Banque Cantonale Vaudoise (BCVN) Earnings Call Transcript & Summary

Good afternoon, everybody. Let me jump directly on Page 4, where I would like to highlight the key messaging -- messages, sorry. First of all, so if you look at the numbers, we had solid growth in almost all our business lines. Operating profit as well as net profit are up 4%. Looking at the numbers, those are the best -- these is the best result in the last 12 years. And if we don't take into account 2005, '06 and '07, which were affected by accelerated product following the recapitalization, 2019 is the best-ever profit for BCV since 1845. Based on those results, we will suggest or propose at the general assembly to increase the dividend by CHF 1 according to our distribution policy we disclosed, I think, something like 2 years ago. And finally, Thomas will highlight also the second proposal to general assembly to go for 10-for-1 stock split. Let me go on Page 6. You'll see the different, let's say, volume growth. So maybe comment on mortgage. We bagged at 4%. I think last year, we had something like 3%. In the previous year, it was inferior to 4. So 4% is also the growth in the market in Canton of Vaud. In Switzerland, it was like 3-point something -- 3.5%, and always growing slightly more rapidly. So I think we are back at a growth rate, in line with the market. I would like to stress that we haven't changed our credit policy or criteria. It's more due to a more, let's say, aggressive sales force approach as well as some commercial, let's say, initiatives and some price reduction that we see then definitely in the margin. But after a couple of years where we had a growth which was below the market, we decided that we don't want to lose again market share for the next couple of years. So we want to stay at a market share of roughly 30%. And this is why we decided to slightly decrease prices where it was necessary in order not to lose businesses and to be more aggressive on the sales front side. So sight deposit. Although there's no, let's say, positive rate on those sight deposits, since we pay 0, basically, this is still growing. This is clear that if we want to change that, we would have to pass negative interest rates to retail customer as well as SME, which we don't want to do for the time being. AUM, plus 12%. Of course, there is an impact of market performance. Thomas will go into more details. The rest is quite stable. And net new money, I think you can read for yourself this is, on one part, individuals, but mainly institutional and large corporate. But mainly institutional. Okay. Page 7, I'm not going to comment directly. On Page 8. So our 4 business lines. For the first is retail banking. The growth is 4%, totally in line with the market. Customer deposit is high, plus 7%. This is due to kind of arbitrage from the customer. Not between banks. Between the market and the banks. Clearly, for many retail customers, they are not happy with 0%, but they are, nevertheless, quite happy to make sure that they get their money back in 2 years at the same level of -- or the same amount, even though they don't get in interest rates. So this is why -- that will continue. I'm quite convinced about that. So -- and then revenue, quite stable. So you see here the price pressure on the margin. Definitely, we see the volume going up by more than 4%, and the revenue is only at 1%. I think you have exactly the same trend in every single bank in Switzerland as far as interest revenues are concerned. And operating profit, plus 28%. So there is a part which is basically cost reduction in the business line as well as some changes in the cost allocation between divisions. Okay. Corporate Banking, 3 different, let's say, messages. Quite strong growth in SME as well from the customer side as well as on the credit side. And the large corporate, this is always volatile, so you see some volatility here. So the numbers they are plus 8%, but they could be plus 5% in 2 months or minus 2. You know that we just look at profitability in this business, so the volume are not really important for us. And trade finance slightly down on average in 2019. Basically, this is due to -- mostly to the, let's say, the commercial discussion between -- so the trade discussion between China and the U.S. This is clear that today in the world of trade finance, for most banks, China plays an important role, and this is the same for us. And probably due to the latest health problem in China, we might see trade finance going slightly down in the next couple of months. Actually, we already see some trends going downwards due to the health problem in China and in Asia, and now, mostly everywhere in the world. The rest in terms of revenue and profit is quite stable. Important to notice here is the quality of the loan book. So very, very low new provisioning needs for 2019. Wealth Management. Here, I repeat, this is a bunch of different activities. So you are in the modern company, the private banking onshore, which is the biggest part, the private banking offshore, the asset management business, and you have also here the subsidiaries, so Piguet Galland as well as Gerifonds. So growth, which is not a surprise, given the very good financial market last year. Positive net new money, especially from institutional clients. So pension fund being in the French part -- or in the German part of Switzerland, so quite happy that, let's say, our office in Zurich is doing quite well. And you see also an increase in revenues and operating profit, reflecting the increase in volume, basically. We have decided for institutional asset management to implement ESG criteria, so this is fully implemented. And we will do the same in the course of 2020 for private clients. And also, we have made a rollout of a new application and a new service line for investment advisory services for the private customer. Next trading. Trading is again up. You remember, we always said that this is linked also to the volatility in the ForEx market. Since most of the revenues are ForEx driven, there is no prop trading. This is a customer-driven activity. And we had this decrease in the last couple of years. And probably now we have reached kind of a bottom, so this is roughly stable between CHF 45 million and CHF 50 million. Quite stable in terms of ForEx, but -- let's say, small gain of activities in structured products and fixed income. But this is quite marginal compared to the main activities, which is basically FX trading for customers. So that's it for the business. I'll hand over to Thomas for the detail on the financial numbers.

Yes, hello, everybody. I'm on Page 13, with the income statement. Well, the overall picture, you know, plus 3%, the income; 4%, operating profit. I will come back to the different sources of income and different kind of charges. At this page, I would like then to insist on the point that starting from 2019, the new tax regime applied, with 13.8% as the corporate income tax. Now the difference in tax charges between '18, '19, actually slightly overstates this change, given that there was net extraordinary income in 2018, which also had its tax part. So it's rather kind of CHF 27 million on a comparable basis. With regard to the different sources of income, [ what I'll insist ] here that we are happy to state that net interest income is only half of our total income, which is the most diversified situation of the Cantonale Banque in Switzerland. It is up 3% in net terms. I will come back to that later. The commissions are up 2%. Actually, we must take into account that, of course, on the -- mentioned part, there was an upside given the higher market valuations. But then it was slightly slowed down, this increase, given, as mentioned Pascal, the trade finance was a little bit lower than the year before. Keeping in mind that trade finances as well interest income as commission income. Now here you have trading. Total revenues from an accounting point of view across the bank, not from individual point of view, what Pascal just has been showing, but the comment is the same. While now, let's go the net interest income. Now what is obvious -- it's very important to distinguish is what is happening on the interest and the yield curve side and the commercial pressure, which basically you see in the NII before loan impairment charges. And then I will our comment secondly on the risk element, which is the evolution of loan impairments. Now on the growth element before loan impairment, you see that we are stable. And actually, the dynamics, which are going on here is that obviously, they sell mortgages which are repricing now at lower rates. Whereas on the liability side, you understand basically the deposit prices or the date of repay don't decrease any further. So this gives pressure on the income. And yes, this is also, as Pascal mentioned, with regard to the commercial pressure, we are a little bit more aggressive. So it's not on the yield effect, but also commercial margin effect, which brings in lower rates on the mortgages. Now this pressure is compensated by the volume increase of 4%, right? So which is, of course, the dynamic, which is a little bit dangerous because more business, same revenue. Over time, this will provide further pressure on cost management as this goes on. Now the other element, which is the loan impairment. This is a whole situation with regard to risk -- credit risk, and my overall statement here is if you take a more broader view on that is that for years now, this is low. It has been minus 6 of new provisions -- net provisions in 2018, and now in 2019, we even see reverses, right? Keeping in mind that the gross new provisions every year of something like CHF 10 million, CHF 20 million or CHF 30 million, and they are reversed every year of something like CHF 10 million, CHF 20 million, something like that. And now it turns out that here, the netting of those 2 gross numbers brings in net reversals, right? So it's overall reflecting the positive economic cycle in which we are living. And it's even -- it shows out to be a pretty high number in terms of net reversal this year. So taking those elements together, we then have the net interest income increasing by 3%. Well, with regard to charges and some comments, right? Other operating expenses, we were able to increase them, particularly on the IT side. Now with regard to the personnel cost, I would like to draw your attention that there's still the same rigorous cost management. But actually, the increase you see on personnel costs, I would even say it's a good news. Because we in-sourced about 20 IT experts, which before basically worked exclusively for BCV, but were external. Now insourcing them, we already basically take out the margin and VAT, which is obviously an improvement. We can even manage them more efficiently. This will work through the balance sheet. I don't want to get into technical elements here. But the overall effect on operating result is positive even if we see a personnel cost increase. Depreciation and amortization, slightly up, reflecting our positive development of digital banking. While headcount -- well, actually, here is the same point I just mentioned before, the 20 people coming, joining us and which explained the increase in headcount. Total assets, while the same story continued, story-wise, increasing cash and equivalents at the Swiss National Bank -- and liquidity at Swiss National Bank, given that on the liability side, we have an ongoing inflow of deposits, which Pascal commented already. On the business side, we have a 4% increase in the mortgages. And loans and advance to customers were rather flat because on the one side, we see very positive developments on the SMEs, but as mentioned, trade finance, which also is the balance sheet part, is a little bit lower. On the liability side, I mentioned the income flows on the deposits. And we are -- even if you see later, our distribution policy there is an ongoing increase of further equity, up 2%. Assets under management, right? Well, of course, for all -- actually, the market, beautiful market performance, adding CHF 6.4 billion to our total assets under management. And we are able to do net new money of CHF 3.8 billion, of which there is -- the onshore side was CHF 4 billion up. CHF 1.7 billion from the private customers and the SMES. They represent the kind of continuous inflow of net new money. More volatile are the large corporate institutions, which show up at CHF 2.3 billion, but it's a very volatile number. And still the outflow on the offshore, but the strategic refocusing, which we had mentioned in the precedent -- previous years is done. Capital ratios, while beautiful, I guess, you agree with me, is still about 17%, and the leverage ratio about 6.3%. Also on the LCR side, I mean, I can really say we are above target here with regard to the LCR given the inflows of the deposits. But it is also, to some extent, linked on the interest to fill up the -- our account in Swiss National Bank because as you know, we have a franchise there. We have a quite significant amount. We can put money there at 0 interest rate. With regard to dividends, right, so basically, I mean, you -- most of you follow us annually. And while you see we walk the talk, right? We told you that the new tax regime, right, basically means that we pay kind of CHF 27 million, CHF 28 million less taxes, and that we will bring that back to the shareholder. And actually, this new tax regime means decreased tax charge, means CHF 3 per share. So our new proposal is CHF 33 plus CHF 3. I mean, if you take where we have been before -- I'm not talking at 2018, which has been marked by extra income. But I look at 2017, we were at CHF 33, now you plus CHF 3, and it's CHF 36. That's what we have been explaining for a while, and that we will propose to the general assembly in a few months. So basically, we lift our search horizon of our distribution policy, which now is between CHF 34 because of 2018, before the new tax regime, and CHF 38, right? So now we have been reworking our business strategy, and Pascal will comment more on this. And we have, in that plan also, restate our strategic financial targets. So as we go forward, first of all, we continue at a cost income target is 57% to 59%. Then there comes something which we must admit, we have always been a little bit complicated on that point. But it's a very interesting point. Then there comes a point that we say, basically, this bank would be perfectly capitalized at 13%, and because it's kind of minimum equity level or minimum target level, which means that economically speaking, the equity, which is above 13% is excess capital, right? You consider the balance sheet of a bank as a production unit, you need those 13% for this bank to be run on a solid basis. And basically, the corporate value should include that. But then you could add on the corporate value CHF 500 million for the excess capital. It's very important. I mean this is theoretical, but this is really significant because annually, we do capital and liquidity, very, very aggressive stress test. Not the kind of BCE stress tests, but a real stress test, and they always, always confirm that this bank would be perfectly capitalized at 13%. It's important message. Now the -- I apologize, but the theoretical game continues a little bit. Because then we say that if we had the situation on the accounting side that our capital would be at a level that our CET1 would be, at 13%, then that -- at minimum target, our ROE target is 13.5% to 14.5%. Now I think -- I will immediately answer a question you might have. Now if you do that kind of calculation gain by end of 2019, our ROE at minimum target equity is 13% right now, okay? Maybe you may have further question on that in the Q&A later. So this was a part of real tough financials. Now we get more into the soft part, right? Because all of you know that the stock split has nothing to do with corporate value, obviously, financials and make no change in the value of the company. But we decided to do a stock split, and that's part of the initiatives and the things we have been reviewing, given that we have been reworking our strategy last year. It's not a thing we would have started on its own. And we say, okay, it would be good for now to do this share -- the split in 1:10 because basically if we were in the Swiss market, we would be closer to comparable -- the banks' comparable, which are quoted and which are significant as a stock -- a bank stock in the Swiss market. And secondly, there's also an argument that we might broaden our private investor base because of private people. It's easier to do a decision to buy stock of CHF 80. It's easier to manage this private portfolio where you can increase and decrease your portfolio by CHF 80, and instead of CHF 800. So maybe this in 5 or 10 years will even create more private investors and more identification with the shareholder approach that we see within the local media. So that's very easy for you, very easy to understand. If accepted by the annual meeting, it will be effective by 28 of May. So on 28 of May, it will be a stock crash, but a split.

Okay. Thank you. Let me go very quickly on the next slide. So as I mentioned in our last call that in 2019, we were in the process of, let's say, checking our strategy, revisiting our priorities. I think it's a sound exercise. The last time it was 2013, '14. So 5 years down the road, I think it's not bad. It doesn't mean that we don't think between those 5 years several initiatives, given the changes in the environment. Nevertheless, it was in-depth thinking. But as I told you also that you should not expect huge changes because I mean I think we have a clear strategy. We are Cantonale Bank, so we know what we can do, what we shouldn't do. So the business model is quite clear. So basically, as I told you, there is not a lot of changes. Maybe a couple of points. If I try to imagine BCV 2025, take a picture of BCV 2025, what I would like to see. So basically, I would like to see something very similar compared to today on a couple of strong fundamentals: being the business model; our customer franchise; our strong financial and very solid governance; a very good, well-functioning executive Board and Board of Directors. That's basically the fundamentals that should not and will not change. But I'd like to improve, to put the BCV on the newest curve, at a better level in 6 dimensions. First of all, the customer service. As you know, this has been, for the last 5 years, a priority. It will remain a priority. I'm convinced this is a key differentiator for a bank like BCV or for any Cantonale-origin bank. So we decided to start this journey 5 years ago, and that will continue. Second is basically everything which is linked to digital, so multi-channel distribution, mostly focusing on digital. This is nothing new, but this is a priority. The third point is, I think, something that we can do better. So we are basically the largest bank in Canton of Vaud, also in the French part of Switzerland. We have all business lines, which is not the case of some competitors. This is certainly the case of UBS and Credit Swiss, but this is not the case of Raiffeisen, of PostFinance, of some private banks. And I think we should better leverage, let's say, the synergy between our different business lines to try to tap some opportunities. We want also to, let's say, to increase, let's say, our value proposition towards employees. There is really a war, let's say, for good banking employees. It's amazing to see that young people are not, as it used to be, attracted by banking, by finance, less than before. So it's more difficult to recruit good people. And here, we have to be more attractive to make sure that on a long-term basis, we keep the best guys because this is quite key in the service business. And we will also carry on what we did in last couple of years, so to do some process improvement, process streamlining where we believe there is potential for automation, for standardization, and to try to get some productivity improvement. And finally, everything which is linked to social responsibility being in a direct manner that we do -- that we've done for a long time, climate consciousness, trying to improve our carbon footprint. Those kind of things, but also now more and more of the direct -- indirect part, i.e., trying to support our clients, our customers to do their part also for the environment or for the society through some products being for institutional investors, also for private customer. For example, mortgage, we will launch, in the course of 2020, some product to mortgage with some advantages in case the client is investing in climate friendly equipment for his or her apartment or flat or whatever -- or house. So we believe this is a trend. We believe, there is -- the demand is not that strong for the time being for private customers, but I'm convinced that it will come in the next 2 to 3 years, so we want to be ready. And finally, to tell you, although we could imagine that this is a kind of boring, unsexy firm, this is the Cantonale bank. We have a clear target of growing. We will never grow at 10%, but we will carry on growing 2% to 3%, steady growth. Very, let's say, sustainable growth like we did, I think, in the last 15 years. So we'll carry on, on that path. Now maybe the second chart on strategy. We have [ revisited ] the objectives in terms of growth or in terms of market positioning for our different businesses. So we believe that in some areas, it will be difficult to grow more than the market. I mean in retail banking, we already have a 35% to 45% of market share, depending on the product, on the business line. So for example, here, we want to grow at the market pace, which is already kind of a challenge given some new potential entrants, given the strong competition in mortgage in Switzerland right now. We believe that in some areas, we can target a number of market growth. When I say above market, it means maybe the 20%, 25% more than the market. I'm not talking a bucket would make 3%. We will certainly grow by 6%. But if the market is up 3%, probably we would could target 4%. And some businesses in terms of volume, for us this is not a priority. Priority is clearly profitability. If growth is profitable, we will grow. If growth is not profitable, we will stay at the same level or maybe downsize if [ this is a ] -- which is not the case, for the time being. But clearly, those 4 businesses that you see here, profitability is the main target. And then the offshore activities. As you know, given the current situation in terms of market access for Swiss banks, it's quite difficult to imagine growing without taking huge risk. So we don't want to do that. So basically, we have existing franchise. We have some customers. They are all now tax compliant. So everything is fine, is okay. But if we don't get market access, which will probably -- which Swiss banks will not get for the next 5 years, I believe it's very difficult to grow this business. So the best we can do is to try to manage a normal attrition that will take place every year, I don't know, 2% to 3%. So there is a trend here, a slight decline going forward in those offshore activities. Okay. In terms of economic numbers on how we see the future. You see here the estimate in January 2020. So those are the number of December. They were published in January, but they are December numbers by those analysts [ SET ] and some economic people. I don't believe that was number given the next -- the latest news on the coronavirus, I think we will see a decrease in growth in China, definitely also in Europe. I don't know how much. You don't know either, and either how much. But I believe that we will rather be 2020 between 1.2%, 1.4% instead of 1.5% or 1.7%. But I don't expect, at least as of today, being below 1%. So that means this is basically kind of, let's say, continuation of the current situation plus/minus 0.5%. In terms of real estate, this is the same picture as 6 months ago. It means, basically, prices went up again. They are quite high, I believe. Now they are pushed by the low rates, the low interest rates. So as long as interest rates will not go up, I don't think that the trend will change. You would agree with me that probably interest rates will remain low for a couple of years, negative. We don't know, but certainly low for a couple of years. So I don't think that here there is a risk, short term or even midterm of a problem. If there would be a problem in the real estate market, it will become in the, let's say, residential market, where we see pricing going up. Many pension fund dying. Large house for private people. And here, I expect that if the trend carries on like that, that means we build quite a lot and the number or the growth of population is flattening. In the last 10 years, I think we have an average growth of population around 1%, 1.2%. 2019, it was 0.7%, I think. So you can imagine that the vacancy rate for this market, the housing for rent will go up -- is going up. You see that in the numbers. Probably also the, let's say, the promoters. So the people are trying to buy new houses. We also noticed that. So that means there might be also a flattening effect going forward. But nevertheless, in some areas, we can already see that the vacancy rate is above 2%. And if there would be a problem in real estate, it will come from a too large supply and not from an increase in interest rates. I think that's important to notice. Basically, we will carry on the same policy target growth 3% to 4%. No change in our criteria. And this market, which, I believe, is quite dangerous. This is the housing. So the house for rent, we don't finance that. I mean this is mostly 80% equity financed today by insurance or pension fund. So far, this is not a problem. The only problem is an effect on the rest of the prices of the market. But we don't have any position in those segment of the market. This is basically equity financed by pension funds, mostly. So the outlook for me 2020 similar to 2019. Difficult to say today whether we will break the record and have a new record in our results. But I don't expect to be very far off from 2020. Thank you very much for your time.

The first question comes from Andreas Venditti from Vontobel.

Maybe first one on net interest income. If we look at half yearly numbers, we see actually quite a difference between H1 and H2, roughly CHF 8 million or 3%. Could you maybe explain a bit this move in -- by the way, net interest income preprovisions, obviously, and maybe provide some guidance. What would better reflect a run rate going forward on this number? And in this context, maybe you could also help us understand a bit better what impact BCV might have from the increased threshold by the SMB from 1st November onwards. Then maybe on the strategy update, thank you for this as well. You mentioned growth of 2% to 3% that you would imagine or would you expect to keep on going. My question is, how easy or difficult is it to achieve, in your view, given -- or assuming that interest environment will not change? And also, I think you mentioned that as well, new entrants coming into the market. So maybe if you could elaborate a bit more on this. Finally, on trade finance. You mentioned some impact you're seeing already at the beginning of the year. And maybe you could also elaborate a bit more -- provide more details on what exactly you see there.

Okay. Maybe I'll start with the last 2 questions. So the first one on trade finance -- the second one on trade finance. I mean it's difficult to be more precise. My point is that we already see a decrease in the number of transactions. So nothing to do with price. It's really the sheer number of transaction. We have also decided to be quite careful with China because when you send goods to China, you don't know exactly -- I mean, the boat is going at the harbor. And then for the time being, there is nobody to take the goods out of the boat because people are confined at home. So we have to be careful. So I expect that if nothing changed, that our business volume with China will not be 0, but will decrease by at least 20% to 30%. And China is an important part of our portfolio. It's not the majority. It's not 50%. But nevertheless, I could well imagine that decrease roughly, I don't know, over the year of 10% to 15% in trade finance would be possible due to the problem in China. Being more precise than that is really careless for the time being. But my point was just to say, we can already see something, okay? Whether this is 5% or 2% is another discussion. But people pretend that there's no impact on the economy and on the trade of goods for the time being due to the China has problem. This is not true. We can see it. So that was the question on trade finance. The other one was the 2% to 3%. So I was more referring, maybe a very good question that you asked, I was more referring in terms of volume growth in our main activities. Now you're right. If I translate that into revenues for the interest revenue, that's difficult. That's quite tough to be very precise. What we want to achieve in the minimum terms is to try to offset the, let's say, the pressure, the reduction on margin by volume growth. But we will not change our criteria, loan policy because that would be completely wrong. But also, as you mentioned, the SMB has modified the threshold on the basis for the threshold calculation. That will help us as well. So I expect rather here kind of a stability in the coming months. But what I was referring about 2% to 3%, it's a kind of strategic growth. I mean it's clear that this is totally influenced by interest rate. But if you don't take, let's say, a pure financial analyst view in the next 12 months, if I may say so, but I think a more strategic, let's say, CEO perspective for the bank, I wanted to mention that I don't expect BCV making a 10% growth. But I don't want also BCV to make a 0% growth. We are committed to have a sustainable growth of around 2% to 3%. I hope that answer part of your question. Maybe, Thomas?

Yes. I take the first question. Well, on the decrease in net interest income in the second half of 2019 was clearly linked to the slowdown in trade finance. And then, I mean going forward, Pascal gave already part of the answer, that effectively they see positive impact of an increased threshold of the SMB, which is slightly up. Well, we don't communicate those numbers, but it has a positive impact. But it's a one digital number. And then, of course -- I mean the uncertain variable, which is the trade finance income is difficult to comment. I mean the comments have been made. Currently, there is [ pressure ] with this coronavirus, but these things can also change in 3 months. So it's an open question. So well -- I mean, all in all, you see there's a positive effect coming from the threshold, which makes us confident on a continuous development of interest income.

The next question comes from Stefan Stalmann from Autonomous Research.

I have 3 questions, please. The first one, starting with your strategy, Slide #27. If I look at the businesses that you discussed there, is your approach in any of these businesses changing compared to what you have done in the, let's say, the last 5 years? Or is it basically business as usual in most of these businesses? The second question goes back to the point on the deposits where we have seen quite a remarkable growth in the second half of the year. And it seems that a lot of them are actually coming from corporate deposits, and also if I look at the LCR disclosure from less stable wholesale deposits. So basically, large corporates. And I'm wondering whether the signals that you are less aggressive than your competitors in imposing negative interest rates. I don't know if you could comment a little bit on that. And also, I'm wondering -- I mean, you basically took in about CHF 1.5 billion more deposits in the second half of the year than you granted loans. I was wondering if these CHF 1.5 billion of additional excess deposits in the second half were actually losing money effectively. And the final question is regarding credit quality. And you have seen quite a remarkable decline of your impaired exposures during the second half of the year. And a lot of this has come from, while portfolios with a lot of small exposures like retail, SME, and I was wondering if there's any particular cleanup effort going on, or if there's anything changing definitionally that would explain this.

So let me take the first question on the different businesses. No, this is business as usual. We want just to put more emphasis and to put more resources where we believe we can grow faster than the market. But in terms of activities, product, market approach, this is business as usual. The second question, I think you've got a point here. Probably, we are slightly nicer than some competitors in terms of negative interest rates or the application or the transmission of negative interest rates. I can tell you, we look at that every 2 months. We are, right now, in the process of pushing that further. This also helped to achieve, let's say, revenue without -- I mean, without losing revenue due to market pressure in terms of margins. But overall, I think you're right. We could be a bit more aggressive. This is right. Then you have a third question. What was the third question?

Credit quality.

Credit -- no, credit -- that's the fourth one, credit quality.

Oh, the less aggressive.

I guess the question [ 3b ] was whether you actually lost money on these excess deposits that came into the bank in the second half of the year.

No. I think those are -- let's say -- I cannot -- it's difficult for me because we have one important client. You could imagine who. That makes huge volatility in our business. So that comes. It comes back and the...

It's AAA canton.

So there's no risk, but those huge swings are due to this single customer, which by the way, pay negative interest also. And the last one for Thomas, the credit quality.

Yes. I'll get it. With regard to credit quality, very, very clear answer. No change in definitions and policy. No cleanup actually. I mean this is really due to the match of what happened with regard to new provisions or increased provisions on a growth perspective, and what happens with [ this kind ] in terms of reverses on a growth perspective. And adding those things up, turned together turn out to be a net reversal. Now I mean, I want to pinpoint you to one element, right? That is when we have a credit loss provision on off-balance sheet exposure, it is on the operating provisions line, we cannot put it on net interest income, right? So if you look down on the P&L, there is an effect, which kind of diminishes a little bit with net reversal. Do you get it?

Yes. Right.

But it's still margin. I mean as a matter of fact, it's still a net reversal, right, which is -- I mean, honestly, if you think in order kind of magnitude, right, where we have [ loss ] provision needs additional, right? Kind of CHF 30 million, CHF 40 million a year or sometimes CHF 25 million, right? And [indiscernible], we have net reversals, which can be 15, which can be 25 or 30, right? So these are independent numbers. And by the end of the year, you add them up and you get a distribution, which is somewhere between minus 10 and plus 10. The bottom line of the whole story is this economy is evolving very positively. We are in a positive cycle here. This economy is doing very well. That is really the key message. 2018 already was very good, minus 6. 2019 is very good, plus 10. And I always comment that the [ over -- beside the ] number is a credit loss cost, net cost of kind of CHF 10 million, CHF 50 million. So we are in a very positive cycle, as a matter of fact. And this was now a particular outcome.