BNP Paribas SA (BNP) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen, and welcome to the presentation of the BNP Paribas Third Quarter 2024 Results with Jean-Laurent Bonnafe, Group Chief Financial Officer; and Lars Machenil, Group Chief Financial Officer. 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 like now to hand the call over to Jean-Laurent Bonnafe, Group Chief Executive Officer. Please go ahead, sir.

Thank you. So good afternoon, ladies and gentlemen. Welcome to the presentation of our third quarter '24 results. As usual, at the end of the presentation, Lars and I will be pleased to take your questions. So moving to the core of the presentation with Slide 3. Our net income group share reached EUR 2.9 billion in the third quarter of 2024. This was a very strong quarter for BNP Paribas driven by good performance across our operational divisions. Our revenues are up 2.7% compared to the third quarter '23 on a distributable basis. All in all, an outstanding quarter for CIB, which was up 9% year-on-year with global markets leading the way. Meanwhile, CPBS generated stable revenues, excluding revenues from used-cars disposals at Arval. We see positive momentum in the commercial and personal banking activities in the Eurozone, France being a good illustration with a 1.6% increase in revenues in third quarter '24 versus third quarter '23. I will get back to this in the next slide. IPS was a strong performer, up 4.9%, supported by insurance and asset management. This quarter, operating costs were up 1.7%. Cost growth was efficiently targeted at supporting our development, and we were able to sustain positive jaws of 1 point for the quarter. We are on track to deliver our promised operational efficiency measures. EUR 655 million of savings have been achieved as of the end of September with a further EUR 345 million expected in the fourth quarter, adding up to EUR 1 billion for the full year '24. Our gross operating income is up 4.2% year-on-year at EUR 4.7 billion and operating income up 4.1% at almost EUR 4 billion as an illustration of the performance of the quarter. Moving on to the cost of risk. It remains stable at 32 bps and demonstrates the strength of our credit portfolio through the cycle. As a result, in third quarter, our net income reached a solid level of EUR 2.1 billion, up 5.9% year-on-year, and our EPS was up plus 11.2%. Our financial structure is strong with our core equity Tier 1 at 12.7%, which includes a 30 bps impact due to the prudential consolidation of Arval on July 1, as previously announced. In the second half of '24, planned securitization program will be positioned in fourth quarter '24. The main part of the capital redeployment of Bank of the West is now completed with the project of acquiring AXA Investment Management by Cardiff, which would strategically reposition IPS within the group. Overall, we have redeployed 150 bps of which 60 bps were returned to shareholders in the form of share buybacks and 90 bps were reinvested in a disciplined manner within the group in activities with high potential for value creation. 40% of that 90 bps was devoted to IPS businesses, insurance, asset management and Wealth Management, out of which 25 bps is related to the Cardiff/AXA IM project with this major strategic initiative focused on fee-driven capital-light businesses. It will boost the IPS division, drive integration across its various businesses and significantly increase the potential for synergies between them. It will also strengthen synergies with CIB and CPBS, further enhancing our already impressive ability to cross-sell and enhance our share of clients spend. We will hold a deep dive dedicated specifically to this major strategic initiative after the closing. Moving on to Slide 4. We confirm our '24 trajectory from a revenue, jaws effect, cost of risk and net income perspective. Let me share with you the analysis of our business drivers. CIB, we continue to gain market share while retaining a balanced allocation of capital. The very good third quarter results illustrate this. Within CPBS, the outlook for commercial banks in the Eurozone is improving, thanks to a favorable shift in the interest rate environment related to the steepening of the yield curve, the stabilization of loans and deposits and the gradual reduction of the impact of headwinds on business growth. We're already seeing a slight positive trend in third quarter, which should continue in fourth quarter then in '25 and '26. In this sense, third quarter constitutes an inflection point. In '25, the headwinds will no longer bite into business growth. And in '26, all other things being equal, we should benefit from tailwinds. Moving to Arval. It has experienced a major impact from the normalization of used car prices, which is greater this quarter and is likely to last until fourth quarter '25. However, Arval is intrinsically doing well with a sustained growth in volumes, supporting a significant increase in financial and service margins. Within IPS, third quarter results illustrate a strong momentum for asset management and insurance. With that, I would like now to hand over to Lars, who will take you through the group and divisional results.

Thank you, Jean. Very fine afternoon, ladies and gentlemen. If I may, I suggest that you move to Slide 7, which contains more details on the P&L and a clear demonstration of our solid operating performance this quarter. As already mentioned by Jean-Laurent, our performance in terms of gross operating income is quite strong, up 4.2% as well in terms of operating income at almost EUR 4 billion. This can also be seen at the bottom line being up 5.9%, clocking in EUR 2.9 billion, which marks a nice progression year-on-year. Actually, the level of net income in the third quarter is the highest that BNP Paribas has recorded in the third quarter. Now before looking at the solid performance across divisions, a quick review of the exceptional items this quarter. Basically, there is no review. They are quite limited and similar to last quarter or a year ago. And so this is a further illustration of the strong intrinsic quality of our results. If with this, I can ask you to move to Slide 8 and review the performance by our operating divisions, and you will see an overall performance that confirms our trajectory. So overall, group revenues up 2.7% year-on-year. So if we walk through the divisions, first of all, strong revenue growth at CIB, up 9% year-on-year and driven by a very strong performance in each of the 3 business lines. And this leveraging on deep client relationships and an increase in demand for financing. Global Banking, a leader in EMEA, is up 5.9%, supported by capital markets activities, which are at the heart of the group's originate and distribute strategy. And if you look at its capital markets, which is really close to what the corporations need, it is up 12.4% in EMEA. We are already positioning ourselves in what we believe is a fast-growing market as corporate client financing needs, for example, for climate, technology transition, bringing back technologies and the likes, and these financing needs are unprecedented. We also believe the potential acceleration of the Capital Markets Union or elements thereof in Europe offers strong growth opportunities, both for Europe and for ourselves to assist in it. So also, if we stay within that department, there is a solid 5.7% increase from transaction banking in the Americas, driven by trade finance and a good performance by cash management in Asia. If we then go to the second division within CIB, Global Markets. Activities were up 12.4%, driven by a strong performance on one hand in Equity and Prime Services, up 13.2% and in particular was strong in Prime and stable in overall equity derivatives. So that's EPS. Then secondly, the performance in FICC was also robust, up 11.8%, thanks to strong activities in basically all letters of FICC, maybe bar commodities, so strong in credit rates and ForEx. Then the third one is Securities Services, up 6.6%, and this is driven by a sustained growth in net interest margin as well as higher client cash balances. So good business acquisitions in Securities Services was demonstrated by new mandates, higher outstanding and our ability to assist clients through market volatility. So that's the first division. If we now look at the second one, CPBS. It had a stable quarter, excluding the negative impact of the used car prices with Arval. So if we start within CPBS, so you have 2 main divisions. And if we start with the Commercial and Personal Banking businesses in the Eurozone. The third quarter showed an improvement, as mentioned by Jean-Laurent. We are currently at a tipping point as on one hand, site deposits stop moving and loans to individuals show positive trends. That's one thing. And second thing, the headwinds are becoming less punitive for business growth. As you can see, I mean, I'm not going to comment it, but if you browse to Slide 21, you can clearly see that it's tapering off from a EUR 150 million impact negative in the first quarter, and it's coming down to EUR 63 million in the third quarter. And so if I look at it, I take the first 9 months for our commercial banks in the Eurozone, they are basically up 2.1%. If I look through these headwinds and these headwinds, as I said, they will basically be gone and out of the base going forward. And the 2.1%, if I look specifically at the third quarter, it is up 0.8%. And we saw some improvements in the net interest revenues and fees in France as an illustration of the quality of our franchise, and we also saw it in Italy and Luxembourg. So overall, the pretax income of our [ Net-Zero ] increased by 10.8% with a positive jaws effect and a low level of cost of risk at 19, 18 -- 19 basis points. So all this, what you see in the Commercial and Personal Banking in the Eurozone is biding very well to crystallize the pivot and deliver growth going forward. There is one point of attention that is Belgium, where we have been adapting to, I would call, a significant market disruption that could continue for a few quarters. And this, in particular, witnessed through intense competition on loans and deposits that is weighing on margins. From our stance, our commercial strategy created in response to the market reaction to state bonds, which are maturing in September or have matured in September, is to provide customers with medium-term certainty rather than matching the short-term high rate products in the market. And this, on one hand, preserves margins for the bank and retains and protect clients, especially in an environment of declining base rate environment. So this strategy contributed to a 4.4% growth in customer deposits and off-balance sheet assets at the end of the third quarter compared to a year ago. So that basically synthesizes the commercial banks. And if we now go to the second part in it, which is the specialized businesses. They are moving downwards 5.7% year-on-year. If we look at it in detail, if we start with Arval, we are adapting to the continued normalization of used car prices. These are basically down 35% in used-car prices year-on-year. However, the organic business growth is doing well and is basically up 15% with financial and service margins continue to grow at a healthy pace. The expansion of the finance fleet will keep on supporting organic growth with further gains in individual customer fleet, added by the development of partnerships with automakers, as you are well aware. If you now move to Personal Finance, we see positive trends in revenues in the core perimeter. So the core perimeter is up 1.5% year-on-year as an illustration of the successful implementation of the strategic plan. The business could continue to benefit from the favorable shift in the interest rate environment with the resulting decrease in refinancing costs and a positive effect on volumes. Last, a stable performance this quarter from new digital businesses and personal investments. So that's 2 out of 3. Let's look at IPS. As you've seen, the division performed very well this quarter with revenues up 4.9%, driven in particular by Asset Management and insurance. If we look at Asset Management, up 7.9%, driven by a strong growth in assets with a supportive market environment and strong inflow driving fees up. Then there is insurance, up 6.4%, driven by good performance in France and a more favorable rate environment. The business momentum was good with a strong increase in savings gross asset inflows, which were up 13% year-on-year as well as a strong growth in protection, driven by our ability to offer a full range of products. And then the third part is Wealth Management. Revenues were stable compared on one hand to a high base a year ago and the impact of the interest rate environment compensated for by good momentum in fees. So that's basically what I wanted to say about the dimensions of the divisions. So if I can take you to Slide 9. And here, we wanted to show how diversified and well integrated and rather unique model as a growth engine through economic cycles. So platform -- on one hand, we have platforms at scale that are the key foundations of our business model. These platforms allow us to grow at marginal cost, thanks to efficient production facilities. They also feed our client franchise with a very broad range of products as illustrated by our significant cross-selling activities. Indeed, cross-selling is core of what we do, and it's a key component of our group revenues. So it generates 1/3, 32% of the total, representing roughly EUR 7 billion in the first half, up 5%, which is 2.7x more than the group revenues, which increased by 1.7%, so this is really a core element unique to BNP Paribas. It is strong in all our client segments, with a fair representation in Corporate and Private Banking as well as with retail clients. In particular, IPS products represent 36% of the group cross-selling revenues in the first half with an increase of 3%. These 2 figures, so 36% of cross-sell and 3% of growth are encouraging in the context of the ongoing IPS transformation because in particular, you see the numbers, it's 36% of the cross-sell and IPS represents "today only 12% of the group revenues. So you see a tremendous lever for these products. So thanks to our diversified and integrated model, our revenues have continuously grown at an average rate of 3% per year, so 2.7% in this quarter. So that's basically what we do with the top line. Let's now look at the evolution of the costs. So overall, we said positive jaws, so costs up 1.7% and our cost income stands at 60%. So if we look again at the divisions, CIB first, the increase in costs is supporting growth. Jaws were overall positive 0.4 points this quarter and costs are also well contained for Securities Services in the context of high volume growth. They're also very positive jaws. If we go to CPBS, costs are well contained, down 1% in the Commercial and Personal Banking in the Eurozone and that thanks to the continuous improvements in terms of operational efficiencies. So costs are down 1.9%, driving jaws to almost 1 point. Within specialized businesses, costs are down 1.3% with positive jaws, Personal Finance given in the core perimeter and thanks again, thanks to the adaptation plan that is underway and the implementation of new operational efficiency measures. Positive jaws for Leasing Solutions, 2 points. The third division, IPS, we see contained costs in every business, either to support growth or because of faster implementation of operational efficiency measures. Hence, operating expenses are down 0.4% with an overall strong positive jaws of 5 points. And so jaws are positive in every business bar real estate. So if you stick with me for a couple of more slides, and we look at Slide 11. And what you see here is that since March 2024, we have stepped up our operational efficiency program with further cost savings of EUR 400 million, resulting in a total savings over the year of EUR 1 billion and EUR 2.7 billion in a cumulative basis by the end of '25. These additional savings are roughly split around the businesses, as you can see. As of today, out of the EUR 1 billion planned for the year, we have achieved EUR 655 million of savings, and this to absorb on one hand, inflation, but also allow for new projects and investments that are needed to serve our customers. And so what are these kind of efficiency measures? They include, as you know, the nearshoring and offshoring and combined with a global sourcing and optimized real estate assets on top of several additional efficiencies, in particular, in our retail sector. So if we now move on to our strong risk management culture, as mentioned also by Jean-Laurent. Our prudent risk management, what else can I say, is illustrated by main ratios, including our provisioning rate and the rate of nonperforming loans. Focusing on the third quarter, our cost of risk is stable at 32 basis points. Stable. It was also 32 basis points a quarter ago. Overall, it's a bit technical, but our Stage 1 and 2 provisions is still comfortably above our cost of risk on Stage 2. The cost of risk over gross operating income remains low at 15% this quarter, and we have a limited exposure to the currently sensitive industries. So regarding the evolution of cost of risk by individual businesses, you can see that overall, it also remains at a low level. If with this, I can ask you to turn to Slide 15 on the financial structure. As of September 30, our common equity Tier 1 clocked in at 12.7%. It's a solid level, well above our 12% objective on the regulatory requirement. So where does that 12.7% come from? So it basically stems from at the end of the second quarter, we were at 13%. What happened? First of all, there is a 30 basis points impact, which we announced well upfront from the prudentially consolidating. So prudentially consolidating Arval in anticipation of the finalization of Basel. So that we anticipated it is what it is. The second one, there's 20 basis points that return to the investor. So basically, the dividend that we return to shareholders as we usually do. And then there is this 20 basis points of dividend is compensated by 20 basis points of capital generation. Normally, this 20 basis points in an average quarter is basically 30 basis points. So there should be a generation of 10. But what you have this quarter is that the efforts of what we call originate to distribute is split over 2 quarters. So what I mean by that, the originations that have been going on for clients, in particular given the solid demand at the end of September has driven up the fact that we put into our balance sheet this originated lending, and we are in the process of distributing it. And so what we have foreseen and putting in motion in the fourth quarter is an equivalent of 10 basis points in distribution. So we basically stick just the OTD, which is split over 2 quarters. So we stick to what we said, the 12.8% is our run rate. As a result, we are fully on track and confirm our CET target of 12% by the end of 2025. And this takes into consideration the remaining elements of the finalization of Basel starting, so which is, of course, excluding the FRTB, but we'll be ready for that at the end of '25. And last, our trajectory will be supported by organic capital generation and further balance sheet securitization as we have done. I know there are other metrics like the leverage ratio, it clocked in at 4.4%. So that's fine, well above where we have to be. And the same is true for the liquidity position. The 100%, we are at 124% LCR ratio. So that's basically how you see that we are well on track with the profit and with the prudential metrics. And so with this, I hand it back to Jean-Laurent to conclude the presentation.

Thank you, Lars. To conclude, BNP Paribas delivered a strong third quarter, thanks to the solid performance across the operating divisions. Beyond the short-term '24 trajectory, the strength of BNP Paribas model lies in its ability to adapt to economic cycles as illustrated by the continuous growth of our EPS, dividend and tangible book value. This is particularly due to our ability to optimize portfolios on an ongoing basis to maintain a balance in our capital allocation and divest from noncore businesses. This is what we did by selling Bank of the West, reallocating 1/3 of the deployed capital to CIB to finance its organic growth and boost its market share gains. Now we are repositioning IPS within the group with the Cardiff/AXA Investment Manager projects and our approach of creating industrial platform and product factories, which is core to our model. We will develop fee income capital-light businesses to feed our growth story. We're on track with our GTS plan, and we'll provide you with an update of our '26 outlook, taking into account the deployment of capital on the publication of the '24 annual results. So thank you for your attention, and we are now ready to take your questions.

[Operator Instructions] The first question is from Tarik El Mejjad with Bank of America.

A couple of questions from my side, please. First, on the Equities and Prime Services division, I think the market was a bit disappointed by the performance there, especially after Q2 -- strong Q2, punchy message during the quarter in different occasions. I know you're still up 27% in 9 months and 13% year-on-year for the quarter. But I mean would you suggest there are some higher seasonality than you anticipated in this -- in Q3? Or what we should have in mind when looking at the EUR 820 million in EPS in the quarter? Should we look at actually EPS on a yearly basis? And if you can maybe give us a bit more indication on how we look at that post the Q2 kind of finalization of the restructuring of the division? I mean the second question is more general. I know you will give guidance for the full year results for the 2026 and maybe an update on '25 as well. But can you run us through the main growth levers? Obviously, not the whole thing you've done it in the presentation, but just the 2, 3 areas that you think really will be a swing factor for you for next year given the rates. I noticed in your presentation that I have these red and green arrows and apart Arval and Belgium, everything looks green in the right direction. But what can you tell us in this stage what you have in mindset for '25, '26? And what's the market missing, do you think?

Tarik, thank you for your question. First on EPS. Yes, if we look at it, let's go back. So in the second quarter, all stars were basically aligned. There was demand in all of the domains at the same time. And so again, if you look even at the year-to-date, that's very strong. Now when you -- when I hear your remark on the third quarter, it depends what it stems from. So I suppose that you basically say and you compare also with what you see with other banks that are basically operating on the other side of the Atlantic. And so let's not forget, so our activity, we are mainly for a big part, we are European based. And so what you see is the dynamic, particularly in the last couple of weeks of September were different. And so on your question of how to see what is a bit the base, for me, it's typically -- if you take a look at the volumes in the zone, so for us, Europe, so you look at coalition, you look at the volumes that we have, and then you basically see that we take market share versus that domain. So that's basically what it is. There is nothing else to read in it. We have all the services. We are there to serve, and we basically are doing so and stepping up market share and particularly in Europe. So Tarik, that will be the answer to your first question. Jean-Laurent, on the second?

Yes. Maybe on the second point, I mean, clearly, must be some focus on the French bank, the Belgium bank and probably personal finance. If you look closely this quarter, after 2 quarters in negative territory, the French bank is in positive evolution. Next year, we should get something north of 3%. This is the internal target for next year is clearly above 3% for the French domestic bank. If you look at Belgium, unfortunately, we knew from the very beginning of this year that '24 will be a difficult year, but it went a bit further. You can look at the evolution of the top line in the third quarter. It will stabilize in the fourth quarter. Next year, if you look at Belgium, again, we will be clearly north of 3%. Our target is clearly above 3%. And looking at Personal Finance, that is still in negative territory globally, even if you look at the core perimeter, it's up 1.2%, if I remember well. Next year, the whole Personal Finance will be up. And if you concentrate on the core perimeter, probably north of 5%. So I would say, CIB is a growth story. IPS is every quarter more kind of growth story, especially considering the fact that we're going to consolidate progressively AXA Investment Managers and the Wealth Management coming from HSBC in Germany and other, I would say, bolt-ons. And CPBS, looking at 3 major areas that today this year is under pressure well, next year, clearly, we are going to be back in positive territory. So maybe this is the bulk of your question.

If I can just follow up on the CIB part on the EPS. I mean I wasn't commenting on the market effect. I was more on your market share gain, strong market share gain you're expecting post all the actions you have done for the division that -- I mean, do we think like Q3, which normally is seasonally lower, is equal to Q1, which actually normally is a good quarter. Is that kind of a run rate? Or again, I really, really come back on -- we should have a look at the full year, look at what you've done in 9 months and have an idea on how to annualize that and see what would be the new level for EPS. Sorry to insist because this is a key part...

No. No worries, Tarik, but it remains. When I basically said when we take market share, you really have to look at -- so that market share is expressed in a part of revenues, and it's part of the revenues and basically the European activities. So you cannot bulk the U.S. activities in it. So it's really looking at -- and that's what I said. You look at what coalition is giving for Europe, and that's where you can see. And then again, the demand can be different. So yes, you typically have a strong start of the year and even the second quarter. And then the third quarter, it can be different. It depends on how the summer goes. It also depends a bit what the central banks are doing. And so that's basically what you can see. So I cannot tell you that it is a fixed number of run rate you should go for. What I'm saying is I'm stepping up the market share of the demand that is happening within that quarter. So it's not a number, I give you a relative positioning.

The next question is from Azzurra Guelfi with Citi.

Two questions from me. One is on the French retail. Can you elaborate a little bit on the dynamics there? Because net of the hedging, I haven't seen any improvement of the margin. So I don't know if you can elaborate a little bit on the rate sensitivity, what to expect when the rate will move down and on the volume side? The second one is on the deal with AXA. It's clearly a big step into the IPS division and a big transformation going on there. Can you elaborate a bit on the benefit and potential synergy as well as synergy between the different division for the group between, I don't know, the CIB and CBPS with the savings as well.

So we do not have typically a French retail. We changed the brand name a couple of years ago. So it's more commercial private banking type of business. If you look at the NII, it doesn't move like a retail banking -- regular retail banking activity because of a number of factors, especially the fact that you have flows from the balance sheet out of the balance sheet and vice versa. It doesn't move exactly the same way. So what happened this year is that unfortunately, short-term rates remain quite high for a very long period of time again. So this is a price signal that create a kind of, let's say, regular move from side deposits towards, I would say cost deposits. So -- and this has created a negative effect. So not only this year, we are not benefiting from anything based on the rate scenario. But on top of that, we suffered some pressure on the size of the volumes of the site deposits. So -- and if you look at the French bank, probably this is in the range of EUR 200 million. So we have a kind of EUR 200 million negative headwinds coming from this, I would say, pressure on the deposit side -- deposit volumes. And if you look globally at the Eurozone banks, probably this is north of EUR 300 million. So next year, we're not going to get something typically from the rate curve. It's just the fact that this phenomenon is going to come to an end. So you will have 200 that are going to vanish in the year down to 0 for France and more than 300 going to 0 for the Eurozone banks. So this is the situation. It's not typically a rate effect. It's a pricing. It's a signal given to the market. And especially in the commercial bank, private banking platform, affluent type of customers, well, the signal is strong. So people they are moving. It's not a regular mass market operation. And this is valid also for Belgium. This is valid. So well, so next year, we suffered quite negative headwind coming on top of what we disclosed that was the end of the remuneration of the deposit at the Central Bank, the Belgium bond and so on and so on. So we got that negative headwind in France, Belgium and globally in the Eurozone linked to the quality of the franchise. So those -- this element is going to come down to 0 next year. And this is also why next year, we are quite confident with the French Bank, Belgium and the Eurozone bank globally. While for Personal Finance, the fact that short-term rates are going down will help us, I would say, rebuild margin at the level of the platform. So this is the situation. For AXA, well it's a bit complex to comment because we signed MOU end of July, 1st of August. By year-end, beginning of December, probably we will have the full signing and the closing will be probably end of June, beginning of July next year. Well, so very difficult to compute the level of cost synergies. I mean you have the cost base and well, if you are strong, you can go up to 18%, 20%. So you can compute with that. It's not very difficult. But we cannot really comment that far because it's not closed and it's a bit tricky to give, I would say, additional numbers.

The next question is from Giulia Aurora Miotto with Morgan Stanley.

I had a question on Personal Finance and/or Arval. I know you are more skewed to corporates within your leasing book. But the recent developments in the motor finance consumer lending in the U.K. do they impact BNP at all? I know that you have some presence in the U.K. on consumer finance and leasing. So if you can -- yes, just give us some sense there, that would be great. And then my second question, more strategically, can you tell us about the benefits you're getting from the partnership with Apollo and more in general, how you are thinking about private credit as an opportunity, as a threat? Yes, I would welcome your comments there.

On the motor, Lars, if you want to answer it.

Yes. So on motor, there's 2 things. So on the Personal Finance, there's basically we have no exposure. When it comes to leasing, we have some activities. But what I can tell you is compared to the other players, it is marginal. So that's on PF.

I'm sorry, last marginal means like less than EUR 100 million sort of potential impact or?

Yes. Wait. I think there was still a question on Apollo and on the -- Giulia, did we answer your question? Or do you want us to come back to your question on Apollo on the private credit?

No, no. So the U.K. car motor finance question is answered. Thank you for that. But yes, on private credit, if you can comment.

Yes. On private credit, if you look with Apollo, so what you basically see, there has been moments in time. If you go back 20 years, all financing was basically public financing done by banks that went into the market. Then when COVID hit and whatever, it basically -- the private credit stepped up. And that's what you saw like that several players are coming in. But what we're seeing is that it's not going to be black or white. There is now going to be a spectrum of financing that basically goes to schools from public to private. And so we are a player in basically all of those aspects, and that is why we sometimes team up with other players in that domain. So it's a continuum. We consider that private and public will be a continuum, and we play in all aspects. So Giulia, that will be our answers.

The next question is from Delphine Lee with JPMorgan.

I just have 2 quick ones. Just on the cost from Slide 11. So there is still another EUR 200 million from your EUR 400 million of additional cost savings to come in Q4. So just wondering in terms of how we should think about the seasonality of Q4 because generally you have a bit more cost in Q4. Is that -- should we expect it to be less pronounced than usual? If you don't mind giving us a bit of color on this. And secondly, just wanted to ask, you're going to -- you commented that you will provide an update of your 2026 outlook, taking into account the redeployment of capital sort of with the Q4 results. Just trying to understand a little bit, is that -- are you going to give us like more like new targets in '26, which we don't have? Or would that take into account AXA? I mean just trying to get a bit of feel of what you mean by that.

I'll take your cost question, Delphine. So indeed, so as a quick reminder for the cost savings, we initially had during the plan, we had like EUR 600 million savings this year. And then with inflation stepping up or staying high at the beginning of the year, we basically said we're going to do EUR 400 million more. And so they basically said we put that in motion in the second quarter. We started to see the first effect. And so it's basically ramping up. So the decisions were taken. But then before they hit, before they are instrumentalized. So that is why it is ramping up. And we see that we are well on track. And so with all the elements that we put in motion, we are confident that we will have the remaining part of the EUR 1 billion savings over the year. So that's basically that. On the strategy, Jean-Laurent?

Well, usually, beginning of the year, we are giving an update of the term plan. So this is typically what we're going to deliver next year. We have term plan. The return on tangible equity, 12% was postponed beginning of that year in '26, 12%. So we are going to give the, I would say, the color around this term plan, taking into account part of the redeployment of Bank of the West, the proceeds from Bank of the West, not everything will be available around the transaction with AXA EM for a simple reason, it's not yet closed. So we have to be cautious with that. But it's a typical update on the term plan at the beginning of the year to give the relevant color on the different divisions based on the, I would say, the redeployment and including the deployment of the proceeds of Bank of the West. But yet beginning of next year, we won't be able to give all the details around the AXA Investment Manager.

And just as a follow-up, I mean, would you say that the numbers we can see so far for the first 9 months already largely include the proceeds -- sort of the proceeds of Bank West or it doesn't fully capture yet sort of all the earnings accretion?

Listen, Delphine. There are still elements to come in. As you know, there have been things that have been really closing or in the process of closing. Look at what we've done in Italy with IKEA or what we're doing now with HSBC in Germany. So those elements are still coming into play. So there are still elements of the redeployment that will be adding to the results.

The next question is from Flora Bocahut with Barclays.

Yes. Two questions. One is going back to the CET1 ratio, please. Obviously, it was flat this quarter if we put aside the Arval consolidation impact. So that means that the growth you had this quarter was essentially too capital intensive. It didn't allow for organic capital generation. I hear the comments you made, Lars, around OTD having been delayed a bit by a quarter and securitization coming in Q4. But isn't there anything more to add to that? I mean I was looking at the RWA move Q-on-Q, credit risk as well as operational risk, RWA, I think, went up. So I don't know, any comment you can do on that and the lack of organic capital generation this quarter beyond the OTD delay would be useful. And then the second question is going back to Eurozone retail banking revenues. And I mean, obviously, it's important because I think CIB is doing okay. We agree on that. IPS is also doing okay. It will do better with lower rates, the external growth coming in. The market concerns remain very much on the lack of revenue momentum in Eurozone retail. I think essentially, the question I have for you because the messaging you have is clear on why you think it rebound in '25, '26. The question is really about the timing of the bottom. Because if I look at Q1, Q2, Q3, Eurozone Retail Banking revenues have been kind of flattish in EUR 3.4 billion, EUR 3.5 billion. Do you think it's a question of like 1 quarter? Or do we have to wait another 2 to 3 quarters before we start to see the decent pickup? So really about the timing here of the pickup in the momentum.

Flora, I'll start with the common equity Tier 1. So when you look at the evolution of common equity Tier 1, there's always many moving parts. And so the main moving part is the OTD. So there is an origination. There has been a lot of activity in the end given that uncertainty in September. So we put it in the balance sheet, and we didn't have the time to get it out. So next to that, there are other moving parts. So there are the typical moving parts. You can have OCI moving a bit. You can have your model reviews that are happening. But that is run of the mill. You have the typical kind of things with some overs and unders that basically iron out. The main thing, which is the phasing is that one. And on your question on the revenues, listen, with what we've guided, you can clearly see -- so we said there is this pivot coming. Of the elements of the pivot, there is several of them that are basically crystallizing as we speak. On Slide 21, you can see the headwinds. So the headwinds are really tapering off. And so they will basically be gone -- almost gone in the fourth quarter. So that's the pivot. So you will clearly see in Q4, the pivot and then picking up in the quarters thereafter.

The next question is from Stefan Stalmann, Autonomous Research.

I would like to start and try my luck again with the AXA deal. I appreciate there's still lots of moving parts, and it's early to be very committed. But can you give us a sense of whether -- when this deal closes in the middle of next year, whether in the second half of 2025, you expect a positive net profit contribution from this deal or not? And the second question expands on, I guess, Delphine's question earlier. Looking at the fourth quarter, last year, you surprised the market with a fairly poor set of results, and that was coming both from unusually weak revenue and also quite a spike of the cost base, which always looked like a kitchen sink. Is there any reason from what you can see today to believe that we're going to see something similar again in the fourth quarter of this year?