compared to the customer loans. This is only slightly higher than what we saw in the previous quarters when we exclude, of course, Greece.
Moreover, and while awaiting the finalization of regulations, we continue to bolster our buffers as shown by the further increase of our stable funding surplus, which reached EUR 71 billion at the end of September. This means a massive EUR 19 billion increase in the quarter.
By the end of Q3, we also achieved our target of reducing the RWAs of our CIB division. You'll remember that we had a target of reducing it by EUR 45 billion compared to a year -- June last year. And we basically achieved this, and we achieved this earlier than foreseen, and this helped us to boost our fully loaded Basel III ratio beyond our 9% target. And in fact, at the end of September, it stood at 9.5%. If I peruse other presentations, it turns out to be one of the highest amongst our competitors.
So all in all, we confirmed a good profit generation capacity with a net income of EUR 1.3 billion. However, if we include -- exclude, sorry, the 2 most significant exceptional items, which I will relay on in a second, net income basically stands at EUR 1.6 billion in the quarter.
So with this, I can ask you to flip or slide, whatever device you're on, or just turn to Page 5 of the presentation and allow me to elaborate somewhat on the 2 main exceptional items. The first is the own credit adjustment as it now stands to be called, which is totaling minus EUR 774 million, and which bizarrely, reflects the improvement in market conditions and specifically the lower cost of funding for BNP Paribas in the third quarter.
Second, there is a one-off accelerated amortization of Fortis PPA due to an early redemption with a positive impact of EUR 427 million. This relates to an instrument which was put in BNP Paribas' balance sheet at market value in 2009, so May 2009, and which was originally in the heritage balance sheet of Fortis and which amortized over a very long period. But as this product was called in September at par, it generated of course a capital gain reflecting this acceleration. The combined effect of those 2 elements led to a negative EUR 279 million, which is why, if I correct the results for that, I came to the EUR 1.6 billion.
Now if you can again proceed to Slide 7, I would like to say a word about the adaptation plan. As you can see, it's basically now totally done and ahead of announced schedule. In particular, and as a reminder, the U.S. dollar funding needs, we reduced by EUR 65 billion, but we already did that or achieved that back in April. The CIB RWA redemption of EUR 45 billion, we're basically done. And here, I would like to stress that we accomplished this with less than 1/3 of the sale cost originally envisaged. That is to say, for those who follow us for a while, that it is not the EUR 800 million that we announced that it cost us come, but it was limited to EUR 250 million. And the third point is the 9% target Tier 1 ratio that I talked about, we have exceeded this and we now stand at 9.5%, as I said, one of the best in the industry.
With this, if I go a little bit in detail on Slide 8, and as I mentioned at the start, the revenues of the operating divisions progressed well in the quarter and driven, of course, by a rebound in CIB as you can see on the Slide 8. In particular, Retail Banking revenues were 1.3% higher, where revenues in the domestic markets were slightly softer, where lower revenues in France were accounted by increases at BNL and in Belgium, so Italy and Belgium.
Elsewhere, the Europe-Mediterranean showed double-digit growth driven by volume growth, in particular in Turkey, but with the other Mediterranean countries also performing well. BancWest's strong performance, as you can see, I must say, was somewhat flatter by the appreciation of the U.S. dollar over the period, and Personal Finance was a touch lower, as a relative good performance in consumer lending was offset by the continued and surge for decrease of mortgage loans.
Then if we switch to Investment Solutions, it saw its revenues climb 3.7% as Insurance and Securities Services continued to show positive dynamics, especially outside France. And last but not least, CIB, with rebound in revenue was led by strong Advisory and Capital Markets departments.
Now if you slide forward to 9, and you'll see that as a complement of the revenues, you also see the benefit of the continued cost control actions, as it is reflected in Slide 9 in the gross operating income performance. In fact, you will notice that retail and also domestic markets show a positive evolution. And within retail, some performances are certainly noteworthy such as Europe-Mediterranean but also Belgium and BNL.
An similar story emerges for the other 2 operating divisions. Investment Solutions shows a 5.5% improvement, and that of CIB increases to an impressive 43%. But as I said, I'm bearing in mind the low comparison base in Q3 with respect to CIB.
Now that is about what cost control does to you. And now if you go to Slide 10, you can see what management of risk does to you. And as I said, we saw a slight increase, as is visible on Slide 10. However, we're still talking of relatively low cost of risk and the main variables in it are a moderate rise in CIB following previous quarters, which as we relate at that time had been marked by the write-backs of provisions. And so probably for CIB, the 9 months is a good indication of the results more than the individual quarters. Also, there is a stable cost of risk as BNL quarter-on-quarter. And as you know, of course, there is some pickup as we saw it versus last year given the recession, but as I said, relative stability quarter-on-quarter. And then as a third one, I would like to highlight the continued decrease of BancWest cost of risk and stabilization at Personal Finance.
With this, if you could cast your eyes on Slide 14 and take a quick look at the cumulated 9 months net income, and if you don't mind, compare it to our main competitors, you can clearly see that despite the significant adaptation, which we've just done and finalized and have behind us, but still we have implemented and we are still coming with the strongest results among European banks and one of the strongest in absolute terms as well.
So if you could swipe to Slide 15, and you basically find the reason for the resilience of our results rests on our diversified business mix. And particularly, if you look at the pie chart, if you go and look at it at Slide 15, as I said, it shows how our equity is allocated under the different business lines. I'm sure you will agree that we show a highly diversified profile, where France represents just 13% of the total. Obviously, those who follow us, they know that this is the retail part. But even if I would add other relevant bits of France and other activities, France would not represent more than a quarter of the total. As also, for example, in terms of pretax impact income. That is to say, while we are certainly registered and headquartered in France, we're a well-diversified banking group across businesses and geographies, or even said other words, where it's franchise, french fries.
Now on this later notes, let's maybe turn on to Slide 17 and look at our domestic markets. Domestic markets delivered solid performance at a high level. The deposit growth accelerated in the third quarter, as deposits increased by 5.3% or EUR 14 billion year-on-year. Slowing demand affected loans which were actually marginally lower. We continue to reap benefits from our One Bank for Corporates initiatives through which, as you know, since 2011, some 2,200 new accounts have been opened by corporate clients of our domestic markets.
Similarly, we have recently launched our priority offering across the 4 networks aimed at individual clients this time. We first rolled it out in France and Belgium, where we have already reached close to 200,000 users, and more recently, also in Italy and Luxembourg. Revenues were slightly softer, as I said, due to lower demand for credit and due to the low-yield environment. This was particularly the case in France, where French Retail Banking was hampered by the prolonged decline in interest rates. However, as you've seen in Italy and Belgium, revenues continue to increase on the back of repricing actions implemented in previous quarters and actually still ongoing implementation.
Moreover, as I said on the overall slide, our continued mastering of cost control in all 4 main activities, meant that domestic market achieved a positive Joule's effect. This was also reflected in the improvement in the cost income ratio, which was particularly noticeable in Belgium and Italy.
In conclusion, domestic markets confirmed high levels of profitability, with EUR 1 billion of pretax income, thanks to good cost control, and also as I said earlier, risk control.
So with this, I can ask you to go and take a little hop across the ocean to the U.S. and it's a good day to do so. On Slide 22, we show that BancWest continued to benefit from sustained volumes both in terms of deposits and loans, the latter driven in particular by corporate activity. This helped countered the impact of lower interest rates on revenues, which were slightly softer due to the impact also of regulatory changes as we have been commenting in the past.
We continue to invest in our corporate and small businesses, configuration that is for them, leading to a slight increase in operating costs. Also, we continue to deploy the private banking model, and we opened to the 6 private banking center in Q3. So all this is basically driving the cost increase.
The favorable environment in the U.S. contributed positively towards cost of risk, which continued to show a decline in trend year-on-year, meaning that ultimately, BancWest confirms its position as a strong and growing contributor to the group's profits.
Now if we round up with the retail, and I can ask you to go to Slide 25, and we shall take a quick look at Investment Solutions and its performance in the third quarter. So what we see here is that the revenue growth accelerated compared to previous quarters of the year, driven essentially by Insurance businesses and Securities Services. Wealth Management also saw a growing revenues, while Asset Management, as you know, suffered due to the reduction in managed assets which have been taking place over the quarters.
Operating expenses increased at a lower rate than revenues. As you know, that is basically what we aim for. This was essentially due to 2 contrasting factors. The first is the benefit kicking in from the adaptation plan in Asset Management, where cost showed a 6.8% reduction to that; but secondly, and on the other hand, the fact that we continued to develop our businesses in Insurance and Securities Services, especially in Asia.
And so, all in all, to conclude, a net of the one-off impact from Greece in 2011, pretax income showed a healthy double-digit improvement compared to our previous year.
Now if we turn to Slide 27 on the third leg -- well, not the third leg, the third part of the activities, which is in CIB. And on Slide 27, you can clearly see that Advisory and Capital Markets bounced back. It's revenues bounced back significantly from, as I said, the crisis hit third quarter 2011. And this, while confirming a very low level of VaR in this quarter, which actually decreased to EUR 40 million.
If we look a little bit more in detail, it was Fixed Income that performed strongly with a high level of primary activity, especially in September. This helped us confirm our strong position on bond issues, where we consolidated our #1 spot in euros, and while ranking seventh for all international retails for the first 9 months of 2012. We enjoyed a handsome performance in Credit and Rates activities where ForEx was actually stable.
If we look at the other part, which is Equities, it also bounced back strongly. But the effect is magnified, I must say, by a very low base in the third quarter 2011, as I mentioned already before due to the market crisis, in particular at that time. In fact, transaction volumes remained fairly subdued during the summer, but we did very well in equity-linked issues where we ranked #2 in the EMEA region. And in addition, we were book runners on 7 deals just in the month of September.
Now as you know, our CIB is more than Fixed Income and Equities. And on Page 28, you see the other part which is Corporate Banking. Corporate Banking, whose revenues decreased, but they decreased in line with the de-leveraging we have been doing. And despite this, we confirmed our strong position in origination, ranking #1 for a number of syndicated loans in Europe. At the same time, we continued to roll out or originate or distribute business approach, gaining some significant deals in asset finance, which we then largely distributed retaining only a residual part on our books.
Alongside this, we continued, and here I'm re-beating the drum, as I've been saying before, we continue to develop our cash management offer, where we are ranked #5 worldwide. And we rolled out, at the global level, our dedicated corporate deposit line, which is the complement with respect to deposits as we had it already in the Financing. And while we rebranded this activity Corporate Banking out of Financing as it was called before.
And so through this combined approach, we are successfully boosting our client deposits as confirmed by the EUR 5 billion deposits we gained in the third quarter and as you can see.
So with this, I would like to conclude my focus on the different business lines. Before I hand over to you, I would like to illustrate a few significant evolutions in our balance sheet, as well as in our liquidity and solvency.
If we start with Slide 30, starting with the balance sheet, the cash balance sheet, which you see on Slide 30. You can see that in the third quarter, we have further increased the surplus of stable funding over the funding needs of our client activity. This is the greenish part of this slide. This increased, as I said, this accident increased by EUR 19 billion and now stands at the high EUR 71 billion. Or expressed, if I look at those green liabilities over those green assets, it leads to an equivalent of 110% of the financing needs of our customer activity. In my view, this ratio is much more significant than what I would consider the simple loan-to-deposit ratio.
These elements I mentioned are true in euro, but they're also true in U.S. dollars, where the surplus had increased to $53 billion by the end of September. The main change, if you look at those slides and you compare it to previous quarters, is basically on the deposits with central banks. So it showed, for the lack of a better word, a sizable increase of EUR 34 billion in the quarter. On the other hand, as you saw, customer loans, customer loans decreased partly due to slowing retail demand and partly due to the ongoing de-leveraging in the corporate bank. And so these elements, of course, drive the fact that we have increased at the central banks.
If you go to the next slide, 31, we look now at the liquidity buffers. You can see that also those have further increased in the third quarter. Our immediately available liquid assets and asset reserves now stand at EUR 239 billion, up from EUR 168 billion at year end 2011. And so these cover now 114% of our short-term wholesale funding.
So, well, in a nutshell, BNP Paribas has ample liquidity. And this is also apparent actually if you look at the update on our 2012 medium- and long-term funding program, which we closed in mid-October, having raised EUR 34 billion in total. We went beyond -- with this amount, we went beyond initial estimates in order to capitalize on market opportunities. In fact, we confirmed competitive funding conditions with an average price of 109 basis points above 6 months mid-swap considering on average maturity of over 5.5 years. So that basically means we are now closed for this year, and any funding from now on will be prefunding for the 2013 funding program.
I'm almost there. I will give it back to you for questions, that's basically Slide 32, that I want to talk about on the solvency. I already told you that we exceeded 9% Tier 1 target fully loaded Basel III. And actually, we're at 9.5%, which basically means we indeed exceeded it. This corresponds to 11.4% under Basel 2.5. If I look at the evolution of the quarter, this means that the Basel III fully loaded ratio improved by, again for lack of a better word, a mighty 60, 6-0, basis points, with half of the benefits accruing from the combination of the net income, which we showed you were solid, and the RW reduction stemming from our adaptation plan. However, the other half of the benefit came from the revaluation in the available foreseeable portfolio. So it's on the upside. This clearly illustrates the volatility introduced by Basel III. So those who have forgotten about it, this is what the removal of the prudential filters do to you, and it basically confirms, in our mind, that it was wise for us to reduce our sovereign debt portfolio.
But in a nutshell, I think that BNP Paribas also has -- I'm running out of adjectives, ample solvency and is fully loaded, and its fully loaded Basel III is one of the highest amongst competitors. So and basically to conclude, you know that we tend to be -- if I may paraphrase someone, a boring bank, and like simple straightforward things like net book value per share, which you can see on our final slide, we are basically at BNP Paribas, we're proud of the fact that we have consistently increased this net book value per share for our shareholders, and this is confirmed in the 9 months 2012. In fact, our net book value per share has topped EUR 60, while the tangible book value is just shy of EUR 50, and our share price is like just above EUR 40.
So with this, I hope to have conveyed to you that thanks to another set of solid results in the third quarter, BNP Paribas confirms its standing as one of the most profitable banks, especially in the European context, one of the best capitalized in terms of fully loaded Basel III ratio and one of the most prudent in view of the huge buffers that we have put in place.
Fine ladies and gentlemen, I thank you very much for your kind attention, and I'm now very happy to open the floor, or the phone at least, to take your questions. Operator?
[Operator Instructions] We have our first question from Jean-Francois Neuez, Goldman Sachs.
Jean-Francois Neuez - Goldman Sachs Group Inc., Research Division
I have a few questions, if I may. The first one is on the BNL net interest income. It looks to be growing quite rapidly year-on-year despite loan shrinkage, and this is pretty unique in the Italian context as far as I get it. And I just wondered if you had more color on that, and how sustainable you reckon that is? The second question is on your level of liquidity. I can't help noticing the huge amount of reserve build-up that you've done this quarter again. And I just was wondering whether, first, you'd take that down, if the LCR rules were to be softened a little bit? And secondly, is this in anticipation of possibly repaying some the LTRO? Thirdly, a competitor of yours started to talk about PVA, if you've heard about that, that was hurting their Basel III impact. I think it was Barclays. And I was wondered if you had an update on these type of things and whether that was in your estimates for Basel III impact? And lastly, I can't help asking, we've seen one of your major competitor in the Fixed Income market announcing a major retreat from some of the markets. And I've read in the press that you guys have envisioned to actually grow in these types of businesses. I just wondered whether you could shed some colors on why you think these guys do that and what's different with you essentially?
Jean-Francois, that's a lot of questions, and I'll take them one by one. If I look at BNL first, and as I said, BNL is part of the domestic markets. And indeed, given our positioning actually in the Italian market, we have been able, actually already since the end of last year, we have been able to reprice handsomely, I would say. And so this is something which started at the year end already of last year, and which basically has continued and have seen its effect in the third quarter. So it's a fact that is, I would say, on the back of indeed the positioning of BNL, the client segments in which they are, and which have now been continuing for a couple of quarters. And of course, as you know, it's essentially for a big part in the corporate segment that this is taking place. With respect to your liquidity question, indeed, as you have seen, we have stored or stashed a lot of deposits at the central banks, which is of course not yielding much, not to say anything at all, which is one of the reasons, as you can see, in our corporate center, were part of these, let's say, costs, so to speak, or foregone revenues and are reflected upon. At this stage, just this is just a reflection of our prudent stance. I mean, as you know, it is still relatively uncertain out there. And so at this stage, we prefer to continue the prudent stance and store it there. With respect the LCR, I think our stance remains that it is way too early to say something, given the uncertainty about it. And the LTRO, it's the same thing. You know that the LTRO, we also took it last year out of prudence. As you know, we put it in our short-term funding. We don't do any tariff rates with it. We don't use it in any of our "green assets." And of course, we will review in January, when it's up. We will see how stormy it is outside, and we will decide at that moment. With respect to your third question, I think you -- if I understood well, you refer to DVA, which is as you know where we start to use or there is this kind of nomenclature, which is getting out, which is what we used to call own credit, is basically being called OCA, own credit adjustment. And then you have the CVA and the DVA, which basically will be shaped somewhat with the upcoming IFRS 13, which is something for next year. And so of course, this DVA, when it will come, will induce some further volatility. So this is P&L volatility, very similar to what you have on the OCA. But at this time, it will be in our derivatives. But again, typically, this is something, which as the tax stands today, should not impact the capital, just as the case for the OCA. So this is something which will indeed come in 2013 with IFRS 13, and which will lead to a further volatility. And volatility, as you know, in a strange way, I mean, whenever the perceived risk on the bank goes down, you will have a positive impact and the other way around. And as you know, for me, that is a little bit of an accounting aberration, but it seems that is what IFRS 13 wants. With respect your last question, where you, I guess, I don't if you pronounced it, but I supposed you referred to UBS? So there are 2 things. So first of all, as we have finished our de-leveraging, where we basically, indeed, you saw we were impacted somewhat in U.S. dollars. And as you have seen and as is also been very clearly articulated by our CRO, CEO we're now totally back in business. And so, yes, we are back in business. And if you look at our Fixed Income activities, you have seen that they were already back in business in the third quarter. And don't get me wrong, and let me just give you some figures. I mean, not every Fixed Income is necessarily the same. If you look at first, our Fixed Income, part of total BNP Paribas, is not as sizable as it was for UBS. Also, if you look at the rankings, if I look at the rankings, you saw that BNP Paribas ranked #1 book running euro bonds. UBS was no bonds. BNP Paribas was ranked 7. UBS was not ranked within the top 10, and I could go on. I mean our management of Fixed Income has been stable ever since. Also, there is no legacy portfolio out of our Fixed Income. So I could go on and give you many reasons why Fixed Income is not the other, and why we believe that Fixed Income fits very well in the originate to distribute, which is clearly something that the regulators want. And as you know, on [indiscernible], sorry for my French, with respect to that, so we believe that we are in a very fine position and we cherish our Fixed Income.
The next question is from Jon Peace, Nomura.
Jon Peace - Nomura Securities Co. Ltd., Research Division
So I have 2 questions, please. The first one was around your capital management strategy. Now you've hit that 9.5% Basel III core Tier 1, and you're probably generating 20 to 30 basis points per quarter. Looking beyond the buyback, when you have discussions with your regulators about share buybacks, what do they actually say to you? Is there a certain level that they would expect you to reach, 10% or more, before they would give their go ahead to buy back shares? And how are you thinking about the mix of dividends versus buybacks? And then the second question is if you could just talk a little bit about your expectations from the French banking reform bill at the end of this year? Do you imagine it will be similar to the Liikanen proposals? And could you give us any idea of potential costs?
Let me be very clear with respect to the capital management. We have no discussions whatsoever with whomever about share buyback. As you know, we've put ourselves 9% target. The rules, we still wait for them to be cast in stone or chiseled in marble, whatever recipients you prefer. And as long as that has not happened, we just continue minding our business. And once the things are clear, we will be able to share some news on that. So that is that. With respect to the French banking reform, which is normally also due before year end, I think you know as much as I do. From what I see, it is something which has always been articulated as something, which we'd want to indeed separate speculative activities, which has always been clearly stated as such by the candidate of Holland at that time. And so we expect that, that will be the gist of the proposal.
The next question is from Delphine Lee, JPMorgan.
Delphine Lee - JP Morgan Chase & Co, Research Division
Delphine Lee, JPMorgan. Just a very few -- a couple of very quick questions. First of all, to come back on BNL, is it possible to get some color maybe on kind of the progression between end of June and basically end of the year between securitization and maybe the retail bond issuances that you've done and what level the impact has had on revenues? And then secondly, just on the provisioning on the DIV, maybe just if you could get some color on what has happened in terms of the increase, and what kind of a runway we should expect in the next few years? And also just the come back on capital, has the guidance on Basel III, on the Basel III impact really changed? Because I think if you look at the Slides 32, I mean, it looks like it has decreased slightly. And since we have had some revaluation on the ESS [ph] side, just looking at the moving parts, if anything has changed from that perspective?
So indeed, if I elaborate first on BNL, so what you refer to is indeed the topic of the intra-group funding that as you know, in the past, we basically funded ourselves ahead of this and basically reinjected that into our activities. In anticipation of upcoming LCR and other regulations, we basically decided to have in BNL the increased self-funding. And so for example, we were at EUR 18 billion still of intragroup funding at the previous quarter, we have brought that down to EUR 13 billion. So that basically means, of course, that we use a mix of indeed, retail bonds, but also we use covert and other elements in order to have that funding. And as you see, at the same time of course, it really allows us to have the repricing which basically, all in all, at this stage, makes that manageable. And as you know, so we came from EUR 18 billion, we're at EUR 13 billion, and we have an effect or we have an ambition to basically be single digits or to be below EUR 10 billion before year end. And allow me to just limit it to say it is the mix of let's say, covert, it is the mix to retail, it is also the fact of the loan-to-deposit ratio changing that basically that does to us. With respect to your second question, I think your question on provisioning is on the Corporate Banking side. I guess, that's what yous' have asked?
Delphine Lee - JP Morgan Chase & Co, Research Division
And so indeed Corporate Banking, just give me a second. I took a sip of water. With respect to the provisions, as you know, at Corporate Banking, it is not as, let's say, portfolio-based as it is on the Retail. So which basically means that, as we told you last quarter, you should not take it as a run rate because we had write-backs. You should see that in this quarter, we had several files, never a file of 100, but several files which basically impacted the cost of risk. So for me, if I would have to guide you, I would say that none of the individual quarters is a good proxy. However, the 9-month evolution in the year is probably a good proxy. It's probably a good base for what you would have the year and then I let you be guide, if that would deteriorate somewhat going forward in the elements where there might be some impact on recession. So that will be my answer for that. I suggest you look at the 9 months to be a better proxy than any of the individual quarters. With respect to your Basel III, there are no -- if your question is on moving parts, if we have reviewed our impact, no. We have always guided that we were somewhat around 180 basis points in difference between Basel 2.5 and Basel III. So what basically changed here is the important point of the 30 basis points of available-for-sale. I informed you last quarter, not you in particular, but we informed all of you, that we had a 40 basis point negative impact going into Basel III due to the unrealized latent losses. And given that economic situation in the third quarter has improved, these unrealized losses have decreased, and has therefore, impacted the Basel III by a positive 30 basis points. So the moving parts, so you wish that you have observed, is basically that one. And that one will continue. It will continue as long as there is no potential filtering of these effects.
The next question is from Kinner Lakhani, Citigroup.
Kinner R. Lakhani - Citigroup Inc, Research Division
So a few questions. Firstly, on capital. I just wanted to get your sense on how you think about payout ratios. If I look at history over the last 10 years, clearly, there have been times when your capital ratios have been consistent in your end of kind of 35% mark. Is that something that we could think about going forward? Secondly, on the Fixed Income business, just wanted to get a better feel for what kind of investments and what kind of opportunities you see in the U.S. market, and how that fits into your model. It's much easier to understand how your Fixed Income business fits in your European model versus the U.S. model. Thirdly, just on the French retail business. Just to get a better feel for the net interest margin, seems like the pressures have increased in the very recent past, and therefore, what's really changed and what your views are going forward? And maybe just the final one, just on your thoughts on the Liikanen proposals and how you think that might evolve.
On the first one, I will have to give you a very similar answer to what was asked in a previous question. At this stage, and moreover, the payout ratio is something that, in the end, the board and even the general assembly will have to decide upon. And I think it is too early at this stage to address that question. As I said, once the regulation is clear, I mean, if I would now tell you, we're going to move something and then regulation comes in a way which is different than anticipated, that would not be a sensitive thing for me to do. So I will have to ask you to hold that question until there is further clarity. With respect to Fixed Income, the investment and indeed, the opportunities, well there are several things. Of course, there is the regular business that we did, which is basically U.S. distribution platform for the Eurobond issues on investors, where we want to go back to the positions that we have. I mean, given our de-leveraging, we've bumped a bit out of the league where we want to be, so as we want, first of all, clawback to the position that we believe is the natural one. The second thing is that we are also further pushing on the works together with our BancWest activities, which has also a focus on developing own corporates, which is basically another platform that we are investigating for further growth. So that will be the 2 main access [ph] of clawing back on the thing that we have and further improving it, and on the other hand, exploring out further growth within our total constellation of activities in the U.S. With respect to French, so as I said, the French, let's not forget the retail, as I try to make a little joke, if you allow that, that we're not necessarily, as I said, whereas French as french fries, because the French retail is part of the domestics, which of course have some impact. You have seen that on one hand, we have persistent low yields, so that basically impacts. And of course, you've also seen a marked slowdown on the credit demand, and that, in particular, if you compare it still with what we have last quarter, is one of the elements that impacts it. And so in France today, we are at a quite a high level of income. We, of course, we use the levers we have for that to use. And of course, as I said, as always, we continue on the cost side to basically counteract and ensure that we have gross operating income growth. With respect to your last question of Liikanen, I think there's not that much more that we can say. Liikanen has basically a two-step approach. The first one is basically identifying -- it's very crisp on identifying which banks fall into his parameter, and I think the majority of the larger banks under his parameter would fall into that. But afterwards, basically, my read is that he falls into the same difficulty as everybody else to define what to do, where he basically relays it to local regulators. So for us, at first stance, the important point is what is to come in, particularly in France, with the local law. And as I said, for us, what is very important in Liikanen is that he really confirmed the general bank approach which has a mix of activities, which for us is, as you know, is very important. We believe that we have proven that it works for us. I have shown you that our resilience is coming from that. I've shown you that we have one of the strongest results. All that is coming from that, and so we're very pleased to see that basically that is underscored in that document.
The next question is from Benoit Petrarque, Kepler Capital Markets.
Benoit Petrarque - Kepler Capital Markets, Research Division
Yes. It's Benoit from Kepler. A couple of questions from on side. First, on the liquidity. Your surplus stable funding improved considerably over the past year. You grew your deposits. You basically finalized your de-leveraging plan. I know you have difficulties to answer the question, but what do you roughly stand on LCR and NSFR ratios? I know the regulators are still finalizing them. But just broadly, just to give us a feel on the -- how much effort you still need to realize post de-leveraging and where you stand on those ratios now? And again, on the liquidity, you grew your deposit with central banks. Is there any P&L impact to be expected in Q4, again, on that? And then on Belgium, I was pretty surprised to see the top line holding pretty well, in fact. Do you think you have merged more room to reprice your deposits? I know you have done a lot already there. And will that be enough to eventually offset the impact on the low yields environment in Belgium? And then also on the PPA in Fortis, how much do you still have to the P&L this quarter?
All right, interesting questions. With respect to the liquidity, I will have to give a similar answer as earlier. I mean, there is still a huge set of uncertainty about the LCR. I mean, just what I observed is that there is more and more people voicing that in the -- not about the concept of the LCR, which is something I think is a good thing to have. But on the parameters, in particular, in the stress, there's more and more people voicing that these will have substantial negatives, probably unintended or intended consequences also on the economy, particularly the ACB is articulating this point of view. And so these things are evolving very much. So I mean, honestly, I can give you a number -- or I cannot give you a number. And if I would, it would be wrong. And so, I mean, I would be totally guiding you wrongly on it. So you'll have to abide with me and wait until we have clarity and at which time, we will be able to say something sensible. On your question of the central banks, as I said, yes, we keep on accumulating. It's also the effect of de-leveraging and the fact that we have been able to attract a lot of medium- and long-term funding, given the environment. And of course, as I said, that does impact, I mean, sadly, [indiscernible] doesn't pay as much as I would probably like. And so indeed, there is a negative impact on the corporate center. I've been guiding you in the past at the corporate center, you can see that we are not making that guidance. We are below that. And that is because of the forgone revenues in this. So, yes, as long as we will have an excess at central banks, you will see an impact in it in corporate center. With respect to Belgium, and there is a couple of things. Yes, repricing, we keep on doing it. I told you that we did it in April. We even were repriced [indiscernible]. We did it again in November. We repriced -- which is not yet in the figures, but in November we repriced another 10 basis points. So if I may just crack up a little bit this meeting, we are now at it for a while. I mean, when will it stop? When we reach 0 basis points, I guess. But there is repricing. Yes, we've done it. But again, in the domestic markets, like it or not, we will have to continue our mastery of the cost, as we have been doing, as you have seen it to the RBA, and we will continue to do so. With respect to the PPAs, so I remind you all this is -- we told you that the PPA is typically -- and we give you the number explicitly in corporate center. We've always said that we had the run rate at the majority. So I remind you that the PPA is basically product that in May 2009, that we found in the heritage Fortis and then were put in the balance sheet and that were basically amortized. The majority had a maturity of around 4 years. And so basically, it amortized at this stage at around EUR 150 million a quarter for this year. But what we said, that it will basically be close to 0 as of next year, so you should anticipate that there will be hardly anything left next year. And so on your question of this one, this one is a product with a very long maturity and which was basically amortizing until 2033, so it would have not been or it is basically not visible if it would amortized at that speed. But of course, it materialized due to the fact that it was called and paid back at par, which realized basically that PPA. So a bit of a long answer to basically say that next year, you should not expect too much out of the PPA.
The next question is from Alex Koagne, Natixis.
Alex Koagne - Natixis S.A., Research Division
Yes. This is Alex from Natixis. Just have a few questions. If I may start with a request, would it be possible to have in the Retail Banking, the breakdown of commission between the financial commission and the service commission to see how these 2 parts are moving altogether? Then if I go through my question, in Personal Finance, would it be possible to have your guidance in the cost of risk? And I will say mainly on the cost of risk in France as the decrease in this area is on the explanation of the stabilization of the cost of risk in the division? Secondly, the frame of the revenue in the Corporate Banking, we see over this year a drop of 16 year-on-year and 8% Q-on-Q. Now that you are finished de-leveraging, what is the trend in terms of revenue over share? Then coming back on the capital, sorry for that, but just to be sure that I have understood it clearly, have you removed the negative impact of 40 bps in term of mark-to-market on the sovereign debt on your calculation?
Okay. I'll duly note, and I look at the people here around the table with respect to your breakdown, we will note it. We try to improve every time. We've added the balance sheet, which was one of your requests, so we jot it down on the list, and we'll see how we can attend to it. And with respect to the cost of risk on Personal Finance, as we said, we're basically at s relatively stable level as we stand both, as I said, you should disregard some of the exceptional elements, which if you refer to France, which we have adjusted. So I think the run rate roughly -- the run rate, the cost of rate that you see today in the third quarter is relatively representative for the picture and the risk environment as it stands today. With respect to Corporate Banking, yes, indeed, the main part of Corporate Banking is behind us. There is -- there will still be in the next quarter a little bit of an impact of de-leveraging which is done, but which is, I mean, it still has to take its effect. It's signed, but the deal is not yet finalized. So there will still be a little bit of an effect, which is EUR 35 million. And so that is something which we'll exceptionally weigh still a bit on the next quarter. But what you see for the moment in your Corporate Banking is a run rate, which is roughly, let's say, the run rate following the de-leveraging. With respect to capital, yes, thank you for allowing me to clarify the situation. What we have done is we have shown you the Basel III as it is fully loaded. So we have taken the rules as they ramp-up, and has taken them as if they are active in 2019. In 2019, there is no longer any filtering of unrealized losses or gains. So that means, in the figure that you have seen, those are in a quarter ago. This weighted for 40 basis points in it. So they were in and they weighted for 40 basis points. Today, they only weigh for 10 basis points, 10 basis points negative, because there was an improvement of 30 basis points. So it's fully in, and it's something which was negative, which became less negative.
Alex Koagne - Natixis S.A., Research Division
I get it. If I have one last question, if I may. Coming back on BNL, now that you're reducing the intra-group funding, I guess that one part of -- I mean, if we have to consider that the interest of having BNL was also based on the fact that you have this intra-group funding, now that you have to finance originally your subsidiary, could it hurt the interest for BNL for your group?
No, not at all. As we said, our domestic markets, with our clients, and we have a very strong drive to serve them. You have seen that the contribution, the profitability of BNL is a very handsome for, if I may use that Italian word. And so there is no change in stance with respect to that. And so, we thank you for allowing me to clarify. We are not retracting any way or another out of our BNL activity.
The next question is from Jean-Pierre Lambert from KBW.
Jean-Pierre Lambert - Keefe, Bruyette, & Woods, Inc., Research Division
Three questions on my side. The first one is on the corporate center. You provided the guidance in the past. It seems like there's a difference delta, if you want, in the revenues where the underlying revenues are negative EUR 98 million in my estimate. And the costs are also higher, something like 147 versus the guidance of 100. So at the gross operating level, that's a delta of about EUR 100 million per quarter. If you could provide some further update on the guidance? Then, on the Basel III ratio, if you could provide the 2 magical numbers, maybe risk-weighted assets and the common equity Tier 1 in absolute terms? And also, does that include -- does your estimate include potential for favorable amendments under the corporate CVA and the change in treatment of CCP [ph]? Finally, the cost base in Italy is quite seasonal in the fourth quarter. Has there been some smoothing or shall we still expect this seasonality in this year?
Jean-Pierre, thank you very much for your question on the corporate center, because indeed, I think on the NBI, I think I've provided the answer, it's the fact that the depositing at the central banks, which basically provides foregone revenues versus a normal redeployment in banking activities is impacting the corporate centers. So as long as we will have an excess at central banks, yes, versus the guidance I've given, they will be weighing on the NBI. But on the other one, I thank you very much and very well spotted, and bad for me that I haven't guided you on it. The cost of corporate center is impacted for EUR 91 million by the doubling of the systemic tax in France. So in August 4, as a reminder for those, there is a systemic tax, which is active. What? France has it, but, I mean, many euro countries do have it. And it was voted to basically double it. It's something which costs us EUR 120 million a year, and so and it was voted. We had to accrue for the 3 quarters of the year, which is EUR 91 million. And that is what we have accrued at this stage in corporate center. As you know, things that happened in the year, we basically put it in corporate center. And then when we restate our accounts, we basically allocate it. So the initial systemic tax is well into the pools. Now this one is put in there, so that is basically in there. So that is, let's say, a one-off effect, which you will still have the remaining complement of the fourth quarter, coming into the fourth quarter. So there is another 30 that you should expect in the third quarter due to that. So again, thanks for allowing me to clarify. On Basel III, as I said, we haven't changed any of our hypothesis. We stuck to what is the so-called Danish proposal, which is the one that we -- we'll see. We anticipate that will basically be voted, and that is on which we have done all the calculations and which basically leads to that. And again, also here, one things are clear, we will provide further elements. With respect to the cost base, I'm not entirely sure that I understand it, there is -- I understand that it is to do with the seasonality that we typically have in the fourth quarter, and which is something, I mean, from my point of view, that is probably something you might expect just like you see it on the revenues.
Your next question is from Nick Davey, UBS.
Nick Davey - UBS Investment Bank, Research Division
Nick Davey from UBS. Three questions from my side, please, one on BancWest, one on asset quality, one on funding. On BancWest, I hoped you can elaborate a little bit more, please, on Slide 22, in the cost growth, please, in that division. And you've obviously mentioned a bit about the build out of the private banking set up, if you could maybe just give us some more color, please, on the scale of the alterations there, for how many more quarters we should expect investment coming through? On asset quality please, I'm just looking for some sorts of lead indicators. You give us some color around doubtful loans on Page 38 of the presentation. I wondered if you'd be happy to talk us through any trends on gross doubtful loans. So whether or not there's a big difference between the two. I would imagine there's a little bit of a collateral build going on through the retail networks of your corporate customers. So is there any difference really between gross and net NPL progression, please? Thirdly, and finally, on funding on Slide 30, just interested to know that the amount of medium- and long-term funding placed through your networks and declined on the quarter. Could you, please flesh out a little bit what trends you're seeing there? Is it when you're bringing down the intra-group funding in Italy, are you really focused on replacing BNP bonds of BNL bonds? Is that really the key trend? And what regions is the amount declining?
All right. With respect to BancWest, as we said, so BancWest, we found, let's say, its growth, and we basically have or are rolling out the concepts that we basically apply in the domestic markets, which is if we take the private banking commercial set up, it's ensuring that we have proximity with respect to the clients that we can basically offer that. So we have offered -- we have opened another site. So this is basically the steps that we are doing. Also, what we are doing is catching up on mobile banking. So we're basically, really copying, so [indiscernible] we are copying, [indiscernible] so you weigh the things we are doing, which of course do costs some money. And that is something I think for the next quarter or maybe quarters, you might or you will -- or you might expect to see. So that is basically on BancWest. On asset quality, indeed, if you look at page -- I'm going through it. If you look at the total page -- where is it? 38. If you go to 38, and if I comment, indeed the two, so we look at figures of course, excluding Greece and for the bank, you see that if you look at our coverage ratio, our coverage ratio basically improved somewhat. But I must say that this is and particularly also on the back of, let's say, further guarantees that are being put in place that basically improved the coverage ratio. If you look at the nonperforming loans, which had a little tick up from 4.4 to 4.5, where you basically, if you look at it, there is 2 things -- that there is one, which is of course a certain effect of the deterioration that you see at BNL, of course, which is doing in [ph]. But there is also another element, which -- well, and justly, but fuels it is the fact of amongst others the de-leveraging, but also the Dolphin, that's the internal name, but the instrument which have been called, which basically removes also elements out of it. So that is what you see. So a gentle pickup on that one, I would say, as a general trend. with respect to funding, I must honestly say that I didn't fully understand your question. So if you could maybe rephrase it or just repeat it to be sure that I capture it?
Nick Davey - UBS Investment Bank, Research Division
Yes, of course. On Slide 30, I just noticed a small note, Note 6, I believe, saying that the amount of medium and long-term funding placed in the networks, they've just slightly declined on the quarter. I just wondered if there was any effect?
Oh, no. It is just -- I mean, you know how it goes. We try to be opportunistic in these things. And as you have seen, we have been very opportunistic in the debt markets. And so there is nothing in particular that you should read into this, just as you should not read anything, particularly when I compared Fixed Income of UBS, for example, if you allow me on that one. So nothing particularly to be read in that.
The next question is from Andrew Lim, Execution Noble.
Andrew Lim - Espirito Santo Investment Bank, Research Division
Got a few questions, please. Firstly, going back to potential ring fencing, I was wondering if you could disclose how much of your total trading assets are actually market-making assets, which might be excluded from ring fencing? And then secondly, I appreciate you can't disclose your Basel III LTR ratio, but perhaps you'd been in a better position to disclose what you're Basel III leverage ratio is, so including off balance sheet assets and guarantees in the denominator there. And then thirdly, now that you've completed your de-leveraging, what kind of risk-weighted asset growth should we expect for the group on an annual or quarterly basis? And then fourthly, just a technical question here. Obviously, you said that you had a 30 bps improvement from the reduction in your AFS losses there. If that goes into positive territory, does the whole benefit translate to your core Tier 1 ratio? Or is there any of that part from minus 10 bps to 0 which is taking that as a benefit and then the rest goes to Tier 2?
With respect to your first question, as you know, what is really speculative -- the speculative part, I would say instead of using market-making, because market-making is, in our mind, a much too generic term. The speculative part for us is really very small. And while we haven't disclosed that number, but it's very minimal. As you know, what we do is mainly for our clients, even -- I mean, things like if you have price, I mean if you do market-making to ensure that you have sufficiently -- sufficient amount of products which are appropriately priced or for clearinghouse or for your clients indirect, we are convinced that, that is something which is a solid economic client-related activity. So in our mind, what is speculative is very limited. With respect to your question on leverage, again, I mean, what I can say is that -- and I don't know if we have published it actually, but so if we look at the leverage ratio, which is the simplest one, that we use if we compare ourselves to U.S. banks where we basically strip out the derivatives because, you know why, addressing U.S. GAAP, they will never find a common way. You will see that, that leverage ratio for us stands around 20, and we believe if you would do a rough calculation, that you would basically see that, that brings us in line with what a Basel I would be. So we believe that for us, at the situation where we are, we are in fine waters. With respect to the RWA growth, as you know, I mean I don't have a crystal ball, and therefore, we don't give outlooks. But you could assume that indeed, and particularly in the areas where we have deleveraged, and in others, that we aim to pick up growth. What will it be? It will depend a bit. It will depend on the mixture of the stabilization of the regulation, the pickup of the demand. But our aim is to be firmly at the side as it has always been and as we've never shied away from it with our clients. And with respect to IFS, yes, allow me to say that again, I mean, we have counseled on it and I observed that the U.S. regulation has pronounced more reserves with respect to those OCA. But indeed, the OCA are not filtered at all, so that means that you have all affects, positive and negative that you have. So as we said, it can induce rings, it can inflate and deflate your capital. So again, as I said, for us, this is probably not necessarily the wisest impact because there's volatility and it meant that we, and I reiterate it for good reasons, reduced our AFS and in particularly this portfolio because of that.
Your next question is from Pascal Decque, Chevron.
Pascal Decque - CA Cheuvreux, Research Division
I still have 3 questions left. The first one is I wanted to be sure that there will be no more adaptation costs, restructuring costs in CIB and Personal Finance starting in Q4. The second, could you give us an updated number on your intra-group funding with Spain? And the last question is about the provision, the cost of credit on the French return in Q3. I was a bit puzzled by the variable level in a so-called recessionary environment where we had to go back to the third quarter of 2008 to find a lower level in terms of provision. Then I was wondering if there was any special affect or write-back on any kind of specific file or not? And if you had kind of a guidance, I know you don't like it as well, a kind of guidance for the cost of credit in French returns going forward, because 17 bps looks very, very small to me in that environment, as I said.
Okay. If we look with respect to the first question on the restructuring, as I said, first of all, on CIB, there will still be the remaining impact with respect to the de-leveraging. So as we said, we have been selling some of the aspect. We said that there's EUR 250 million is the total impact. There is still EUR 35 million of that to come. So that's basically deals which are signed but are not closed. And so there is still some effect to come. And also on the restructuring cost, there were still something be left, it is people that are going that have not yet gone because we have to handle, stuffs like that. So there will still, also on the cost side, some remains are to be expected, but they should not be material. With respect to your question on intragroup on Spain, the total amount had basically not budged. So we still had EUR 7 billion intragroup. And with respect to the cost of risk in France, what can I say? I mean, you know us. I mean, we should maybe bring back also a slide to illustrate -- given the size that we have and given the model that we have, we are very restrictive as with origination. That's one thing. Second thing is, as you know, we are not everywhere in France. So as I said, and I'm going to say it anyway, but we are not a French bank from that point of view. We are not everywhere. We are in areas, If you look at our market shares, our market shares are basically linear with respect to the GDP in certain areas. So all that means that we have been very selective, and that's one of the reasons. Will it stay like that? I cannot say. I don't know. But at this moment, in those economies and the same thing, as you would see it in Belgium, we are indeed at low levels of cost of risk.
Pascal Decque - CA Cheuvreux, Research Division
I thought Belgium was a little bit specific because you had lot of provision when you consolidated Fortis for the first time.
Oh, no, no. There's 2 things for having been on both sides, I can tell you. What had happened is that it's basically the heritage Fortis was put to the norm of what BNP Paribas is doing. And so that is basically that. But indeed, there is -- but it's not necessarily related to that, but indeed there has been some write-back, which have flattered to some extent in the Belgium situation. That is correct.
The next question is from Maxence Le Gouvello, Crédit Suisse.
Maxence Le Gouvello du Timat - Crédit Suisse AG, Research Division
I will have 2 quick question. The first one, can you give us more color on the performance of the Insurance, because in such a low interest rate environment, I'm a bit struggling to see the reason for such a good performance and especially the breakdown between the domestic activities and the following one? And then the second question, we'll move back on the fee generation in the French retail, can you give us a bit color how the fees' performance have been between the financial fees and the banking fees? And have you seen a massive change of trends on the last months of the quarter in September?
It's going to be a bit -- the theme of this. With respect to your question on Insurance, I'm going to give you the same answer. After I said we're not a French bank, allow me to just indulge myself and say that we're not a French insurer neither. And as you know, part of the growth actually of Insurance is indeed coming out of the international activities...
Maxence Le Gouvello du Timat - Crédit Suisse AG, Research Division
In which part?
Pardon? Which part of international activities? Allow me to quickly look it up. It's basically relatively in most of the parts. So out of France in Europe, there is still good growth. There is double-digit growth, if you would look in Asia and the Americas. So it's relatively similar base of growth that you would see in both Asia and the Americas. So that is a bit driving that. With respect to the commissions on French retail because as somebody has asked, indeed, for those, we published it but I am browsing through the pages. But intrinsically, there is no material evolution, just allow me to -- voila, if you look at it, there is basically no material evolution on the commissions if you compare it to the previous quarter. Overall, if you would look at it 9 months-on-9 months, you would see that there is a little dent on it, which has to do with lower fees or related to financial markets, again, given the environment in those markets. So that one is relatively or is a little bit weighing on it.
The next question is from Stefan Stalmann, Autonomous Research.
I have 2 questions, please. The first, looking at your balance sheet from a slightly wider perspective, maybe 1 or 2 years out, some of the trends that we have seen in the third quarter are likely are continue. You have a weeklong growth or actually declining loans, you have deposits flowing in. You have already 30% of your funded assets in a liquidity buffer. How are you going to deal with this if these circumstances continue for another 1 or 2 years? And then what are the implications of that kind of dynamics for your revenue? And also considering that your cost keep growing at a very measured pace, but nevertheless, they do grow, are you planning to do further cost management and then introduce further cost question? And this is a very short one, could you add any color to all -- to that particular files that were impacted in your CIB division by loan losses? Was it primarily France? Was it more international? Was it any pattern at all?
All right. With respect to the balance sheet, well there is indeed a couple of things. So first of all, the loan going down is indeed -- well, for a big part, driven by the de-leveraging. So that part should basically be over. As we said, it's done. We take no prisoners. We move on. So you should anticipate that the strong decrease that you have seen is not something you should extrapolate going forward. So that is basically meaning that there should be a redeployment into assets that you would have to expect, which would at some point, basically also bring down the accident that we have in the central banks. So that is -- so you cannot take the trend and continue it. You should basically see we've done something, the war is over, we move on, we grow. And with respect to cost, of course, we are in a low interest rate environment. For everybody who has looked out, that's what it is. For everybody who's older than 40 years, know what it means. It means continued focus on the cost. And we have been doing that. As you can see, if you look quarter-after-quarter at the jaws, look at our domestic market's positive jaws [indiscernible] generation, and so we will continue to do so. With respect to CIB, I mean, I cannot give you any names. You know how that goes. There are periods where there are -- I mean, at CIB, it's not a portfolio approach. The only thing is there is a slew of things, which is spread over several domains and geographies. There is no particular concentration that I have to draw your attention to.
The next question is from Anke Reingen, Royal Bank of Canada.
Anke Reingen - RBC Capital Markets, LLC, Research Division
I have 3 areas of questions, please. The first one is again on capital management. I understand you remain quite cautious in terms of what you're going to do actually with your 9.5% core Tier 1 ratio relative to the 9% target. But I just wondering, I mean how should we think about giving you the credit for the excess capital in a way or is it far too early to talk about it? So would we find out the trend with full year results? Or is it possible to sort of like rank your priorities in terms of risk-weighted assets growth, dividend, buyback or acquisitions? And then secondly, on French Retail Banking, is it possible to give us a bit of an outlook what you expect for revenues? And also do you expect to continue to deliver your 1 percentage point jaws? And then lastly, just on P&L, I was a bit surprised to see loan-loss charges flat to slightly down. Are you surprised as well?
Okay, thank you very much for allowing me to clarify this. On your question on capital management, if I paraphrase your question, how to give BNP Paribas credit for its 9.5%, I think the best credit, if you allow me just is to say that -- I mean, give us the credit that we can look forward. If we look at the ranking, and again of other banks, we are one of the best capitalized. So for us, we look forward. We have taken off, for those who have kids, if you have a bandaid, you can rip it off quickly or you can rip it off slowly. And I was told that ripping off quickly is the best way to do, so we look forward. So we are in a position to grow. We are in a position to help our clients. So if you want to give us credit, remove the discount that I have versus my tangible net asset value per share. That is how you could give them credit for that. Jokingly aside, as I said, it is too early. I mean, the moment things get clearer on regulation, we get -- hopefully, that might allow us to get by the time when the board and the general assembly has to clarify things, we might be able to clarify. With respect to BNL, am I surprised? No. I think you heard me say that when we saw the pickup in the first quarter and the second quarter, we thought that we would be along those waters for the rest of the year. And that is basically where we end up being, so there's no surprise from that point of view. And on French retail, or say in general, I mean, we have been committed to creating value. We have done this also always expressed by our jaws. You have seen that in domestic markets, we have done so, and we will continue to do so and in a low-yield environment, our focus will be a bit more on the cost than it is on the top line. But again, you being young, it might not have had a full cycle of low interest yields, but that is basically what we will do and continue to do.
We have no more questions.
All right. Then with this, I want to thank all of you for you interest into BNP Paribas. Be aware that we're fully open for business as we've always been, and this time, even with 9.5% capital ratio and ample liquidity. So thank you again for your interest in the company, and have a very good day.
Ladies and gentlemen, this concludes the conference call of BNP Paribas Third Quarter 2012 Results. Thank you for your participation, and you may now disconnect.
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