BNP Paribas SA (BNP) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen, and welcome to the presentation of the BNP Paribas 2022 Full Year Results. For your information, this conference call is being recorded. Supporting slides are available on BNP Paribas IR website, invest.bnpparibas.com. [Operator Instructions] I would now like to hand the conference over to Jean-Laurent Bonnafe, Group Chief Executive Officer. Please go ahead, sir.

Thank you. So good afternoon, ladies and gentlemen. I trust you are well and welcome you to the presentation of full year 2022 results and update of the group's 2025 targets. As usual, at the end of the presentation, we'll be pleased to take some questions. So jumping to our key messages on Slide 3. You can see that 2022 marked again a year of strong growth in business activity and earnings for BNP Paribas. Our 2022 results confirm the key ingredients of a successful execution of our strategic plan growth, technology and Sustainability 2025, and the relevance of our business model. Indeed, the group's solid model and its ability to support customers and the economy globally continued to deliver a very healthy growth in net income of 7.5% compared to 2021 and 19%, excluding exceptional items at EUR 10.2 billion. The group delivered a strong revenue growth of 9% year-on-year stemming from all three divisions with a significant increase by CIB, up 15.7%, a strong growth at CPBS, up 9.3% and a rise in investment and protection services up 3%. Our growth is disciplined. We delivered a positive jaws effect of 0.7 point, 1.5 point excluding the contribution to the Single Resolution Fund. If costs increased up to 8.3% at historical scope and exchange rates, 55% of this increase is due to exchange rates and scope effects as well as the impact of the Single Resolution Fund increase and specific adaptation needs, Bank of the West in particular. So a strong confirmation of our ability to grow organically at marginal cost. The group continues to benefit from its long-term prudent and proactive risk management. Hence, cost of risk was low at 31 basis points of loans outstanding. Group core Tier 1 ratio increased by 20 bps, thanks to organic growth and clocked in at 12.3% as of December 2022 and will go up to 14% now that the sale of Bank of the West is closed. On the back of our solid results, and as per our commitment of a return to shareholders of 60%, we will return EUR 5.8 billion in ordinary distribution. This ordinary distribution is split between a cash dividend of EUR 4.8 billion or EUR 3.90 per share, equivalent to a 50% payout, and a share buyback program of EUR 962 million, equivalent to a 10% payout. In addition, and as we closed the sale of Bank of the West a few days ago, we confirmed a EUR 4 billion additional share buyback program to compensate for the dilution related to the sale of Bank of the West. Hence, an overall share buyback program of EUR 5 billion globally for 2023 to be executed in two equivalent tranches given its size and time needed to execute buybacks of this magnitude. A first tranche of EUR 2.5 billion has already been submitted to the ECB for approval. The second one will follow with a view to be fully executed before year-end. So in a nutshell, very solid results and a good start to our '25 strategic plan. Going to Slide 4. '22 has been marked by the sale of Bank of the West, and I would like first to warmly thank Bank of the West and BNP Paribas teams who have been working closely with BMO these last months in order to prepare the closing of the transaction and the transition to BMO. This closing on February 1, '23 opens a new page in our history. Let me remind you some figures, which illustrate the value created with this transaction. First, a fixed price transaction for a total consideration of $16.3 billion, representing 1.72x the tangible book value, a transaction which results in a net capital gain of around EUR 3 billion to be accounted for in the first quarter '23 and the release of a common equity Tier 1 capital of roughly EUR 11.6 billion or an equivalent of 170 bps on in core Tier 1 ratio. As indicated, on one side, we will compensate the EPS dilution with a share buyback of EUR 4 billion. On the other side, the remaining EUR 7.6 billion, on equivalent of 110 bps in Core Tier 1, will be invested over time in a disciplined way with the aim of accelerating long-term shareholder value creation through BNP Paribas diversified and integrated model. We benefit from a unique positioning with strong and leading platforms and client franchises and shown track record of increase in market shares in key European businesses. So our priority will be to boost on organic growth. This is what we do best with limited execution risk and immediate return on equity. Then we intend to do some targeted investments in technologies and innovative and sustainable business models, finally, potential bolt-on acquisition in priority sectors. So redeployment of the proceeds put BNP Paribas in a unique position to accelerate and step up long-term growth. Now on Slide 5, you can see that it provides a first level, allowing the group to accelerate its growth with approximately EUR 3 billion additional revenues by '25. The redeployment will be disciplined on the basis of a cost income ratio of 60% and a return on tangible equity of 12%. Moreover, the second lever will be the positive impact of higher rates. We expect to see a EUR 2 billion plus positive impact on NII across the group by '25, stemming from interest rate at having taken place in '22. In particular, CPBS will benefit from it to the tune of 80%, and we expect to see around 40% of it in '23, mainly in commercial and personal banking in the Eurozone. On the strength of our '22 results and with an additional growth potential of EUR 5 billion, BNP Paribas reaffirms and confirms the importance and relevance of the strategic pillars of its Growth, Technology and Sustainability '25 plan and revises upwards its ambitions. We are thus significantly revising upward our initial target for compound average annual growth in net income of more than 7% to a target of more than 9% between '22 and '25. We're also anticipating a stronger and steady compound average annual growth in EPS of more than 12% or a 40% increase over the '22-'25 period as it will be boosted by the execution of share buybacks each year and particularly in '23. Of course, the growth will remain disciplined with positive jaws effect each year and averaging 2 points. On this backdrop, switching to Slide 6. You will see that '23 is a pivotal year. As such, we have decided to adjust upward the '23 distributable result to reflect our new trajectory resulting, on one side, from the sale of Bank of the West, and on the other side, from the end of the ramp-up of the Single Resolution Fund. As a matter of fact, looking forward, first, we anticipate our organic growth in '23 to offset more than the perimeter effect related to the sale of Bank of the West. Second, our unique positioning permits us to do as if the ramping up of the Single Resolution Fund was beyond us and not impacting '23. And to do that, we have decided to adjust the distributable income upwards by EUR 1 billion in '23. Furthermore, the group has also decided to exclude from the distributable results the negative impacts of the adjustments in hedging positions, which will occur during the first half '23 as a consequence of the ECB decision in the fourth quarter '22. And as you are already aware, the capital gain linked to the sale of Bank of the West will be also excluded. So basically, all this should mechanically enable us to deliver a '23 adjusted result increasing in line with the group net income target of an average growth of more than 9%. On top of that, it should result in a growth in EPS in '23 higher than the objective of a CAGR of more than 12% that will be boosted by the EUR 5 billion share buyback executed in '23. Last but not least, as this '23 adjusted distributable income will serve as a base for the 60% return to shareholders, it should result in a growth in DPS to the same tune. Moving now to Slide 7 as a wrap-up and to take away for the first part of our presentation. You can see that not only we anticipate delivering an average strong growth in net income by '25 on the back of our [indiscernible] growth and additional potential, but that in addition, our unique positioning in '23 allow us to deliver a steady growth year after year with an even higher growth in EPS boosted by the execution of our share buybacks each year. I would like now to hand over to Lars, who will take you through the group and divisional results. Lars?

Thank you, Jean. Finally, ladies and gentlemen, I will now take you through the record '22 results, which form the base for our updated '25 objective. An objective that you have seen with the distributable income growing by at least every year even in the pivotal year '23. So let's now look at Slide 9, and let's turn to '22 -- and actually, let's turn to '21, where you can see in '21 that the capital gains largely compensated exceptional costs. And for 2023, so this year, and actually over the whole GTS 2025 plan, we also anticipate each year capital gains to compensate these exceptional costs for around EUR 400 million for restructuring, adaptation and IT reinforcement. However, in 2022, as a consequence of the very specific circumstances in Central Europe, this compensation was not the case, and hence, exceptional items where atypically negative overall. And this is then not mentioning the increase in taxes that you also see on this slide, so the so-called IFRIC 21, which was entirely booked in the corporate center, which was up EUR 300 million on the back of the final year of the Single Resolution Fund. I remind you in 2023, so this year, being the last year as the fund will be ramped up. And so if we -- with this, we turn to Slide 10, which illustrates the strong performance of the group, as detailed by Jean-Laurent, from the revenues all the way down to the bottom line with a healthy return on tangible equity at 10.2%. If with this, I can ask you to turn to Slide 11 with the revenues of the operating divisions. They grew by a solid 10.4% year-on-year, 7.8% on a like-for-like basis. If we look at our divisions. CIB revenues grew sharply by 15.7%, thanks to our diversified and integrated model, ensuring to capture the buoyant client activity, in particular, in '22, at Global Markets and Security Services and also at Global Banking with a strong rebound towards the end of the year '22. A level of activity, which is strengthened by the complete coverage of clients' needs leading to the gains in market share. If we take the second division, a strong momentum was also seen at CPBS, up 9.3%, driven by the strong performance of Commercial and Personal Banking activity with the improvement of net interest income and fees on the back of a favorable positioning in Corporates and Private Banking but also in cash management and trade finance. Moreover, an increase was also seen in our specialized businesses and Arval in particular, so the car fleet leasing business, sustained by the growth in a fleet of more than 8% in the year '22. Last and third, activity was very good at IPS with strong [net] asset inflows and better resilience versus peers in assets under management, illustrating our commercial outperformance versus peers over time. Hence, IPS delivered an increase in revenues at 3% on the back of a strong rise in private banking businesses despite a lackluster market environment, which weighed on asset management and also insurance revenues. If I can now ask you to flick to Slide 12, we look again at the operating divisions, the same ones, but now at the costs. Costs were up 8%, generating strong positive jaws of 2.4 points for those operating divisions, and this is for the full year. And if you would look at the fourth quarter, also delivering 1.9 points of jaws. So you can see that we continue not only to benefit from our industrialized and mutualized platforms but also from additional initiatives generating this year more than EUR 500 million in cost savings. CPBS delivered very positive jaws of 3.3 points, thanks to the ongoing rationalization of our operating model. For CIB as well, jaws were positive at 2.1 points as basically, what else can I say, attribute to the high operational efficiency of our leading platforms. And then at IPS, costs were up 3.5%, supporting the business with a close to 0 in jaws effect on a like-for-like basis despite the impact of an unfavorable market environment. So we have looked at the top line, we've looked at the costs. Let's now look at the cost of risk. So if you could turn to Slide 13. And there, you can see the confirmation of a low cost of risk at group level at 31 basis points over outstanding, well in line with our guidance of a cost of risk every year below 40 basis points, and this as a result, not of luck, but of our prudent risk profile, as it can be -- or as it is illustrated by the lowest level of cost of risk over gross operating income, so revenues minus costs, and this through the cycle compared to Eurozone peers and a continuously improved risk profile. And if you look at the Stages 1 and 2 in the cost of risk of around EUR 6 billion, and they basically cover 2 points for that stock -- is basically covering 2.4x the Stage 3 provisions of this year. So in '22, the cost of risk is due in particular to the combination of, one, low impairment of nonperforming loans, the so-called Stage 3 provisions; and also an [ indiscernible ] prudent provisioning, the so-called Stages 1 and 2, on performing loans. And this for EUR 463 million, simulating the side effects of -- side effects and simulating, I cannot stress it enough, of the invasion of Ukraine and higher inflation and rates partially offset by released of provisions that we took that were linked to the COVID crisis 1.5 years ago, and this also with some releases in provisions that we have to align us to the European standards and which, in turn, are less conservative than ours. So with this, if we now move on from the businesses that we have seen, you will basically see, and I skip those next 2 pages, but you see the evolution of the cost of risk for our divisions. And basically, it is always a variation on the theme of low cost of risks. So allow me to take you through the financial structure on Slide 16. You can see, first of all, that the common equity Tier 1 ratio in the last quarter improved by 20 basis points, and so clocking in at 12.3%. As in the past, if you look over the full year, the '22, there has been an organic contribution to the common equity Tier 1 of 30 basis points. Moreover, as you've seen in the beginning of the year, there has been a reduction of 40 basis points, again, over the year through the OCIs that are basically impacted by the market environment. And also, as we told you at the beginning of the year, there was an update to models and regulations that had an impact of 30 basis points. So if we now look forward, and basically, you see that the benefit related to the sale of Bank of the West, which represents, as Jean-Laurent said, in basis points, 170 basis points, which kicked in on February 1. And so that basically takes us to 14%, 1-4% common equity Tier 1 ratio. Going forward, we should continue to grow organically our CET1 ratio by approximately, let's say, somewhere around 50 basis points over 2023 and 2024, and we anticipate as well the ratio to be impacted. Well, as one thing you know, we're going to do a buyback of EUR 5 billion, so over and above the return in dividend in cash and share buyback of the results. There is also the return related to Bank of the West. So in total, a share buyback of EUR 5 billion. The first EUR 2.5 billion done before the summer will reduce the common equity by 20 basis points. And at the second tranche that we will do around the summer will basically reduce by 40 basis points. And then there is also the implementation of IFRS 17 in insurance that will lower in a one-off the Common Equity Tier 1 by 10 basis points. So this is a bit the view on common equity Tier 1. So you see we are very well capitalized. And if we also look at the leverage ratio, it clocked in at 4.4% at the end of the year, well above the requirement. And also, this ratio will be further boosted by the sale of Bank of the West by 40 basis points. And as Jean-Laurent said, if you see this, there is a remaining excess of capital that will be redeployed very frugally and mainly by accelerating organic growth. So if I can top that off on Slide 17 that, with no surprise, you see our net tangible book value per share continued to grow clocking at 79 points, EUR 3. The rest of the slide is basically crystallizing the level of our return to shareholders. We have summed up in the different elements for '23. So this is then basically the group. I now want to hand it back to Jean-Laurent for the other two pillars in GTS, technology and sustainability.

Thank you, Lars. So this group presentation would not be complete without mentioning what has been achieved in terms of operational efficiency, technology and company engagement. So please turn to Slides 18 to 21. You know that optimization and cost discipline are at the heart of the '25 plan. First, we have leverage while leveraging on our internal platforms, enhancing shared services centers to better allocate resources and to further outsource and mutualize technical offers with external partners with an objective of a 20% increase in resources in the main shared services centers. Second, we integrate new work usages and methods to optimize premises costs, lowering our mutualization ratio down to 0.75 through flex offices and fewer inner city locations. Last, we are entering a strong discipline on investments with a proactive management of external spending. All these levers have proven to be quite effective, bringing more operational efficiencies. As a result, we have revised our initial recurring savings over the duration of the plan by plus EUR 300 million, up to EUR 2.3 billion over the plan. It will sustain our ability to deliver positive jaws in addition to end of the ramp-up of the SRF, representing a decrease of EUR 1 billion in operating expenses between '23 and '24. Investing in technology to support operational performance, innovation and growth is a top priority at our GTS plan. Our global IT strategy is built on four major pillars aiming at creating value. First, a safer and more resilient IT with the cloud with the objective to embark more than 60% of our apps by '25. We are actually halfway. Second, an open information system to create value through sharing IT assets and simplified consumption. Launched in December '21, it has proven its effectiveness. Third, a widespread adaptation of [ appization ] bringing interoperability and the rationalization of our information systems. We have already largely exceeded our '25 objectives with more than 660 apps available, sustaining more than 620 million transactions per month. Last but not least, we intensively deployed AI with already 670 concrete and value-accretive use cases rolled out in 2022, plus 57% more than last year on the back of strong data science in-house capabilities. Contributing to a responsible and sustainable economy is a major foundation of our strategic plan, as described in Slides 20 and 21. Engaging with our clients to support their transition, we have set ourselves three key sustainable targets for '25: first, EUR 150 billion of sustainable loans; second, EUR 300 billion of sustainable bonds; third, EUR 300 billion of sustainable investments. And in addition, we commit to target EUR 200 billion to support our clients to transition to a low carbon economy. Our action are concrete and illustrated by significant achievements and the figures we provide. We are a worldwide leader in green bonds with EUR 19.5 billion raised for our clients. We have also been recognized as the European leader in combating climate change and protecting biodiversity. We are strongly committed to a net zero trajectory and take concrete steps. As recently announced, the group is now embarking on a new phase of acceleration in financing the energy transition. The group has already pivoted with outstanding to low-carbon energy production, 20% higher than those to fossil fuels. And we're accelerating in financing the production of low carbon energies with a target of EUR 40 billion in financing outstandings by 2030, primarily renewables. We are also accelerating in reducing financing to fossil fuels with a commitment to reduce financing for oil extraction and production by EUR 1 billion in [ 2030 ], so decreasing by 80% in comparison with the current level of EUR 5 billion. By 2030, we will have completed the transitioning of our financial financing activities to the production of low carbon energy by more than 80% in less than 15 years. And I now would like to hand over to Lars, who will take you through the divisional results. Lars?

Thank you, Jean. All right, ladies and gentlemen, let's now look at the operating divisions. Let's start with CIB. Basically, I'll let peruse Slides 24 to 27, and let me give you the main takeaways. So CIB had very good results in '22, supported by a strong client activity leveraging on a diversified integrated model and confirming its leadership positions in EMEA, in particular, in financing and bonds, in transaction banking but also on multi-dealer electronic platforms. On the back of these strong platforms, CIB today benefits from a top 3 position in EMEA and confirmed its strong and resilient growth year after year. First, if we look at the divisions within CIB, first, a very good performance in Global Banking with a strong rebound in the fourth quarter despite an unfavorable context and decreasing primary markets. If we take Global Banking revenues, they were up 2.6% year-on-year. Secondly, and supported by a very robust client activity and a reinforced set up with strong positions in FICC and equity business, Global Markets saw a very strong increase in revenues. Very strong in the sense up 27% year-on-year with a very good performance of FICC, up 32%, and a strong increase in revenues, up 19%, in Equity and Prime Services. Finally, the performance of Security Services, so the third part within CIB, illustrated the relevance of a diversified model, benefiting from high transaction volumes and major new mandates but also from positive impacts of the interest rates environment. Revenues went up 11%, a solid performance. So as a result, a remarkable increase in CIB revenues up by 15.7% with the crystallization of market share gains and the confirmation of a change in scale in the European landscape. That's the top line. If you look at costs, they accompanied the growth and they were up 13.6% or up 8% on a like-for-like basis with positive jaws of 2.1 points. All in all, and considering the low cost of risk, CIB generated a pretax income of EUR 5.4 billion in '22, a very good level of results, up 16% year-on-year. So what's next for CIB? I'll let you peruse what makes our CIB strategy so successful on a recurring and a long-term basis. This is what you can see in Slides 28 to 30. A strong differentiator versus competition is the model of CIB platforms' flow-driven, client-centric an integrated approach, ensuring a solid performance throughout the cycle with regular gains in market shares. Why? Because we are uniquely positioned to address the needs of our corporate and institutional clients in all environments and in particular when they need to be accompanied in their development or transformation. How? Well, first, thanks to our broad product offering and our long-term relationship approach. Our complete coverage, combined with transforming initiatives, means that we are always relevant to our clients. Second, our strong client franchise being further enhanced by the proximity derived from our leadership in flow businesses. Third, thanks to the capabilities of our origination and distribution platforms. If you can flip to Slide 29, you can see that '22, the year '22 is attribute to our ability to go one step further by, one, improving our operating model, for example, in Security Services; two, further strengthening our equity franchise with its comprehensive global and integrated offering; and third, accelerating in the financing of the transaction -- transition of our clients. Thanks to these initiatives, CIB financial targets have been revised upwards for 2025 with a revenue CAGR above 5%, relatively well balanced between Global Banking, Global Markets and Securities Services. Average jaws effect is targeted at 2 points over the period. So what else can I say? In a nutshell, consolidating on '22 strong performance and keeping on its strong discipline, CIB is embarking on a growth path above market with continued market share gains, expansion in volumes and franchises, thanks to favorable product and client positioning and a very good business drive. So that's wrapping up CIB. If we now go to the second division, Commercial, Personal Banking and Services. So this is Slides 31 to 39. So I refer to this as CPBS, the short term. And as you can see, CPBS continues on a robust trajectory with a sustained business drive. When looking at activities, loans were up 7% due to a positive pickup in demand across all businesses. Depositors increased similarly by 6.6% across all customer segments on the back of its favorable positioning. If we look at Private Banking, net asset inflows continued to grow solidly, up EUR 10.7 billion. Here again, you can see our model at work, supporting the shift into products, addressing the savings needs, hence triggering a further shift into fee business and attracting strong inflows through external client acquisitions and synergies with entrepreneurs. Moreover, the division continued to partner with fintechs to better service clients, for instance, in enlarging its offering with an automated foreign exchange risk management platform for corporates, a cash flow forecasting solution for treasurers and the development of "beyond banking services". Having said that, how does it translate into the BNL? Well, results for the year going up sharply with very positive jaws. What else can I say? So let's look at the revenues. They clocked in EUR 28 billion, up 9.3%, driven by the strong performance for commercial and personal banking and steep growth from the other part called specialized businesses. First, let's look at Commercial and Personal Banking. Revenues were up 8%, thanks to the favorable interest rate environment, with net interest income up 9.7%. With a good momentum on deposits collection on the back of a strong client franchise with corporates, private and mass affluent clients, Eurozone networks performed particularly well. If we look at France, net interest income increased by 4.9%, with a low relative exposure to regulated savings, while in Belgium it increased by 8.9% and in Luxembourg by 20.4%. At BNL, the positive impact of interest rates on deposit margins remained somewhat offset by the progressive repricing on loans. So that's interest income. If we look at fees, we continue to get the full benefit from our leading positions on flow businesses and our favorable client mix. Despite the negative impact of financial markets, fees increased shy of 5% with a steep price in France, up 8.5%, supported by a buoyant activity on cash management and trade finance. So that's the Commercial and Personal Banking side of CPBS. Second, let's look at specialized businesses. Revenues, they were up 12%, and this on the back of the continued expansion of the finance fleet, up 8%, as well as the benefit of a high used car price combined with new partnerships. And that basically means that Arval and Leasing Solutions saw a sharp increase in revenues, up 28%. If I look at Personal Finance, revenues were up 3% on the back of volume growth, while strong pressure on margins are weighing underperformance. The business is transforming its activities to foster its growth and profitability. So if we synthesize back at CPBS, these are the revenues. If we look at the costs, they were up accompanying this growth. They were up 6%, or if you look on a like-for-like basis, up 4%, and reflecting the gains in efficiency across networks with a very positive jaws effect of 3.3 points. These are the banks. Similarly, the specialized businesses confirmed their capacity to grow at marginal cost with, what else can I say, the huge positive jaws effect at 21 points for Arval and Leasing Solutions. Given the significant reduction in cost of risk, pretax income increased to a sweet rounded number of EUR 8 billion, up 24%. To sum up, what else can I say, that CPBS has seen a strong year with a very good momentum across all its businesses, thanks to its favorable client mix and supportive interest rate environment. On top, the transformation and digitalization of its model is leading to a sustainable rise in income for '22, paving the way for an outpaced performance. If we now turn to Slide 40, and let's look at the two main levers of development for CPBS, which have been confirmed in the year '22. So first, our leadership positions on the Corporate and Private Banking segments. This is key in light of CPBS client mix, as I mentioned before. As you are already aware, 60% of the gross operating income of CPBS is generated on Corporate and 20% on Private Banking clients, so the total Corporate-Private is 80%. This positioning allows for an enhanced cooperation with the rest of the group, hence the material 16% growth in cross-sell on corporate client revenues. In addition, our #1 position on flow businesses in the Eurozone is reported by a broad transaction banking offer and increased capabilities and payments. Acquisition transactions are up 16%. So that was the first part. The second part, our retail activities, which benefited from a favorable positioning with more than 20% of mass affluent clients. And if we look at retail, 20% are mass affluent. And they are adapting their operating model, accelerating their digital and technological transformation and a service model while enhancing the operational efficiency, leading to a better quality of service and variabilization of cost. So these are basically the networks. And if you look at Europe-Mediterranean, after the exit of our activities in sub-Saharan countries, we will focus on Europe and its periphery and will strengthen our position on Corporate, Private Banking and mass affluent clients in line with our global strategy, and that I just commented on, in Commercial and Personal Banking. If with this, we switch to the specialized businesses. Arval, Nickel, FLOA, Personal Investors, see their development strategy confirmed with ambitious growth targets, and this at marginal cost. All these businesses built solid platforms in growing markets and grow significantly faster than competition, meaning for 2025, an impressive set of targets, if I can say so. More than 2 million vehicles for Arval, more than 6 million of accounts opened for Nickel and twice as much for FLOA. So transformation will be needed when we look at Personal Finance in a complex environment with strong pressure on profitability. Personal Finance, in particular, will refocus a geographical footprint on core Eurozone countries with the portfolio structure tilted towards more exposures to the automotive and mobility sectors, having a better risk profile given they are asset-backed. Our objective for '25, plus EUR 10 billion of additional outstandings, an ongoing improvement in cost of risk towards 120 basis points over outstanding and leading to an improvement of the return on notional equity. On leasing, priority to new partnerships and financing to energy transition with a focus on productivity gains to improve the cost/income ratio by more than 2 points in '25. As a result, we have raised our targets 2025 for CPBS with an average revenue growth of around 5.5%, including a positive impact on the interest rates of around EUR 1.6 billion by 2025, benefiting mainly the Commercial and Personal Banking in the Eurozone. As such, and benefiting in addition from a strong ability to develop fees, Commercial and Personal Banking should deliver an average revenue growth of 6%. If we turn to the specialized businesses, the ongoing growth at Arval and Leasing Solutions will be partially offset by the transformation and adaptation at Personal Finance. Combined, it should nonetheless deliver revenue growth with a CAGR at minimum of 4.5% for the specialized businesses. Last, but not least, if I can say, thanks to improved efficiency gains, the targeted jaws effect for CPBS is anticipated at around 3 points on average over the period, embedded recurring savings above EUR 1.2 billion. So we've done 2 out of 3. So stay with me and let's move to Investment & Protection Services, Slide 43 to 46. IPS witnessed an overall positive momentum in business activity, delivering profit growth in a lackluster environment. In difficult market conditions, net asset inflows were good at EUR 32 billion, sustained by good inflows at Wealth Management, supported by our commercial and peripheral banking in Europe and particularly in France but also in Germany and Asia. Post-[deficit] assets inflow also in Asset Management, driven by medium- and long-term vehicles and the rebound in the money market funds towards the end of the year '22. So these are volumes. If we now focus on the P&L, IPS revenues stood at EUR 6.7 billion, up 3%. And this is the result of a good performance of the whole Wealth and Asset Management, plus 6.8%, with a solid increase in wealth management revenues driven by the growth in net interest income as well as the growth contribution at personnel investments and the progression of real estate. Impacted by an unfavorable market environment, insurance revenues showed resilience with a solid momentum in savings and protection activities as well as the continued development of new product offering, offset by decreasing financial results. So revenues decreased by 1.9% on a year basis. So these are the revenues at IPS. And if we look at the expenses, they clocked in at EUR 4.4 billion, up 3.5% year-on-year, driven by the business development and the targeted initiatives. If we look at constant scope and exchange rate, the jaws effect was close to 0. And so IPS pretax income came to EUR 2.6 billion, up 4.8% compared to a year ago. A good performance given the context. So this is the results for the third division. And now let's look at the plans, Slide 47, 48. So IPS aims at becoming a reference European player for protection, sustainable savings and investments as well as a key European player in real estate services. To achieve this, there are 3 main objectives: first, accelerating in financial savings; second, capturing growth in private assets; and third, strengthening our leadership in CSR. And this, using 3 key levers: first, BNP Paribas integrated and diversified model, as you know and as you've seen all the benefits of; second, digitalization as well as new ways of working; and third, operational efficiency. And we can leverage our strong and diversified distribution model, our close proximity with CPBS, combined with our strong ability to develop efficient partnerships and JVs outside of the group. With this, we turn to Slide 48. You can see that '22 is a tribute to the outperformance of our Wealth and Asset Management business and strong ability to attract assets. We will build on this commercial outperformance and anticipate a sustained average growth rate in assets under management with a CAGR of more than 7% over the period '22 to '25. We will capitalize on this good momentum generated by the plan's launch with continued extensions in product offering, for instance, in private assets of production -- protection products and strong developments of partnerships. Last but not least, IPS is an area where we have growth opportunities to see, for instance, with targeted acquisitions and expansion in specific capabilities. As we confirm the growth trajectory of IPS over 2025 with a CAGR in gross operating income of 6%, 4% for insurance and 9% for Wealth and Asset Management in the period '21 to '25. So this basically synthesize the businesses, and I'll now hand it back to Jean-Laurent for the conclusion.

Thank you, Lars. So BNP Paribas '22 results confirm the key ingredients of a successful execution of our strategic plan Growth, Technology and Sustainability '25. We benefit from a strong [embark] growth with a strong mobilization and commitment of the teams. We delivered a solid performance in '22, disciplined and well balanced between businesses. We benefit going forward from a unique positioning and an additional growth potential of more than EUR 5 billion. As such, we have revised upward our target in net income from a CAGR of 7% to a CAGR of over 9%. We will execute EUR 5 billion of share buybacks in '23 and each year an amount equivalent to 10% of our distributable net income, which should lead to an average increase in EPS over 12%. This growth will be strong and steady. To do so, we will increase the '23 distributable result up to EUR 1 billion to provide to shareholders a clear and coherent growth trajectory in line with our potential through the period. Finally, we will continue to confirm -- to affirm our leadership in financing the energy transition. As such, we are entering in a new phase of acceleration in financing the production of low carbon energies and reducing the financing for fossil fuel. On Slide 51, 52, you will find in brief the main objectives under the plan, which have been substantially improved. Thank you very much for your attention, and we will now be pleased to take your questions.

[Operator Instructions] The first question comes from Flora Bocahut of Jefferies.

The first question I wanted to ask you goes back to the Slide 6, please, and more specifically on the building block called organic growth. Just if you could just explain to us in terms of the net income, '23 versus '22, where you expect from what P&L line and what business do you expect that organic growth to be driven. And then on the Slide 5, for the second question, please. First of all, just checking that I understand correctly that you now expect revenues will be EUR 5 billion higher than what you initially planned in the GTS plan. And then specifically on those EUR 3 billion additional revenues you discussed in the slide on the back of the redeployment of the capital from the Bank of the Wests sale, how quickly and in what division can we expect to see those, please?

So on Page 5, it's written. So on one side, EUR 2 billion coming from the new rate scenario, and on the other hand, EUR 3 billion coming from the reinvestment of the proceeds from Bank of the West. So EUR 3 billion plus EUR 2 billion equals EUR 5 billion. So this is basically the momentum. And then looking division by division, as Lars mentioned it, you have the detailed impact of this pickup in the different pages that are presented within CIB and CPBS and IFS. IFS, it's not linked to the top line. It's linked to the growth of the gross income after cost. So I hope I answer correctly your question about the EUR 5 billion.

Flora, if you would have a clarifying question. Go for it.

No, look, I mean, that's clear. I think some of the targets you present are then ex -- the redeployment. So just wanted to check where exactly you see the bulk of the revenue growth, including the redeployment. But that's fine. And then just on the organic growth in the question on the Slide 6, but this one, the net income growth '23 versus '22. Basically, is that revenue-driven? Is that cost, provision that was the idea here?

I'll take that question. So yes, Slide 6. It's not a riddle, but there are indeed a lot of information in it. So if you look at it, we basically start from the bottom line in '22, so the EUR 10.2 billion. Then we basically say, listen, Bank of the West is gone, so this is a reduction. And that is more than compensated by the fact that we consider that the EUR 1 billion, which is the last contribution to the Single Resolution Fund, is excluded from distributable income. And so then there is the remaining growth. And as you've seen in the overall targets, the growth we aim to continue on the levers that we started, so 2022 is a tribute to the model working to the top line basically evolving. And so that is basically what we anticipate to do. Of course, the cost will be very much contained. You've seen our jaws. You know our focus on jaws. And you've seen the cost of risk. The cost of risk, we really are careful in the clients we attract, and that's why we are comfortable to guide a cost of risk well below 40 basis points, by the way, of what we know in customers, but also given the Stage 1 and Stage 2 provisionings that we have in the balance sheet. So that's basically how we see that evolution. And if you do the math, the EUR 10.2 billion and all of that, you can clearly see that the distributable income will end up well above EUR 11 billion.

The next question is from Delphine Lee of JPMorgan.

First of all, I just wanted to check on the capital impact that there's nothing more that you need to take in terms of regulatory impacts from ECB inspections or with views or anything like that? Just basically IFRS 17, the 10 basis points you flagged. And my second question is really on the RWA growth. You talked about the additional EUR 3 billion that you're getting from reinvestment of BancWest proceeds. But what does that mean in terms of underlying [ other way ] growth, getting that big belief in terms of capital from proceeds and RWAs. But there's been an acceleration clearly of the organic RWA growth. So just wondering what we should expect in coming years.

Delphine, so on your two questions. So on the capital impact, there is basically nothing, right? We explained -- well, a year ago in '22, there were a series of new rules that were impacting and so on and so forth that we announced upfront and you had the impact. On this one, the only thing that we see in doing is the arrival of IFRS 17 as of -- that we will clarify in May, and that is what we expect on 10 basis points. And that's basically the only thing that we expect in capital to be taken away from the common equity Tier 1. That's that. And when it comes to your question on RWA redeployment. So one of the things when we look at the further redeployment of RWAs, and particularly the redeployment of the proceeds of Bank of the West, I jokingly but not jokingly say we're not going to buy a bank because we're not going to buy a bank. But in particularly, we want to grow into activities, in activities and particularly also fee and commission-generating. So it could be insurance, it could be asset management, it could be private banking, all of these kinds of elements. That is why we feel comfortable to guide on a higher growth while increasing the ROTE because the ROTE goes from 11 to 12, and this is basically reflecting the lower average consumption of RWAs. That will be my answer, Delphine.

The next question is from Amit Goel of Barclays.

So I have kind of two questions. The first is to do with the redeployment of the capital. And I just wanted to get a sense of to what extent has some of that EUR 7.6 billion already being redeployed into the business? And is there a sense of the kind of revenue run rate that's already being achieved at the end of 2022 from that? I mean -- and related to that, whether you're thinking that beyond 2025, you can realize more than the EUR 3 billion. And the second question is just to do with the distribution of that capital into the business. Just thinking on the CIB side, how do you think about it in terms of whether or not that could push you above roughly 1/3 of capital within the CIB and whether that's a constraint or not.

Sure. If you look at the equity to be reinvested through the different divisions. So starting with 110 bps roughly. Basically, in 2022, we have already invested up to 20 bps. So let's assume that every year, we will redeploy 20 bps, or 4 years, this is 80%, close to 20 bps for bolt-ons and then remaining 10 bps for, I would say, new business model, kind of [context] type of investment. So this is in a nutshell the road map. All those decision, reinvestment, bolt-ons are based upon the very strict financial discipline. To some extent, only, I would say, top business lines, the best position within the BNP Paribas Group can benefit from that. So we can even, I would say, bring those businesses at an even better level. So this is the current situation. Looking at CIB, roughly speaking, 1/3 of the equity is kind of for maximum of the amount we could allocate to the CIB. There is no, I would say, intention or, I would say, purpose to change this balance. We like the diversification of the model, and that's it. And looking at bolt-ons, clearly, it will come more for, I would say, specialized businesses, could be personal finance, insurance payments, so typically non-CIB businesses.

Does that answer your questions?

Yes. And just so some of that investment is going to be in '24, '25. Are you thinking that the EUR 3 billion can grow from there as well as some of those later investments come through?

If you -- of course, we have to redeploy this equity in the current systematic and progressive way. As an assumption, we've picked up an average cost income of 60%. But knowing that we are investing in businesses in which we have already, I would say, a cost base, most of those investments, they are run at a marginal cost. So in reality, it explains why progressively even if it's, I would say, spill over the period, you get the average EUR 3 billion, top line cost income 60% and then return on tangible equity, 12%. So there is no hurry. We have a very strong ability to redeploy equity just because we have a number of very competitive and very well-positioned business models. And this is really the way we are going to look at the situation. And you never know, but there's a very high probability that we are going to be successful in doing so. And we are not interested at any kind of major transaction, banking aggregation, domestic bank, whatsoever. Just about a growing service model that is bringing value-added products and services to the franchise.

The next question is from Jon Peace of Credit Suisse.

Sorry, just one more on the EUR 3 billion of revenues. If you don't find those annual opportunities or the bolt-on deals, would you consider doing a further buyback with the proceeds? Or would you carry forward the excess capital into 2026 and carry on looking? And then a second question, please. I think, Jean-Laurent, you said that the EUR 2 billion of additional revenues from higher interest rates was from rate hikes that have happened in 2022. So just to confirm, that would be consistent with a 2% sort of terminal deposit rates by the ECB because, I guess, the markets' forward path is for rates to go up and then come down again.

Jon, I'll take your first question, the EUR 3 billion. So the EUR 3 billion, the idea is that actually it would not be bolt-on. So what we assume is that 80% can be redeployed within the business so we can accelerate servicing our customers. That's the 80% we will do. And so there's 10% of that, that we have basically earmarked for bolt-ons. So while if it wouldn't be possible to have that 10% done in 3 years, then we'll see what we'll do. But it looks like the way we have been already doing, if you look at 2022, with what we've been able to do with [ indiscernible ], with FLOA, so we feel quite confident. But the amount of bolt-on is relatively small, and so we feel comfortable with redeploying it into accelerated organic growth. On the net interest margin, yes. So what we basically have that evolution that we see ramping up to EUR 2 billion goes with the 2% that you mentioned.

The next question is from Tarik El Mejjad of Bank of America.

Just two questions for me, please. First of all, on the volume growth. Could you please give us a bit of overview of where do you see volume growth in this year and next in the retail and the corporate because, clearly, we are seeing better-than-expected environment, and assumptions built in the beginning of -- end of last year were much more conservative. So where do you see the retail or mortgages growth and then on the corporate side? And secondly, I will come back on the capital deployment. I mean, I'm surprised because when you announced the deal, you were very clear that 1/3 would go for organic, 1/3 for technology and the rest is bolt-on. And then the share of the bolt-on has really shrunk a lot and your profitability is improving. So you organically generate excess capital because it distributes only 60%, and you're already pro forma compliant, Basel IV and so on. So where the significant growth is coming from where you have to allocate this extra EUR 7 billion? And would you consider, for example, buying back your share from the Belgium government if that would be earning accretive as well?

Terry, let me take those two questions. On your volume growth, as you know, we are basically bank focused on corporate institutions. And so that's where the growth comes from. We are relatively a small player when it comes to retail. So for us, the focus is accompanying the businesses that we see on that aspect. And of course, if this one is going faster, we will be very pleased to accompany them. And then on the redeployment, the redeployment, what we said is we basically said there are three drivers. So there is the organic, there is the technology and there is that. And as we mentioned, as you know me, I mean, we are basically frugal and we observed that when there is this opportunity to do it organically, that is the one that is bolted on immediately, that is the one that we know well, that is the one that we serve well, and that's the one that hits the bottom line immediately. So even if there are three levers, I think you can really see that the organic one is the preferred one.

Sorry, Lars, my question on volume was more kind of the volume you've seen now organically on the retail. How is that recovering given the uncertainty in the market, in the retail and the corporate. What do you see on the ground basically?

Well, listen, we don't give an update in the middle of the quarter. So if you look what you basically saw in the fourth quarter, you saw that on the corporate side, the volumes were still going up very well. If you look at the retail side, in particular, if you look at the mortgages, it was somewhat slowing down. So that's basically where we stand.

And on the Belgium stake, would you consider that?