Société Générale Société anonyme (GLE) Earnings Call Transcript & Summary

Good morning, everyone. Welcome. I love this film. You're hearing the voices of our colleagues from around the world, you certainly recognized our heavy French accents and many others. But I know that you also heard our voice, one of passion for our clients, and one of passion for our work, which is at its core, fulfilling the uplifting mission of supporting and catalyzing the potential of others, our clients' potential, their ideas, their projects, the eagerness to grow that lies in each one of them and in every company that was ever created, being the ones that make the genius, the courage, the vision of our clients come to light and impact the world. This job must be done. It is needed. It is one of great responsibility, which we welcome. And it is one that gives us meaning and a sense of purpose every day, a job which we could not perform without our shareholders, the ones who founded us 160 years ago and the ones who support us today. And for this support, we are not only profoundly grateful but also, we feel a great deal of accountability for it. So dear investors, analysts, partners and colleagues, it is a great pleasure to welcome you today in our London office and online. Our CFO, Claire Dumas and I will be presenting today, but I welcome my partners, the deputy CEOs of Société Générale [indiscernible] the members of our Executive Committee as well as Tim Albertsen, the CEO of ALD; and Benoit Grisoni, the CEO of Boursorama, who joined us today. It is an important meeting. One where we get to present our strategy, one where you get to ask us your questions directly. So let's begin. We ambition for decades to come to be a leading bank, rock solid and sustainable. We have strengths undeniable and distinct. We need to change undeniably. We take decisions. We have catalysts that will support our course. Our goal is to deliver consistently a sustainable value creation to our shareholders and all our stakeholders. And to deliver, we must be first rock solid -- more capital, less costs, best-in-class risk management, strong culture. Second, simplified fewer businesses, less cost, less dispersion, more synergies, less [ tail ] risks. Third, high performance, compete where we can win, not where we can merely exist, tightly managed scarce resources as a principle, not as an option. And finally, sustainable, deliver consistent earnings with low performance volatility, be a leader in helping our clients and the world solve the radical ESG challenges we are facing as a matter of survival. So where do we start? Everything starts with our clients. We have 25 million clients around the world. We have been building these relationships, long-term relationships, for 160 years, and we are very good at it because clients have trusted us through decades, we have built a EUR 27 billion resilient revenue base. We have an exceptional team with the level of expertise and professionalism recognized around the world. In many instances, a go-to bank, a team with a unique level of commitment to our clients and to our company, a company where world-leading franchises were imagined and built. One of the few places where the world derivatives markets were born, project finance or renewable financing or even a dedicated ESG equity research teams 15 years ago. The company, which built a leading online bank for 5 million real banking clients off a phone and a fax in one of the most competitive banking markets in the world, a company which successfully restructured and developed leading banks in new countries, a company which nurtured step by step, the most competitive fleet leasing business in the world and grew it into a world leader. These are facts you can check. Can we do better? Of course. We are highly competitive consistently extracting a high gross margin from our business, defined as NBI over RWA. This means that on a relative basis, we create more value than average from each unit of capital we employ in our value creation process. How are we able to achieve this? Because of the unique combination of strengths, which I already described. Conversely, we must recognize that our performance, our net value creation sometimes falls short of expectations. We produce high margins, but with costs that are too high because of complexity. Our earnings are volatile because of idiosyncratic events and all of the above impedes capital generation. These features of our business model negatively affect our valuation. Whether we like it or not, does not matter. Despite a roughly 50% increase in our tangible book value since 2010, our share price decreased by over 50%. Our valuation carries a significant discount to the book value. So this will not come as a surprise to you. We believe that extracting high gross margin is important, growing and innovating is important but consistently delivering a sustainable profitability is what matters the most. Net value creation is our #1 priority and not just for the sake of it, but because this is the ultimate composite measure of a company's performance. So how are we going to do this? Our strategy in the end is one word, sustainability. For our shareholders and ourselves, we want to deliver sustainable profitability. For the world, we want to contribute as much as possible to the sustainable development goals. Our road map is simple, strength and performance. Strength is a good stewardship of capital from setting proper capital management levels to running a tight ship in terms of capital allocation. Strength is an optimized business portfolio with low return dispersion with a good risk profile, strength is a low breakeven point and high operating leverage, sources of superior profitability and resilience. Strength is best-in-class risk management. And on these strong foundations, high-performance businesses can thrive. And performance is focusing our expertise and resources on what we do best, what we can excel at. Performance is leadership in ESG because there is no future for unsustainable businesses. And doing our part is an ethical imperative and helping our clients is a defining business opportunity. Performance is not a given. It's a culture, and it requires an acute sense of accountability from all. With this road map, we will convert high gross margin into sustainable profitability, striking a better balance at the heart of what we do. And we set ourselves the following targets: a CET1 ratio at 13% in 2026, a cost-income ratio below 60% in 2026, a ROTE within a range of 9% to 10% in 2026, a distribution payout between 40% and 50% from 2023 to 2026, a revenues CAGR between 0% and 2% between 2022 and 2026. The ambition to be an employer of choice for our teams, present and future and the ambition to maximize our positive impact on society. Everything is here. The underlying equation is one of balance between often conflicting priorities in an uncertain world. It is also driven by a deep sense of accountability recognizing that promises are not what matters. Delivering is what matters. The capital base is the backbone of banking. And it is, in our view, essential to operate with a level of capital, which enhances the flexibility and competitiveness of our business and financial model. A core strategic assumption, we want to have a rock-solid balance sheet, and we target a level of 13% for our CET1 ratio. Why 13%? We spent a significant amount of time listening to shareholders and reflecting on this key parameter of the overall strategic equation for a bank. We decided to target 13% based on 200 basis points over the MDA, which means a CET1 of roughly 12% [indiscernible] Basel IV, the minimum level we intend to always respect. An additional management buffer to provide enhanced leeway to operate our business responsibly and with flexibility. We are currently at 13%, and we keep this target post Basel IV. It will put us in line with the strongest Eurozone [GC] targets. It means taking the capital debate off the table. It means an enhanced ability to absorb any exogenous shock, an ability to seize business opportunities through the market cycles and ultimately, it means delivering a steady total shareholder return. We are taking decisions to meet this target through the combination of the following actions: first, proactively limit the organic RWA growth. Second, improve organic capital generation through cost efficiency. Third, streamline the business portfolio and enhance capital management through distribution of assets and risk transfer transactions. Finally, define a responsible distribution policy. We are fundamentally changing our approach to growth. We do not grow out of our challenges, we address them. We will capture growth with our businesses, but differently. Our growth will rely on discipline. Over this cycle, the organic RWA growth will be limited to less than 1% per year on average from 2024 to 2026. Only ALD and Boursorama will benefit from incremental RWA allocation. All other businesses will grow only as they finance their own growth through capital optimization and the improvement of their gross margins. And note that capital allocation to market activities, organic allocation will remain stable. We will grow differently by making choices and focusing our investments by increasing the advisory and fee-driven components in our businesses. We will benefit from positive tailwinds in terms of NII from 2024 onwards. We will leverage our businesses through strategic partnerships, which will help achieve meaningful growth with a lower RWA intensity. And overall, we project our revenues to grow annually between 0% and 2% on average between 2022 and 2026. As part of our new strategic equation, we have framed a prudent distribution policy consistent with our strategic goals for this cycle. Over the period from 2023 to 2026, we expect the payout ratio range between 40% and 50%. To ensure clarity and consistency from now on, the payout ratio will be based on reported net income. Within the 40% to 50% range, we aim at a balance between cash dividend and share buybacks from 2024 onwards. Share buybacks because it makes financial sense considering our current valuation. Cash dividend because they are important for some of our shareholders. Once our CET1 target is reached post Basel IV, our intention is to use any excess capital in the best interest of shareholders. So we run a highly diversified large-scope business portfolio with some degrees of complexity. We will simplify it and increase its consistency by applying strict portfolio management criteria, so that management attention is focused. The portfolio has the right risk profile. Diversification comes with synergies and the appropriate level of profitability delivered on a regular basis. Business portfolio management is critical and as it directly impact group capital management, the group cost to income and the group risk profile. Operational efficiency: We and by we, I mean the entire senior management team are fully committed to structurally improve the group's operating leverage. Our objective is to reach a cost-to-income ratio below 60% in 2026 with a linear progress from 2024 onwards. We are a high-cost producer, and lowering our production cost is critical to enhance net value creation. Operational efficiency is a matter of processes and spend, but it is also a matter of mindsets. So we are shifting our mindset so that seeking efficiency guides us in all our actions with clear targets and incentive mechanism set both at business and support function levels, responsibly. It is important indeed to stress that we will not reduce cost at the expense of our core businesses. We will not shrink out of our problems either nor our controls quality. It will be done at the expense of significant structural inefficiencies, some of them stemming from the complexity of our business portfolio, which we'll address at the same time. Efficiency is also a matter of culture. From now on, businesses will have to bear their own transformation charges and to self-finance their cost growth. As part of the efficiency gains, we'll be -- a part of them will be reinvested in innovation and business initiatives supporting profitable growth. Overall, we target gross cost savings of EUR 1.7 billion in '26 compared to '22. This ambition combines existing projects with new efficiency initiatives, which represent approximately 40% or EUR 700 million. This cost reduction plan relies on three pillars. First, the delivery on all existing efficiency projects from the French Networks merger and the integration of lease plan by ALD to all the initiatives already underway in GBIS and International Retail Banking. Second, the improvement of IT efficiency through a more disciplined platform strategy, more structured and systematic digitalization and automation, which I will address later. Third, we will shape a leaner organization to enhance efficiency in the context of the overall simplification of the portfolio. IT and digital are both important cost items and performance catalysts from both the revenue and a cost perspective. And through our growth-focused, fast-paced innovation, we developed wide-ranging product and services offers across multiple customer segments, businesses and geographies. We offer well-regarded digital capabilities through Boursorama or SG markets. However, our diversified business mix and largely decentralized operating model led to a complex architecture, to a fragmented infrastructure and to a wide library of applications. This reality is one of reduced efficiency levels, less standardization and mutualization opportunities and ultimately, one where we do not benefit enough from our scale. With a EUR 4.7 billion cash out spend in 2022, our technology is costly relative to its size and when compared to peers. And to address these inefficiencies, we target EUR 600 million of gross IT cost savings in ['26] versus '22 and to achieve this reduction we will converge towards a platform model. Platform model relies on a common technological foundation and the sharing of standardized tools and services across the organization's IT. And once again, streamlining the portfolio of businesses is a key catalyst for IT efficiency. At the same time, we continue to invest constantly in cybersecurity, cloud infrastructure and data management solutions. Risk management is a fundamental driver of net value creation and therefore, our performance. We have managed our businesses with strong risk management principles and deep risk expertise. We are determined to maintain the highest standards throughout the group. In terms of credit risk management, we have a strong track record in reducing our cost of risk, one of the best. We had an average cost of risk of 30 basis points between 2018 and 2022 compared to around 50 basis points for European peers. And we have a total of EUR 3.7 billion in prudent S1 and S2 provisions. This performance relies on a strategic approach to diversification on expertise, decades of history and experience in our sectors, geographies and client segments of choice. And our risk strategy also benefited from a proactive portfolio management. Similarly, market risk management is a key driver of value creation within wholesale activities. We have successfully derisked both quantitatively and qualitatively, our market activities since the 2020 market dislocation. As you can see, we shifted the paradigm in our consumption of market stress test since 2020. It has significantly decreased as we focus relentlessly on client margins, product risk reward and proactive risk management overall. We will maintain best-in-class risk management within a stable risk appetite. We will maintain a prudent origination policy across all regions and all businesses. We will ensure that our exposures remain well diversified and that concentration risk is limited. We will maintain our appetite for market risk at current levels. We will maintain a constant and strict monitoring of tail risk and throughout the group, expand specific processes, which we developed in GBIS over the last few years. Overall, we expect the cost of risk to remain in a range between 25 and 30 basis points over the 2024-2026 period. Of course, risk management framework goes well beyond credit and market risk. ESG risks, for instance, are specifically considered in a holistic approach across the group. We assessed the impact of E&S risks on our client risk profile such as transition and physical risks. We identify the impact of our own activities on the environment, society and human rights and frame our actions with strict sectorial policies. Governance, compliance and conduct are fundamentally in the culture of our company, and we are constantly seeking to improve even further in these matters on strong foundations, high-performance businesses drive. Our collective future is one of transformational change, which always carries risks and volatility. Banks are COGS in the economy where risks are underwritten, intermediated and managed, and change is always both a risk and an opportunity. We believe that change will further accelerate in the next decade, geopolitical polarization, energy transition acceleration, behavioral and social changes induced by the energy transition and new technologies with the ultimately disruptive potential of AI. In this context, our clients need us. They need more and more expert advice and ad hoc solutions, and we are very good at it. We'll focus further on what we are the best at, not everything to everyone, everywhere with an average value proposition. But the combination of our best with the best of select partners that we will anchor in our platform to deliver the best to our clients. This best-of-breed partnership approach through an open architecture mindset wherever it makes sense across the entire company, we will prove to be a unique business strength and opportunity. Our clients will be best served and we will increase the value per client that we generate from our client relationships because client satisfaction is what matters most in the long run and what drives loyalty, fee generation and profitability. Change is bringing business opportunities. Over the next decade, the world needs a fast but orderly energy transition and a shift to sustainable development. $300 trillion of investment needs, a radical shift to electric vehicles a unique opportunity for our investment bank, our retail bank and for ALD. The world needs infrastructure investment across a wide scope of assets from transportation and energy to healthcare worth another $100 trillion, a unique opportunity for infrastructure advisory and financing franchise and for partnership with Brookfield. The world needs trusted and expert providers of investment advice and investment products as populations age and AUM grow, a unique opportunity for our markets business for our Bernstein JV and for our Brookfield partnership for that matter. The world needs responsible digital solutions, which will ultimately be the norm, a secular trend, which supports Boursorama, our digital sales in private banking and our R&D leadership in digital assets developed through HG Forge. Change is bringing business opportunities. Our business mix is well balanced and diversified across our three pillars, all our core franchises, the ones we excel at have strong prospects for growth and an ability to extract synergies as they address the opportunities their markets offer. Equally, they have all opportunities to increase their efficiency. I want to stress this point. We will relentlessly seek to increase the value stemming from the business portfolio by ensuring systematic offer integration where it makes sense for our clients. We will, for instance, increase cross-selling within the bank insurance model in France as we organize a closer cooperation between the Retail Banking and the Insurance divisions. And we will similarly optimize our mobility ecosystem so that clients benefit from an integrated offer, combining fleet management and leasing with car finance whenever appropriate. I will not comment on this slide as I touched upon the open architecture and best of [ grid ] partnership approach that we will implement to scale up our value proposition to clients. Let's rather dig a little more into our businesses, starting with French Retail. It is important to have in mind our unique setup with two leading banks in France that fits well the specific market and behavioral changes. We have, on the one hand, a well-established bank with brands strongly positioned with wealthy affluent professionals and corporate clients that generate superior value. On the other hand, we have the undisputed leader in French online banking with very strong growth, which captured for instance, over 20% of total client acquisition in the French market in 2022, 5 million clients a consistent #1 in quality with the highest NPS. This is how we capture both the value and growth components of this market. In French Retail overall, our key long-term strategic objective is to achieve over time, the cross convergence of our strengths. While remaining the benchmark bank for high-value clients who require a specific setup and a specific level of service, Société Générale France must continue to decrease the cost to serve and optimize further its organization, its product offer and its operations. It is a shift in paradigm, which requires a longer effort. We took a first step with the merger. It was a transformational step, but a lot remains to be done. In the meantime, while maintaining its leading position in digital, client acquisition and best-in-class operating model, Boursorama must further increase the monetization of its growing client base, increased its revenue per client in a very meaningful way. Boursorama, it will be equally challenging as the efficiency efforts for the Société Générale networks and equally defining for its future as we seek to grow its net value creation. Combining the strengths of our two banks in France, we target a client base of more than 17 million customers and a cost to income below 60% in 2026. Boursorama reached all its targets set in 2020, well ahead of plan and posted in Q2 '23, a quarterly net income close to EUR 50 million. Its potential for profitability is very significant, thanks to its unique combination between growth capacity and a highly scalable model. Because we care about long-term value creation, we have decided to continue to invest in Boursorama in the coming 3 years. It is simply too early to stop Boursorama in its client acquisition momentum, while the digital market is still being formed. Boursorama is uniquely positioned to achieve an overwhelming level of leadership in this market of the future. And it is our responsibility to extract the whole value creation capacity potentially it carries. As it delivers this plan, reaching over 8 million clients by 2026. Boursorama will benefit from the rate environment and will be tasked with selling additional products to its clients at a pace which is consistent vintage by vintage with outstanding by lines doubling in year 3 compared with year 1, and even tripling in year 5. Of course, we will take full advantage of the strong operating leverage of the business model. We would invest roughly EUR 150 million in terms of gross -- negative gross operating income, if you will, over the 2023, 2025 period, to reach the objective of more than 8 million clients by the end of 2026. But let's be clear, we have no intention of increasing the number of clients for the sake of it. This wouldn't make any sense, and we are not a start-up. We target at the same time, a net income above EUR 300 million in 2026. Moving on to the French network. Despite its strong position on high-value market segments, we must admit that the profitability generated recently is not satisfactory and far from the level we target. Therefore, beyond the increased contribution from the NII tailwinds, which we will discuss in a few moments, the sustainable improvement in our French networks profitability requires us to be significantly more efficient. The time -- the deployment of our new model, post-merger is key, but it must be coupled with strict cost management with a view to lowering the cost-to-serve beyond the direct merger benefits and strengthening the value proposition across all client segments, increasing commercial intensity and the level of gross margin will also be part of the profitability improvement equation. We expect that bringing together the networks and insurance activities under the same management, which they would not, will enhance our bank insurance model and help fill the gap we carry in non-life products. In financial terms, we aim to reduce the cost-to-income ratio to below 60% in 2026. Moving on to GBIS. Our GBIS business is strong. Over 7,000 clients balanced between corporate and financial institutions, a high-value client base with low churn, generating stable and resilient revenues. You know the reasons, long-term relationships based on trust and on the provision of expert advice and solutions. GBIS is also at the heart of our diversified business model as it stands at the cross road of the core group synergies, together with French Retail with billions of revenues generated within the group directly or through synergies with GBIS. Over the last 3 years, we have built a solid track record with all the targets communicated in 2021 already largely exceeded ahead of schedule. So simply put, we are staying true to the philosophy of the strategy we set out in 2021. Our primary objective remains the same, and it is actually twofold. On the one hand, strengthen our position as a Tier 1 European wholesale bank and as the trusted partner of choice for our clients, this is the bedrock of our performance to maintain a best-in-class gross margin. On the other hand, we are committed to ensure a sustainable level of profitability with lower volatility than in the past cycles. To continue achieving this, especially in the context of normalizing market conditions, at least for now, hence the limited growth assumptions, we need to go further in improving operating leverage while investing wisely in technology in developing a more capital-light model. Overall, we target a cost-to-income ratio below 65% in 2026 based on a plus 1% to plus 2% CAGR revenue within F&A from 2022 to 2026, 2022 being a high point and a revenue range between EUR 4.9 billion and EUR 5.5 billion for Global Markets. With normalizing market conditions, no incremental RWA allocation, meeting all these targets is no easy task. Without a doubt, we also need to scale up our value proposition to clients at the same time, and this will be done with focus and discipline. First, by shifting profoundly our approach to capital management, we will move further away from a culture of balance sheet management optimization to a truly distribution-driven approach. We will lower the RWA intensity per unit of revenue through our distribution capabilities, our investor reach and capitalized by strategic partnerships like the one with Brookfield. Similarly, we will continue to step up our advisory capabilities, focus on fee generation, more than on NII, and we will maximize all the revenue and client potential stemming from our Bernstein JV. In simple terms, more advisory, more fees, less capital intensity. Excel at what we do. We have well-known strengths, and we will focus on being even better where we are already strong, moving from the best equity derivatives house to one of the best equity house in the world, strengthening our FICC businesses through an even stronger focus on corporate clients, nurturing our reach into our sectors of choice with a leading ESG franchise that is not transactional, but profoundly strategic rooted in our sector expertise and our deep understanding of underlying technology challenges across entire value chains from, for instance, the mining of lithium in emerging countries to the charging infrastructure in Europe and vehicle batteries. Growing our financial sponsors franchise, not across every product, but for instance, through excellence in the private credit chain, once again at a specific spot where we can lead. We will continue to invest in Transaction Banking, a high-performing asset-light business, which benefits from the higher rate environment with a specific objective here to increase the diversification of revenue towards fee businesses. We will also build a more integrated offer across the group to better address our clients' need for simplicity. More advisory capabilities, more expertise, more bespoke scale capital for clients, better transaction banking solutions are what clients need and optimizing the value creation for our clients will help us preserve and expand margins. Turning now to International Retail Banking. Following the refocusing carried out over the last decade, the group is now present in Czech Republic and Romania with two subsidiaries, KB and BRD, which holds strong positions in the top three in each country. And in addition, considering the four ongoing disposals, we are also present in 13 different countries on the African continent and overseas. Overall, we currently serve 9 million clients equally split between corporate and retail clients. Although Europe is more retail oriented, whereas Africa is focusing primarily on corporate business. In 2022, the net income generated by our international banks amounted to EUR 700 million, almost 2/3 of which in Europe, and the average [ ROE ] reached 17%, including 27% in the Czech Republic, notably, thanks to a very favorable rate environment, 19% in Romania and 12% on average in Africa. It is a meaningful combination of national champions, which the group has developed for decades and optimized successfully. Going forward, our strategic objectives will be simple and clear, ensure that our international presence creates value for the group and its shareholders with returns from subsidiaries that are sustainably higher than their cost of equity, which differs from country to country, not least because of geopolitical factors. Indeed, even though notable improvements have been made in terms of profitability over the last quarters, the level of profitability is still not a target, particularly in Africa. And unfortunately, it does not yet cover in our view, the implicit cost of equity. We want a compact and efficient setup that delivers the cost to income below 55% in 2026 and an ROE consistently above the cost of equity. We will take all the necessary steps to achieve this strategic objective without any taboos, digitalization and process streamlining, relevant mutualizations and disposals. Wherever we could conclude that we are not the right long-term owner of a given business. We recently announced the sale of four African subsidiaries as we intend to focus on leading franchises with critical size and which are highly synergetic with the group. It should be noted that in the regions where we will continue to operate, we want to offer the best client experience, particularly in Europe with the digital transformation underway. Similarly, as with the group's other businesses, EHG will be a cornerstone of our approach as we intend to have leading positions in all our geographies in this field. Finally and it is critical ensuring strict compliance with all applicable rules, regulations and business practices as well as high standards in terms of risk management will be a constant imperative in the management of our international subsidiaries and key in performance assessment. Moving on to the New Mobility and Leasing Solutions activities. We have here with ALD, another very differentiating asset with, like Boursorama, promising prospects in terms of long-term profitability. With the integration of LeasePlan, ALD became the world leader in fleet management and a leading global player in sustainable mobility, a leader, which is twice the size of the second player in this market. Additionally, these activities also integrate our consumer finance activities, which are the third largest car finance specialists in Europe. Closer cooperation between these businesses, ALD, Equipment Finance, will open interesting prospects for synergies, particularly in the automotive sector. Key to some customers and partners who seek integrated offering spanning from leasing to traditional consumer car finance. Within this pillar, our first objective will be to ensure a timely and efficient integration of lease plan while making sure that the business activity continues to grow. Additionally, we will strengthen the synergies with the other businesses. And like within the rest of the group, we will pay attention to cost to reach a cost-to-income below 55% in 2026 at the pillar level. With ALD, we are building a leader in mobility. The industry is evolving very fast. We see rising environmental awareness, an increasing shift from ownership to usership in terms of behaviors, changes in urban mobility, all create high-growth opportunities, which require not only financial strength and agility, they require a significant and distributed service infrastructure lean and operated flawlessly. ALD has it and is, therefore, very well positioned to address these changes and these new opportunities. And indeed, through ALD's expertise, we want to capture growth opportunities, thanks to an integrated and holistic offer to clients, and we target a 6% CAGR in earning assets between 2023 and 2026. We also aim to be the key partner for our clients to support their energy transition by increasing the delivery of electric vehicles. We target 50% in EVs, in new contracts in 2026. And finally, we believe ALD is ideally positioned to lead the digital transformation of mobility. And we aim at creating a fully digital business model in Mobility Services, which will also contribute to further improving efficiency. ALD targets 52% cost-to-income ratio in 2026, excluding used car sales. From the group perspective, ALD is a great story. Meaningful long-term sustainable growth prospects, ability to meaningfully contribute to the energy transition, strong digital position at the heart of the key human need mobility which will offer opportunities of an expansion into B2C businesses down the road. Diversification and strong risk profile, best-in-class and accretive cost-to-income and an accretive ROE versus the group average, with good investment and the right majority owner as ALD became a regulated financial holding company, one that addresses our core corporate client segment. With that, I leave the floor to Claire, so she can walk you through the targets in details.

Thank you, Slawomir, and good morning to all. I will provide you over the next few minutes with deeper insight into the main financial targets laid out by Slawomir, the underlying assumptions that underpin the financial trajectory and its various building blocks. There are six main financial targets at group level for the next 3 years, which I'll summarize on this slide. First of all, the strengthening of the core Tier 1 ratio to 13% in '26 post Basel IV, which is a strong commitment made by the group at the core of our plan. Operational efficiency is also at the heart of this new strategic plan. It will concern all the group's businesses lines and support functions. We target at group level, a cost-to-income ratio below 60% in 2016, which mainly relies on cost optimization measures as we have prudent revenue assumptions with an average annual growth between 0% and 2% over '22 to '26. In terms of risk, to maintain a prudent approach in our projection and based on a continuous cautious risk management we expect the cost of risk to evolve in a range between 25 and 30 basis points from '24 to '26. All of the above will enable the group to deliver a return on tangible equity between 9% and 10% in '26 based on a 13% core Tier 1 level. Lastly, our objective is to distribute between 40% and 50% of the reported net income after deduction of interest on [indiscernible] and undated [indiscernible] loans restated from the noncash items, which do not impact the core Tier 1. Before commenting the new financial targets, let's delve into the key macroeconomic assumptions. Our central macroeconomic scenario is based on a soft lending assumption over the '23 to '26 horizon with inflation progressively easing to more normal levels as of '24. In details, our scenario is of a prolonged period of [ store ] speed growth. Annual growth rates are expected to remain positive in the coming years, within a range of around 0.5% to 2% maximum from '23 to '26, both in Europe and in the U.S. We believe that core inflation will ease but the return to target will be slow. After the peak of '22 and '23, it will be back below 3% by '24. Constituently with the GDP and inflation assumptions, we expect short-term rates to start decreasing in '24 and stabilizing around 2% for 3 months arrival and 6 months arrival until '26. Compared to market and ECB expectations we can consider these assumptions as prudent, in particular, on the GDP growth per the ECB projects at 1.5% in '25 versus 1% for [ ESG ] assumptions in Europe, but we think that it is best in the still uncertain environment to keep [indiscernible] conservatism. As part of our ongoing commitment to our accountability, I will now share -- can you hear me properly? Yes. Okay. As part of our ongoing commitment to our accountability, I will now share how our organization is adapting and enhancing our financial reporting. We have set strict and clear principles. First of all, regarding transformation costs. We will, of course, make sure to contain them to a strict minimum and closely monitor them. But most of all, they will now be borne directly by the businesses and not anymore in the corporate center. We consider that this allows for a better accountability and representation of the intrinsic business performance. Secondly, and consistently with the increase in our capital target, we will change the weight of normative capital allocated to businesses from 11% to 12% to better reflect the economic capital cost of our businesses. Also, the group's performance will be assessed through the reporting view as a norm instead of underlying view previously. Lastly, business reporting will change to better reflect the in-force synergies, entrance will be integrated within French Retail and consumer finance will be brought into the mobility and leasing services activity. To conclude on this topic, we will have by the end of '23 financial impacts regarding the valuation of noncash items, which have no impact on distribution and very limited impact on the core Tier 1. The first one is a goodwill impairment of the African and equipment finance activities for a total amount of around EUR 340 million to be accounted for in Q3 as a direct consequence of the increase in the weight of normative capital allocated to businesses from 11% to 12%. The second one is a prudent provision of '23 deferred tax assets of around EUR 217 million in the context of this transition year. In summary, we are actively working to better reflect the businesses and group performance and have transparent, accessible and informative disclosures. Moving on to capital. We target a phased-in Core Tier 1 ratio at 13% in '26, representing a strong buffer over NDA to increase flexibility and competitiveness. To reach these targets, starting with a 13.1% Core Tier 1 ratio at the end of June '23, the building blocks are clear and simple to understand as illustrated on our presentation. Of course, the capital generated by our net income increase after deduction of the distribution component will have a positive impact on the Core Tier 1 ratio and the capital generation over the period. In line with the selective strategic approach in terms of capital allocation, the impact of the growth in organic RWA will be limited. We are now expecting the impact of Basel IV to be around 85 basis points from January '25 to end '26. This impact is lower than our previous forecast mainly due to refinement of the calculation assumptions, which have been made in line with this new strategic plan. By the end of the year, the regulatory topics should have an impact of 50 basis points instead of 30 basis points previously based on the prudent best estimate. M&A and capital management measures, as Slawomir mentioned earlier, such as securitizations, group-wide asset distribution or portfolio management, partially offset by other regulatory impacts will result in a Core Tier 1 ratio at or above 13% in '26. Over the period, we target the phasing quarter 1 ratio to be around 13% each year-end, starting in '25 with a buffer of NDA above 200 basis points. By the time of Basel IV implementation, early '25, the Core Tier 1 ratio is expected to be above 12%. As outlined by Slawomir, the group will be highly committed to improving operational efficiency. It will mainly be driven by a cost reduction across the group as we have prudent annual revenues growth assumptions between 0% and 2% on average from '22 to '26. In more details, in the French Retail Banking, revenues will benefit from tailwinds in the net interest margin, fee generation due to the commercial intensity and of course, the acceleration on Boursorama. Regarding GBIS, Global Markets revenues are assumed within a range between EUR 4.9 billion and EUR 5.5 billion for the cycle and financing and advisory annual revenue growth will be comprised between 1% and 2% in average between '22 and '26. Finally, our mobility and leasing services, earning assets are expected to grow by 6% in '26 versus '23, supporting revenue growth. Let's have a look at French Retail NII projections. As already guided, we expect the net interest margin of French retail to come back to 20% to [ 11% ] in '24 and slightly and gradually increase. Note that this projection is based on assumptions consistent with our current economic scenario. The top left graph reflects the key drivers of our NIM going forward. Commercial margin is set to steadily increase in the next couple of years as margin on deposit improves. As you can see, it stabilizes in the back-end years of the plan as a consequence of the economic scenario. ALM margin is set to increase on the back of the amortization of the net interest margin short-term hedges. The bottom left chart provides you with a focus on the hedging swaps portfolio. As you can see, the short-term derivatives portfolio hedges the net interest margin. These hedges were put in place in '21 and until first part of '22 in a different rate environment. With a sharp increase in rates, this portfolio delivers negative ALM revenues, offsetting the gains on deposits, delaying positive impact of raising rates until '24. Indeed, these derivatives will mature gradually until mid-'24. The rest of the portfolio hedges the balance sheet. Finally, the sensitivity of the NII to a 10 basis point rate increase stands at plus EUR 28 million in year 1 and EUR 52 million in year 2 at the end of August at constant balance sheet. Moving on to operating leverage. Let's have a look at the cost-to-income ratio evolution from '22 to '26. The group cost income ratio is expected to be below 60% in compared to 66% in '22. And let me remind you that '22 was an outstanding year in terms of revenue generation. Apart from the outside factor of the end of the contribution to the Single Resolution Fund, the improvement of the operating leverage will mainly result from a strict cost discipline and execution of our various action plans. Indeed, we have taken product annual revenues growth assumptions between 0% and 2% on average in '22 to '26, which is not the main driver for the expected improvement in operating leverage. As highlighted previously, the group was resolutely managed downwards its cost base by executing well identified saving plans for a gross amount of EUR 1.7 billion. This will improve total cost income ratio by around 600 basis points. The main savings plan will come from the merger of the French networks. So synergies linked to the integration of LeasePlan by ALD and the various ongoing and new initiatives launched at businesses and central functions level. IT efficiency will also contribute to a large extent, as we expect a gross reduction by EUR 600 million for IT spendings. As all current transforming projects will be mostly finalized in '26, we expect to have less transformation costs in '26 that will contribute to improve our cost income ratio by 200 to 250 basis points compared to it '22 level. Conversely, inflation and other investments should increase our cost-income ratio in a range from 450 basis points to 500 basis points. All these moving parts, which are clearly identified will lead to a significant decrease in the cost-income ratio of the group, which is a central aspect of the strategy and a key objective for the management team. In terms of profitability, we target a sustainable ROTE in '26 between 9% and 10% based on the reported net income at 13% core Tier 1 ratio, contrary to past targets, which were based on a 12% core Tier 1 ratio. The various actions plan we detailed today will contribute to reaching these objectives with 2 major effects. On 1 hand, the improvement of our operational efficiency will result in an increase by more than 150 basis points of the group's ROTE. On the other hand, the strengthening of our financial profile, which will significantly increase the level of equity and the solidity of our financial profile, will weigh on the profitability in relative terms, not in absolute. To sum, our ROTE target is the result of a strengthened financial profile and improved operational efficiency with product assumptions on revenues and cost of risk. To conclude on financials. Let's now have a word on liquidity and on the other capital targets. The strong capital we will build over the period to reach a 13% core Tier 1 ratio by '26 will also contribute to strengthen the other ratios and enable us to achieve the following targets through the cycle: a leverage ratio comprised between a range of 4% to 4.5%; MREL ratio above or equal to 30%. On liquidity, our objective is to maintain a robust balance sheet with an LCR equal or above 130% and an NSFR in excess or equal or above 112% through the cycle in both cases. Lastly, in line with our cautious policy and a more dynamic approach in terms of NPL sales, we intend to have an NPL ratio between 2.5% and 3% in '26. In conclusion, I would like to stress that we are committed to those financial targets, which are grounded in the group's strategy and supported by country action plans with a strong commitment of the management team to ensure a successful execution. Thank you for your attention. I will now give back the floor to Slawomir.

Thank you, Claire. As I said earlier, our strategy is 1 word, sustainability. Therefore, ESG leadership is an imperative. We have taken strategic decisions to strengthen it and to increase our contribution to the UN's Sustainable Development Goals. We accelerated the pace of the decarbonization of our business with new targets. We are investing for a sustainable future by continuing to shift our business mandates, and today, launching a new EUR 1 billion transition investment fund, through which we will support green technology innovation, nature-based solutions and new transition players in earlier stages of development. We are stepping up in the way we manage our own impact on the environment. To that end, we are creating a Scientific Advisory Board, an independent consultative body that will support the group's strategic ESG orientations. We want to ensure that our transformation is one that is based on science with a long-term vision. Beyond climate change, including social challenges, human rights and all the other components of the sustainable development goals. Because we want to succeed in this endeavor and because we want impact and outcomes, we will establish meaningful partnerships once again with development agencies and the IFC in particular to build on joint expertise and shared commitment to -- towards the UN SDGs. We will increase strategic philanthropic actions through our foundation, which is focused, among other topics, on social inclusion. Its budget will be increased by 50% from 2024. Today, we are announcing new and ambitious NZBA alignment targets. We increased our oil and gas emissions reduction target from minus 30% to minus 70% in 2030. We announced new sector targets for cement and automotive sectors. We confirm our target for the power sector. Where possible, we strive to meet or exceed the relevant 1.5-degree scenario, which is a decision often influenced by the availability of mature technologies in each sector. Within our oil and gas portfolio, we increased the pace of reduction of our upstream exposure to minus 80% by 2030, taking immediate actions with an intermediary 2025 step of minus 50% versus minus 20% previously. We will also stop all dedicated financing and financial advisory for new upstream greenfield projects, oil and gas. And we will deepen our engagement with our oil and gas clients based on their transition ambitions. Let's be clear. The transition is the transition. There is no switch which would miraculously take us from the past into the future instantly. A responsible posture for bank, especially one that is expert at energy, power, renewables and transition is one where we do our very best to support a realistic and responsible transition. It is also true that the paradigm shift that our society is facing creates opportunities never previously seen. I am firmly convinced that with our diversified business model and our deep sectorial expertise, we have the best fit to both capture these opportunities and to contribute to shaping the outcome of the transitions that are required. We are supporting clients in their evolving needs. We understand the full extent of the value chains needed to deliver a transition, for instance, how to finance the natural resources necessary to renewable energy technologies. We are deepening the shift in each business, adapting business mandates, reinforcing ESG expertise and partnering externally, once again, wherever needed, to make sure that the advice we provide to clients is the best possible. This would increase our competitiveness and deepen our client relationships. And finally, our distinct capabilities in ESG advisory and financing structuring allow us to capture mandates which are much more strategic in nature than what we used to be able to achieve on average before. So once again, increasing fee generation. The leading bank in ESG is not a bank that simply finances mainstream renewable power assets. We do too, but we are a leader because we imagine solutions to finance the transition, the difficult part. New actors, new technologies, working often in coalitions and partnerships to set new common standards. We want to do well by doing good. Successful execution of this strategic plan will rely more than ever on the commitment of our employees and management teams and a strong sense of accountability from all. This is why being a responsible employer is therefore an absolute priority for us. We want our employees to be proud to work for the group, proud of what our clients achieve with our support, proud of our direct and indirect impact on society. We aspire to a working environment in which our employees can reach their full potential with personalized career paths and dedicated training, an environment that ensures the conditions for an inclusive culture and a healthy and high-quality life at work. Diversity in this regard is a key component and a much needed continuous effort. In that respect, we commit to allocate EUR 100 million to further reduce the gender pay gap and to have more than 35% of women in our top 150 key group positions. We will strive to keep a balance at the executive committee level. As clearly stated previously, we will improve efficiency across the group for the benefit of shareholders, but also for employees. More efficiency indeed leads to a better work experience with simpler processes and to better pay, based on net value creation. We also intend to consolidate employee shareholding with an annual share ownership program. The ownership mindset is one which fosters alignment and long-term sustainable value creation. At Societe Generale, our people are our strength, have always been and will always be. And increasing our commitment score is, therefore, a key objective for management. Since I was appointed, I have actively worked to shape a tighter and more diverse management team to ensure a lean and efficient decision-making process, more outside in inputs on substance and on culture, actually. I have built a team with people of great expertise, of great experience who share the same sense of purpose and accountability. The success of our plan will not come without the change of mindset to foster a culture of excellence across all the company's challenges and opportunities, from disciplined growth, to disciplined capital management and from disciplined business portfolio management to sound cost management. We are committed to delivering sustainable performance. This change in culture will permeate the entire company, and it will be reflected in performance management as well as performance reporting, Claire spoke to it. We will use the reported net income as a norm to give a clear representation of the performance of the group to the market. The distribution policy will be aligned with performance. We think that management accountability should come with a consistent, normative capital allocation to the businesses at 12% instead of 11% and a more accurate allocation of transformation costs directly to the businesses. More generally, a greater proportion of central costs should be also allocated to businesses, and it should reduce the corporate center drag over time. We think that management accountability should come with a strict performance management system, where incentives capture properly the entire performance from the revenues to cost and profitability, in addition to the required high standards in terms of risk management, compliance and conduct risks. We think that accountability is clarity. We think that accountability means no excuses. I think that accountability starts at the top of the house. It starts with me. So what's the investment case? A 25 million client base, EUR 27 billion of resilient, relationship-based revenues, a rock-solid financial profile, resilient and flexible. A competitive business with high margins based on leading franchises and a simplified business portfolio. A new, strong and committed management team accountable for the plan. We are excited, and we are looking forward to the journey. We look forward to being, for decades to come, a leading, rock-solid and sustainable bank. Thank you very much. So it's 10:15. So let's take a break, say, 20 minutes. Maybe for our online audience, we'll start again at 10:35 sharp London time. Thank you very much. [Break]

Okay. Welcome back, everybody. The Q&A session is scheduled to last for 1 hour. We will first take questions from the room and then from analyst investors on the call. To give everybody the possibility to ask questions, we ask that as usual, you stick to 2 questions per person. For those in the room, please raise your hand, and a microphone will be pointed in your direction. Before asking your question, please do introduce yourself and the company you represent. But for now, if I can very quickly just ask the operator to please remind those on the call, the action that they need to take to ask a question.

[Operator Instructions]

Okay. Thank you, operator. The Q&A is now open, and we'll first start here, please.

Giulia Miotto, Morgan Stanley. My first question is on slide -- well, the reconciliation between Slide 15 and Slide 50. So it seems to me like there is a willingness to be more rational, more efficient, simplified, have a simpler, perhaps, business perimeter. But then there is no capital creation from potential disposals. So how are you thinking about this? That's my first question. Then secondly, the revenue assumption, the 0% to 2%. Is that because there is a self-imposed constraint on growth? RWAs are not growing much. Or is that due to a lack of growth opportunity? I'll stop here. I would have more, but...

All right. Does it work? Can you hear me? Thank you very much. First question. The reconciliation is that you don't have a direct answer to your question in the slide. So we don't disclose the potential disposal plan and disposal list for 1 very simple reason, is that it's a highly sensitive information, right? And I've been around for a while, and I remember years where we said at the beginning of the year, we're going to sell XYZ by the end of the year, we did. But the ones who bought the assets sold at 4x the price 2 years later. So this is the only end pleased, right? I can repeat this answer many times. I know it's an element of frustration in terms of you wanting very precise answers there. This is the reason, right? So it is, as Claire explained, merged in the Slide 51 with other impacts, which go in the opposite direction. And on the substance, to give you some color. The idea is really what I tried to describe when I talked about the -- how we think about the portfolio, right? It's -- how we think about the portfolio. So it needs to be compatible with our ESG framework. It needs to bring additional value to the group. It needs to be bringing synergies, and it needs to have the right profile in terms of tail risks, right? It's the short version of it. And this is how we're thinking about it. There's a number of question marks that are raised once I said this and once I apply this with discipline. And as we go forward, we will apply this without any taboo and without any complacency. So that's one. Second, a number of reasons. One, remember, 2022, on an underlying basis, even if this is the last time I'm going to use this word. The performance was strong. It was a high point in the performance of the capital markets. Remember, EUR 5.9 billion of revenues, well, well above the range that we discussed many times. It was also the year where if you compare the F&A performance versus, for instance, 2020, it was up like 20% or something like that. Obviously, it was a stellar year for ALD because of extremely high historically high UCS prices, right? So the 2022, remember, is a very high point of one. Two, the limited growth, right? At some point, it's mechanical, right? I'm not saying it's easy in our business to make money, but it is -- there is some mechanically generated growth through higher allocation of organic growth. You see it's extremely constrained for all the reasons that you understand. And so that's another reason, right? And then Obviously, that going back to your first question, there is -- there are some assumptions about disposals there, right? Obviously. So these are the 3 reasons that weigh on this number.

Thank you for the question. Gentleman behind.

It's Tarik El Mejjad from Bank of America. My first question, I mean, is on capital. You clearly identified that there is a concern there by the market, and you have to fix that. The issue I have is 2. First of all, why aiming for 13%? I mean a diversified large European bank now is 12% with enough MDA buffer. So you raised basically the bar for you in terms of how much you need to build of capital. And the second question, which comes back to the first question a bit is, why is it not addressed with a more sense of urgency than you are -- because basically, you're building it by organic generation. You mentioned that there is some hidden disposals potentially in the waterfall chart, but this is way below what we expect you would act in terms of asset disposals. If I take one, I'm not saying that's what you will do. But if you take one, Africa -- I mean you announced 4 small countries, but I think you have a low cost of equity in most of the others. And to reach your cost of equity, you need to invest a lot. And is this really a priority for you to invest a lot in Africa in becoming a very competitive market where you can actually improve your overall group ROE, boost your capital faster and focus on what you said a few times in your presentation, you do best?

So why 13%, we -- I believe I addressed it during the presentation, but let me give it another try. It's because we believe that everything being considered, right, our story, our track record, perception issues. I don't know. I mean, let me -- just for 1 second, draw your attention to 1 of the slides where we talk about risk management, and we talk about the volatility of our top line revenues and market activities. I don't know if you paid attention to this graph. It shows that we are actually -- we have actually 1 of the best track record in terms of volatility of market revenues in the world, right? I mean in our sector since 2018. How many of you think that here, like, spontaneously? No one, right? So we have a set of circumstances that we cannot ignore, right? And ignoring them is not running your ship responsibly, right? And so because of that and the idea that we want to put away over time any idea that we cannot withstand shocks, new things coming up. I don't know what the regulator can come up with in the next few years. I mean, I'm sure they're working on their own innovation. And so we want to put these things like a way, right, in a specific context, which is ours, right? So of course, we could operate the bank much at a much lower level. But what we want to send as a signal here is that we wanted to do this, this way because for us, this is being responsible actually towards shareholders, right, but ourselves as well. So that's the reason. In terms of the sense of urgency, I mean, it's embedded in my previous answer, and I'll be more specific. It's -- we don't need to do that, right? So I think once again, right, we have a 3-year plan. We have a number of things happening, and we want to do this over this period of time because precisely, we think that this is the right target, but we don't need to do that today. And I remind you that in the phased-in approach, we are actually at 13% today. Slightly more specific on the disposals, right? The reason I already gave it, why we're not more specific, believe me, right? Believe me, and I don't believe me, just my word, but wait for it, right? Not everything happens today. There is no complacency in how we approach this topic.

Thank you for the questions. Let's go for the gentleman in the pale blue shirt.

Guillaume Tiberghien from BNP Paribas Exane. The first question is on Boursorama. Three years ago, you said you needed to have 2 or 3 more years of losses to reach 5 million clients. And now you need 2 or 3 more years of losses to reach 8 million. Are we going to actually have earnings at some point as opposed to just -- I understand the value creation longer term, but at some point, you need to actually deliver, maybe? The second question relates to global market. The previous target was EUR 4.7 billion to EUR 5.3 billion. But you've added, I guess, EUR 400 million from AllianceBernstein. So actually, are you downgrading a little bit the targets for global markets? And if so, why?

So on your first question, so if I may, from my point of view, of course, right, slightly different story. Boursorama delivered on its targets and showed very clearly and not just for 1 quarter, that as soon as they slow down their acquisition investments, they are actually highly profitable, even much more than expected, but it is to be expected because, obviously, of the change in the rate environment. So that's one. Two, I believe that if you have a distinct asset, right, I mean no one can question this, right? We're not all over Europe. We're not all over the world. But in the French market, which is not a marginal market, it is an absolutely distinct asset, right? And I think from this perspective, while we do all kinds of other very conservative things, right, as you may have gathered by now, this one needs to have our support because for shareholders, this is the right decision, right, for the long-term value creation. This is the right decision. 5 million is not enough to establish the right leadership in the market, which is still completely in infancy to some extent and forming. It's about the future, and we have a responsibility to the people who are actually going to come after us. And I think this is how I see this topic, and I feel very, very strongly about this. And I think that -- you see all the -- when you look at the granular parameters -- and if you want to have a follow-up, if we have time, I'll be happy to pass the mic on to -- to Benoit. He can walk you through every single indicator. Cost of acquisition per client went down. Hopefully, I'm not going to say something stupid, from $250 to $150 over the last few years. So massive decrease in the average cost of acquisition of 1 client. You see cost per client, obviously, because of the scalability, improves massively. The consistency of higher value per client, you can see it on the slides, vintage after vintage. Every single parameter you want to look at is the right one, right? It's one that is making the story compelling, and this is why we made this decision. I'm so worked up by Boursorama that I -- okay, the range on the global markets. Okay. So here, I don't know if you want to give some color, maybe, Alexandre. Alexandre, Co-Head of Global Banking and Investor Solutions and a former Co-Head of Capital Markets.

So -- so indeed, as you know, Global Markets activities are very dependent on market conditions and market volatility. Our view is that the market conditions were very conducive over the last 3 years. So I mentioned 2022, our base assumption, our base scenario is that market conditions will normalize in the near future. Now obviously, no need to remind all of you that we've come to a profound reshaping of our market activity, which are much more robust nowadays and a much better risk profile. So if market conditions were to be favorable and if opportunities were to arise, we believe we'll be able to seize them.

So just to answer also like very directly the quantitative question. Think of it as fairly similar to where it was.

Okay. Thank you for the question. We've got a lady just at the back there.

Azzurra Guelfi from Citi. I actually like the plan, to be totally honest. I think it's good in the long term and the actions that you are taking. But there is 1 thing that is missing, the building blocks to 2026 in terms of profitability for the various year. Can you give us some color on the profitability of [ 2023, ] 2024? Just to understand how this will progress over time. And linked to this is -- do you think that once you start cutting costs, because it's something that the company hasn't done much in the past, you will find the extra potential buffer or other activities in terms of cost rationalization? The second question is on the payout, if I can. You mentioned between 40% to 50% payout. Is it reasonable to assume that you will keep 40% until you reach 13% fully loaded Basel III? Or we can see a different way of developing?

So I'll address the distribution question. And Claire, maybe you want to address the profile of the improvement in terms of the profitability in the [ end ] and cost-to-income. And maybe I'll also address myself the question, do we think we can do better in terms of cutting costs. So on the payout, obviously, the idea is to have some degree of flexibility intrinsically linked, and I know you all understand that, to the goals that we want to achieve, right? In the end, it's about delivering on targets. And part of the equation -- and you can do the math, right, being at 40% throughout the 3 years, it's not going to make us -- I'm sorry, breach all the change, right, in targets in terms of capital base. But it could contribute. So the way we think about this, it is rational to expect that we will be on the lower end at the beginning of the trajectory. But then, it's more a matter of how we see the trajectory, right? So let's take the disposals, right? For instance, the few disposals that are there. If for some reason, we decide to act on them and everything goes as planned. As you all know, right, in this space, it's not that -- it's your decision and everything happens overnight afterwards. These are processes. We're talking about Africa before. Have a look at the process of disposal of some of our French peers in the continent and when they started and where they are right now. And so you have to have options, right? And depending on how ultimately, this path of building up the capital looks like, we could have a more -- a higher payout ratio, right? But it's fair to assume lower at the beginning, higher at the end. In terms of the cost -- and then I'll pass the mic to Claire. In terms of the cost, listen, generally speaking -- and I've said this, I'm going to repeat this. We want to deliver, right? So a little bit like with the market range in the last 3 years. There's no quarterly call where some of you don't ask me the question, right? Is this an under set target, right, on purpose trying to be low so that we can always beat it, et cetera? No, right? As I said, I think, at the last call, it was a fair assessment of where it is normally, right? We had extraordinary market conditions. We were -- and I said this 3 years ago, we were positioned to capture that extra value, right? And that's great that we did. But it's still a fair assumption that this is the right range. So same with the cost. It's our most honest assessment at this point. Believe me, right? If we find a way of doing better, we will immediately, right? Immediately, right? And I'll explain why and what is it that came up all of a sudden in our trajectory that allowed us to do better. Okay?

Yes. So we will not disclose precisely our intermediary targets. But maybe behind your question, I understand, will we have a D curve? So maybe a few comments in addition to the ones already done during the presentation. So first, we anticipate a linear improvement of the cost-income since 2024, a new D curve in the trajectory.

J curve. Just to...

Slawomir talked about our very pretty French accent, the one. At least, the accent. So no J curve in the trajectory, linear improvement of the cost-income along the trajectory. Maybe a few additional comments regarding the building blocks for this improvement. So regarding revenues, we've made very clear on the quite prudent assumption, which is related to a 0% -- 2% range regarding improvement of the revenues. Regarding costs, the improvement of the cost base will be mainly driven by the already identified projects such as merger in the French retail and synergies on the ELD side that will deliver the full synergies since '25 and '26 for the 2 projects. We will have additional CTA and global CTA for all these initiatives, which will mostly come in '24 regarding these projects. The one that we already embarked in the trajectory, that represent about 60% of the global CTA and the additional ones. Regarding the cost of risk, we gave you, I think, quite a clear guidance between 25 bps to 30 bps. So these together will lead to, once again, a linear improvement of the profitability of the group, notably since -- after 2024 with the deliveries in '25 and '26.

Thank you for the questions. We take the lady just on the corner here.

It's Anke Reingen from RBC. Just trying to understand back on the capital distribution. You said your revenue growth assumption makes an assumption on disposals, but your capital path does not, if that's correct? And at what point would you consider raising the distribution? Do we have to wait to end '26? Or would you potentially visit this earlier? And then second question on the 2026 ROTE and cost/income ratio target. How much of transformation costs are expected to '26 will be included in that number? And should we also not adjust because basically you think these transformation costs will now keep on coming?

So second question for Claire. On distribution, so I gather that I could be clear, so I'll try 1 more time. So it's obviously, whenever you have a range, it's a matter of a certain degree of flexibility. Like the goal, the overarching goal, you understood, is strengthening the capital base. So the first driver of these decisions will be the capital base and how the then trajectory, right, at the moment of making the decision on distribution looks like in terms of meeting this target. So it's clearly not set in stone right now. That is going to be back-ended. So this is why if we had that, we would have told you, right? We would have told you, I don't know, 40%, 40%, 50%, right? That's not what it is, right? It's fair and probably reasonable to assume that it's more on the lower side at the beginning, more on the higher side at the end. But in the end, we will make the decisions based on the actual situation, where a number of things are going to come, right? We have prudent assumptions there in terms of rating migration, right? If they don't happen, we have immediately, right, extra flexibility. So depending on how this quite complex equation looks at the moment of making the decision, we might increase the distribution. There is no preset annual structure throughout the plan. Well, not within the distribution policy. But should we have excess capital for whatever reason, right, anything could be on the table. I don't know. There's the second -- the first question -- the second question on ROTE is, Cost-to-income '26 transformation costs.

Yes, it's transformation cost. Regarding transformation costs, once again, around EUR 1 billion, all of the trajectory must be related to '24. So we guide always very precisely for the year to come, not right now for 2026. But please keep in mind the fact that the sharp decrease in the CTA, in the transformation cost is part of the improvement of the cost income in '26. So we should have in '26 quite a small or very reasonable amount most of it being -- impacting '24 and '25.

And one more comment. It's to address the final portion of your question, it's no, there is no intention of keeping on piling up transformation costs for another decade, one. And two, one of the many ways to do this, right, is obviously to make sure that the people who are spending them, have them within their own P&L.

If we can go with the gentleman here, please.

It's Amit Goel here from Barclays. So 2 questions. The first one, a little bit more detail, the other one a bit more strategic. So just detailed in terms of clarification on that capital return, don't want to [ elaborate ] it, but in respect to 2023, I couldn't tell whether there will be any share buyback or not? And then secondly, on '26, because there's that 13% CET 1 ratio at the end of '25 and at the end of '26. Is that an assumption about excess capital return, getting you to a higher payout? And then my strategic question is just coming back to that kind of 9% to 10% ROTE target. And when I'm looking at European banks, I think pretty much everyone is going to have a 10% plus return target probably by '25. And when we look at the sector, we see 12% to 13% returns on average overall in our estimates. Two, I just wanted to get a sense, when you think about the targets and when you're setting the targets, how do you put that into the context of sector profitability and how you allocate capital? And do you think this is essentially what this group can achieve? Or do you think other people are being too optimistic? Or how do you think about that?

Thank you. So on the clarification, so you are asking for on the distribution of potential excess capital, right? But once again, if for whatever combination of reasons, as you understand, a number of things influence your capital base at a certain point in time. We set clear guidelines in terms of organic growth. So organic growth is not going to be one that impacted, right? So we're not going to show up one day and saying, "You know what, we changed our mind and we decided to free up a lot of organic RWA allocation. So that's not going to happen. But a number of other things influence the capital base at any point in time. So in the case, which is not unlikely, right? I mean this is not our central case, but in the case where we would reach within our trajectory levels that are higher than what we expect in our base case scenario in terms of timing, right? We would consider, obviously, any rational decision in terms of distribution, right? And -- but it's not something that I would model right now. Right now, we gave you the picture that we think is the right -- the prudent one. And -- yes, and that's it. Now again, right, if there is excess capital to be dealt with, it will be dealt with transparently and rationally. And again, not through allocation to organic growth, which would not be consistent with our current view of our trajectory. In terms of your question about the ROTE target, well, first of all, I'm not going to comment for our competitors. So they have to speak for themselves. What I can tell you is something very simple, right? 13% capital base. So that's already, I think it was in the slide, that's already quite significant. Impact downwards on the ROTE because you have a higher denominator, right? So that's the first thing, if you want to compare us to others. And second, it is about, again, our circumstances. I hope I was clear talking to some of our challenges and opportunities, right, to have a more efficient firm, to have a more streamlined firm, et cetera. And these challenges are specific, right? And so this is, believe me, the best, most honest assumption about what we think we will deliver. And today, it's about that, right? It would have made no sense to me, like no sense whatsoever to come up here, target something that would raise less questions and tell you, let's talk about this in 3 years' time, and then I'm going to come with a lot of excuses. That's not how I work. So -- we have thought about this extremely carefully. And with a higher denominator, so once again, with the lower denominator, we would be at double digit if we had stuck with the 12%. And so we set this target where we think is the base case scenario of what we will deliver. Please maybe just -- I'm going to -- because the gentleman with the red tie like, I think, was one of the first who have asked the question.

Jacques-Henri Gaulard from Kepler Cheuvreux. Two questions. The first on distribution, again, sorry, for 2023, you have the DTA provision and the impairment that's excluded from the net earnings, I guess, for the last time, right? So we start in '24 on reported. And here, we deduct the CTAs to calculate the distribution. Did I get that right for the to 1, 2, 3, 4 years? That's the first question.

So not exactly. So what we are saying, and I think it's in the slide, right, in a footnote of the slide of the presentation, probably not very visible, but if you look at it on the screen, you'll see it. And the footnote was being very specific about this. It's -- obviously, we deduct the interest on the hybrid, right? And then it's -- we deduct this time, it's these 2 items, non-cash items that don't affect capital. So say we have -- like we used to an accounting windfall because there's actually a crisis out there like 15 years ago and the spreads on our issuances generate revenues, non-cash revenues. Obviously, we're going to deduct that because -- so anything non-cash will continue to be deducted because it doesn't affect capital, right? So we're trying to be rational about this. And then to a limited extent, I guess the Board has always the ability to exclude something like in any company, in any sector. But the point we're making here is we were the #1 in the world in terms of discrepancy between underlying and reported performance, right? And including there, things that were to Madam's point, for instance, massive recurring transformation costs, right? And I think this is not the right way to manage a company. And therefore, this is what will always be deducted from performance, right? So for 2023, indeed, these 2 things will not be impacting distribution.

Great. And I had a second question, if I may. I have the feeling, hearing you that you put yourself voluntarily in a decompression chamber for 3 years. Okay? And it's like, okay, we're going to show you we can actually deliver quarter after quarter, it's going to be fine. You're going to be 13%. I have the feeling that once you get the approval of the market then you will afford yourself to be a bit less conservative, but that's not before 2027. Is this the right way to look at this?

Listen, I'm not speaking about 2027 today. So I can't give you a direct answer, so to speak, but I'll share a bit of my mindset, kind of. But I'll rephrase one thing that you said not just because the approval of the market, right? But because there's a lot of underlying change there both from a structure of cost, et cetera, structure of the business portfolio, eventually risk profile, et cetera. So the combination of all that, maybe we'll spend another few months. And actually, we're doing this every day, thinking about this, and we'll try and come up with something that makes sense. So it's not just the approval of the market, right? It's because potentially our circumstances, to my earlier point, will be different, right? But they are not -- they are what they are today. I just want to go back for a second to something I forgot to address here, which was the share buyback for 2023. So here, for kind of obvious reasons, it's going to be a decision we'll make on a [ Nat-Hog ] basis when the year is over at the Board level.

Okay, gentlemen, just a back there.

Matt Clark at Mediobanca. So a couple of questions on ALD, please. I guess the first one is the return on normative equity you were targeting a year ago was over 20%. And now you're guiding to 13% to 15% return on tangible equity. So that's a material downgrade in the profitability of that business. Should we, therefore, view the lease plan deal as being value destructive now rather than value creative? Or perhaps you can help us understand why there's such a radical shift there? And then the follow-on question is you said that you will review your portfolio holdings for whether you're the best owner, are you the best owner of ALD now? given that the need for them to be a banking regulated entity because of your ownership is arguably part of the drag on their profitability. So 2 questions on ALD, please.

Thank you very much. Very clear questions. Pierre, do you want to give us the answers?

Well, I'd like to take one step back. ALD is the biggest company in its industry. It's twice as big as the second [ as ] the nearest competitor. It has the best-in-class cost to income today. It will be the case tomorrow. It operates in a market that is going to grow by [ 7.7% ] year-on-year. The return on equity is accretive to SG above the average of Societe Generale in the plan and the cost to income will be lower than the average of Societe Generale. So, we believe it's an investment that is going to create a lot of long-term value for our shareholders. It's true that the return on tangible equity was higher lately, but you need to remember that the prices of used car sales were extremely high and therefore, we are integrated a more normalized market in the years to come. So that's for the first one. Second, are we the best shareholder for LeasePlan? I think we are. Several things. First, LeasePlan -- ALD LeasePlan is getting regulated. In this process, which is a complex process, having a shareholder like Societe Generale is extremely helpful. Second, Societe Generale provide some funding to the company. Third, it has a positive impact on the ratings and therefore, on the ability of the company to raise funding on the capital markets. So I think having a shareholder like Societe Generale is extremely valuable to the company. But maybe I'd like to Tim Albertsen, who is the CEO of ALD LeasePlan, the new combined entity to give you a little bit more color.

Yes. Thank you, Matthew, for the question. And so I think coming back to Pierre's point, I mean, obviously, talking about its acquisition brings an incredible value to ALD. As it was said, the leadership positions we're going to achieve is massive. And we know that we are in a business where our scalability matters a lot. And obviously, we will obviously capitalize a lot on that. On the cost/income ratio, obviously, that was disclosed this morning are different to what we initially anticipated. But if you look, as Pierre said, in the industry, we just had one of our biggest competitors who disclosed the half year results and they are at 66% on a like-for-like basis. So the 56% that we are on a pro forma basis in '22 is still extremely good in the business. We are taking the, I would say, let's say, the opportunity with the integration of Leaseplan, the synergies that we're going to achieve and that we have confirmed the EUR 440 million of synergies over the next years. That will drive down the cost/income from the 56% to 52% and again, 52% being absolutely the best in the industry. I would say the -- maybe an additional point on the ROTE. It's true that we are trending a bit less than before the COVID crisis, but we are also a different company. Obviously, the cost of being regulated has an impact. And obviously, we have seen, as we stated in the press release this morning, that some of the IT costs have also been a bit different than we anticipated. But obviously, if you look at our ROTE of 13% to 15%, it's in the best end of financial institutions and hence, still a very strong result. And overall, as we said, first of all, our position in a market that is growing fast with a lot of perspective. Obviously means that the deal with LeasePlan is still extremely accretive to a lot of things we're doing. And yes, we see that as an incredible opportunity for us going forward all throughout '26.

Two quick comments from my end. So my understanding, I don't want to speak for the regulator. They're not -- these companies are not becoming regulated because in this particular case, because their owned by Societe Generale. Understanding is that the regulatory strategy here is for them to become regulated. So it's not specific to Societe Generale, and it's going to be a change for a number of other players. So that's one. And two, remember, today, although we have dreams and a willingness to become maybe a big player in B2C and usership, et cetera, et cetera, which could be an incredible opportunity, and we have that optionality with ALD, with what they are. But right now, it's a B2B business and the clients of ALD are our clients. right? So, this is another thing you need to understand. There's an intrinsic fundamental synergy in the clients we address with another high margin, kind of low risk when well-managed business that addresses our core client base on top of the other topics.

Thanks for the question. We've got a gentleman here and then after we take the lady just behind.

Chris Hallam from Goldman Sachs. So first question on Boursorama. You talked earlier about sort of fair assessment versus conservative targets that I just thought for 2026 in Q2, you posted EUR 47 million, If we just annualize that at EUR 200 million. 3 years later, 60% more customers. Obviously, there should be operating leverage in that business. How should we think about that EUR 300 million or greater than EUR 300 million perhaps being on the conservative side versus the fair assessment? And then secondly, just on Slide 53, the inflation bucket of 450 to 500 basis points. How much of that can you already see coming, their identifiable items that you have in the plan versus the best guess of what may occur? And am I right in thinking maybe Claire to your earlier point, a lot of that is in '24. You talked about the linear progression on the cost-to-income ratio and '24, you've got the big SRF benefits. So is that sort of front-end loaded inflation?

All right. So let's start with -- let's start with Philippe on Boursorama and Claire on the inflation.

Yes, for many -- the explanation, it's quite simple. It's because 2026 will be really the first year of the profitability. We are going to recruit a lot of new clients in 2024, 2025, as it was mentioned by Slawomir during the presentation, we need 2 to 3 years to equip all these clients. So -- and definitely, again, it's a strategy of growth for profitability. So we are making this effort, 2024, 2025, 2026, we will reach this first level of profitability, which is already quite good. And this is only the first step. But in the meantime, we would have built this platform of more than 8 million clients and with a capacity which has been described of Boursorama to equip this client to collect deposits to sell all these products with a very strong monitoring of the cost base, it will deliver for the following years.

My turn regarding the inflation. So I will make slightly the same type of answer to -- I think it was, I think -- so I will not disclose precisely the profile of our cost base. I consider that we provided you with a quite very detailed information regarding the waterfall or the bridge on the cost/income side. So maybe in addition, a few comments. So first, the same, which is we anticipate a linear increase of our cost/income since 2024.

Decrease.

Yes, decrease for sure. Accountability and transparency is starting quite well in my position. So for sure, a decrease, that's why he see you. For sure, our cost/income. Maybe second comment regarding inflation. So as you've seen, we will more than offset the impact of inflation with our gross savings plans. It's based on several assumptions being, for sure, related to our economic scenario. So our inflation assumptions are exactly the ones that are embarked in the economic scenario with no direct link between our cost base and impact of inflation on our cost base. Considering several, let's say, mitigants on our cost base, such as the fact that regarding external spend, we have the ability to renegotiate some external spend. We do that for more than a yearly basis regarding salaries assumptions. We have until now been over time, slightly below inflation impact. So all these leads to the conclusion, which is that we will not have a direct impact of the inflation on our cost base. And maybe last comment, you have our economic assumptions. So we have a sharp -- we anticipate high level of inflation at the beginning of the trajectory, one being this year notably and a slight decrease for the rest of the trajectory.

Thank you for the question. And just the lady here, please.

Delphine Lee from JPMorgan. So 2 questions also. My first one is, if we could talk about French retail and your NII outlook on Slide 52. Can you just explain a little bit more where the expansion in the commercial interest margin is coming from? What assumptions you have for lending growth, also maybe [ retail ] and Deposit Beta in general just so we understand the dynamics here? And then my second question is more generally on this plan and how that impacts your long-term incentive plans, management remuneration in general. So just we have understanding of what the incentives to align with shareholders' interest?

So I'll start with that and then maybe Claire and maybe Philippe on the French retail, both some of the dynamics and the technical aspects. So in terms of the incentive plan, I mean you know it, right? It's disclosed in the documents. It's voted upon by the AGM. And it's a system where we have all of us, starting with me obviously, a significant amount of our rewards that are linked to -- that are paid in shares or share equivalent instruments and that are in terms of the long-term portion are directly linked typically partly to a [ TSR ] versus a group of peers. So that's one. And then maybe one fundamental piece is that, obviously, our own performance will be first against these targets, right? And the trajectory and on a reported basis and not on an underlying basis. So I think fairly aligned. And on top of this, we have a significant ownership target in terms of the shares, which is set at 120,000 shares and my partners have also some targets. So I think fairly aligned. We will do well if the investors do well. We will not do great if the investors don't do well. And on top of everything else, as I said, I do feel personally and starting with myself accountable for this plan. On the NII?

Yes. So maybe a few comments on the main assumptions we have embarked in the commercial margin trajectory. On the credit side, something quite prudent and conservative with no significant increase of the balance sheet with some comments to give you some colors on the credit side. First, the sharp decrease we had in the real estate loans. We consider that it should restart with a moderate growth. Regarding corporate loans, for sure, the amortization of the state guaranteed loans and once again, a slight increase considering the assumptions we took also on the [ RWA ] side. So on the deposit side, we make a significant difference between corporate and notably large corporates and retail in small corporates. On the corporate side, large corporates, we anticipate that the arbitration between site deposits and the rest of the let's say, remunerated offer, including off-balance sheet products will go on -- will continue at least for the next 2 years, considering the interest rate assumptions we embarked in the trajectory and notably on the large corporate. If we look at currently what happens, we have corporate outflows from the site deposit, we are in a capability to capture them on the term deposit side and notably on the CIB side with, for sure, a deposit beta. On the retail side in small corporates, we see something more stable in our forecast with [ for sure ] arbitration going on from site deposits to [ term ones ] and notably regulated savings that offer an attractive remuneration so a kind of shift in the balance sheet from side deposits to this type of regulated savings. That's what we embarked in the trajectory.

Well, maybe just to add a comment to mention that wealth management, collection of deposits of assets are clearly one of our priority. For example, the merger is a good opportunity because we have the capacity to leverage of the range of product or services of the Societe Generale with Credit Du Nord clients. That's notably true on private banking. And as it was mentioned, we also plan to reinforce the synergies between our retail banks, private banking and insurance. So definitely, it's a more global answer, but wealth management, collection of assets are very important and also for Boursorama.

I mean as an exception to the rule, it's an important question. I mean, Delphine any follow-ons. I mean, clearly, the underlying -- how it works, rates, times, behavioral, behavior induced changes in inventories, right? And on the inventory side, it's a prudent vision of the future. Obviously, there are no bizarre assumptions about the inventory given our scenario which is one of basically fairly stable evolution of the rate environment, right? So I mean just -- if that was part of your question, but any follow-on, please.

So in terms of the [ Livret A ], you have a declining, I guess, by the end of the plan, not staying at 3% or?

You mean on the outstandings?

No, no. On the rates.

No, the rates.

For sure. On the rate, we have an assumption, which is until beginning of '25, the rate has been fixed by the government. So we took this assumption and since Jan 2025, we applied the formula, which is 50-50 rate inflation based on our economic scenario. So we have a soft landing assumption of the Livret-A by the end of the trajectory. And regarding outstandings, as I said, on the contrary, we have an assumption of an increase of the outstandings on the regulated savings globally, Livret-A and also the products that are -- that have a strong correlation with Livret-A on the French market.

We've got a lady just at the back here.

Flora Bocahut from Jefferies. I'd like to go back to the revenue trajectory, especially the slower revenue growth than I expected. I'm trying to understand what's driving this? I think it's essentially French retail. Because if I think across the group, obviously, you start from '22, which is a high base. We talked about markets. It's true. It was a strong year in '22. ALD had a strong year. Although actually, you get LeasePlan in, so this should have helped also in the revenue trajectory. So I think the bulk of the deviation is actually French retail. And in there, I had 2 questions. One is on Boursorama, where you talked about the new objective to target now 8 million clients. And I have to say that's one element I don't understand because I had in mind that getting to 4 million to 5 million was the scalability you needed to then be able to have substantial profit. And meanwhile, obviously, we've had rate increases that should even improve the profitability of Boursorama versus the previous plan. So why do you feel the need to continue to grow so aggressively and at such high acquisition cost on the customer side, when you're already at more than 5 million? And then in French retail, going back to Delphine's question on NII. And looking at the slide you had on the commercial NII versus ALM drag. There's been a massive change in rates, and yet you're telling us there's not going to be much rate sensitivity at the end of the day. So is it because it happens that ALM [ worked doing wait ] this cycle? Or is it like actually the rate sensitivity is much lower than what we had in mind? Just trying to understand why the NII is not going to grow much more than that.

Okay. So let me address Boursorama, on the strategic side, so to speak. And then Claire on NII, and we'll see -- we'll supplement Philippe and I. In terms of the Boursorama equation, I think what I deal with the legacy that I inherited. I want to say here that I'm not sure I understand how 4 million or 5 million clients was the right assumption in this market, right? We have roughly 8 million, 9 million clients in the French network of a completely different nature, right, with also different products, et cetera, et cetera, obviously a much higher revenue per client than Boursorama. It's not the same model. But I don't feel like I have the maximum scale there that caters for the best structure in terms of cost and the best economies of scale, et cetera. So I'm telling you this very directly. I don't think 4 million, 5 million was the right number, right? And it's not about -- it's not about so much what's the number at which point you can optimize value extraction, which was a little bit embedded in your question, right? So there's no, in my view, like a level of -- a total level of client where you can say, okay, here now, I can bill you more for this and have more fees of that or whatever. This is not, in my view, how it works. The question is, you have something which moves at a slower pace, right, in terms of behavior than most of the other markets in Europe. At a slower pace into the digital world, but frankly, 15 years from now, chances are and certainly our assumption that it's going to be the leading form of being in a relationship for an individual with a bank. And so this is how we think about it, right? So we have like by far, and this cannot be disputed, the best vehicle for acquisition and one that works, right? You have plenty of data there that shows you that it's not like -- we're not still spending EUR 215 per client like we used to and where our efficiency is decreasing or whatever, no. I mean every single piece of the equation is showing you that it's the right direction that the economies of scale are there, that the cost per client goes down, that the income per client goes up, et cetera, et cetera. So with all these -- this starts there, right? If we didn't have that, we would have a different view. But because we have that, right? We have the proof of the improvement, intrinsic improvement in the business model. Then, the only strategic matter at this point in time is how much of that future market are we going to grab, right? And these are young people, mostly with the stats that we have. These are not like formal stats, but with the stats that we get from the client acquisition. These are rather wealthy, urban, younger clients, right? So this is the future. And so here, the equation is how many of these clients of the future, can you grab right now? And it's overwhelmingly more important than whether you're going to bill them EUR 2 whatever the number is per month or EUR 5 or EUR 10 per month for having the account. And that's my answer to your second question is there were assumptions about fee generation, right, in that previous plan. And part of the figure being what it is, is that we no longer have these assumptions. For once again, the same reason which I hope you got by now, which permeates everything we say, which is we want to be precise, transparent and conservative, right? Right now, I don't think that doing both at the same time, would be the right answer, right? We spend a lot of time with -- we have been discussing this with Philippe, et cetera, et cetera. And we believe that now the right time is to focus rather on acquisitions still while being in this process of improving. And therefore, because of the better rate environment and the fact that the clients, obviously, you acquire them towards the end of the trajectory, so you don't have the full benefit of the current level of monetization. This is why you have this EUR 300 million figure, which grows very significantly with -- even if you stop the client acquisition in the following years, right, which are not part of this trajectory. So I hope I've been I've been clear on this. On the NII follow-up.

Yes. So on the NII, for sure, we have embarked and it's on the slide. A recovery of the net interest margin all over the trajectory. This being said, we have embarked on the back end of the trajectory. A stabilization of this increase in the NII for the reasons I already explained, which are first, our interest rate assumptions because by the end of the economic scenario, we have a downward trend on interest rates. So for sure, it has a consequence, another consequence we have a stabilization on the NII increase. And the second one is the one I disclosed previously, which is some prudent assumptions regarding the balance sheet with -- on the credit side, moderate growth linked to -- in line with our notably other assumptions. And on the deposit side, at least on the corporate and also on the regulated savings on the retail side. We took some prudent assumptions regarding the kind of deposit beta. So this is not a -- we keep a good momentum on the net interest margin, and we have embarked a recovery and the net interest margin in the trajectory. But with the stabilization at the back end of the trajectory. I hope it's clear enough on the graph.

And again, don't forget, when we talk about this 2022 reference point, like markets, we're talking basically about EUR 800 million less in the trajectory than 2022, just to spit it out.

Okay. Any other questions? Yes, we have a gentleman just here.

Pierre Chedeville. I have 2 questions. First question is regarding capital because one of your idea from the plan is to reduce the gap between the share price and the tangible book value. And you also mentioned that you want a balanced distribution between dividend and share buyback. I was wondering that if we say balance, it means 50% or something like that of share buyback and 50% of dividend. But if you succeed in your plan before 2026 and that your share price is increasing, at a level closer to the tangible book value, do you think it would be as pertinent to balance between share buyback and dividend? First question. My second question is about globally, your insurance -- you transfer your insurance in your French retail. So I guess that you want to put the -- to emphasize on the development of insurance into the French retail networks, I guess. And I was wondering if you had some color to share with us in terms of, for instance, equipment rate and progression of equipment rate in your networks in terms of insurance products. And if you have also ambitions in [indiscernible], which is a segment that in the insurance business is developing very fast with good margins and not very expensive in terms of capital, which is quite important in your global strategy. So if you could give us a little bit more focus on insurance.

All right thank you very much. I'll address the first question and Philippe I'll leave the floor to you on insurance. With only one comment about the healthcare is you heard me saying, we want to do things that we excel at. So if we have the right circumstances, maybe because of everything you said, appealing margins potentially, et cetera. But certainly not, just because there's a market out there, and so let's grab it and let's do some stupid things, right? So if we do it, we'll do it, we'll do it right. But I'll leave the floor to you on insurance more generally, it's an essential topic. On distribution, I mean, obviously, you're right. But -- and I'm not here to give my own prediction certainly not on our share, but neither on the market. But let me put it this way. Everything we will do will have to make sense for the shareholders, right? So let's assume the entire European banking industry is at one, which it is not. But let's assume it's at one. Well, then you go back to basic financial theory and you want to do buybacks even if they make sense in terms of how much it costs you from a rate perspective, right? And most likely in the current environment, wouldn't make a lot of sense, right? So we will be guided by financial theory, nothing else, right? So that's my answer. On the insurance?

Yes. On the insurance, well, you know that we have an insurance company, which already works pretty well. The idea is definitely to go one step further on the French market, and I will comment on international market and all the partnerships. So sharing the goals, maybe more than in the past, same management, common goals. We will also make sure that we deploy all this expertise on the ex Credit Du Nord perimeter because that's one where Credit Du Nord was less performing well. We also make sure that in the definition of the client journeys in the self-care capabilities, in the app, we are also making progress. We will continue also to increase the expertise of our teams in this area, more trainings, probably also recruiting more people who sold insurance products before, we see a big difference. So on life insurance, the momentum is quite good. And on the nonlife insurance, you're right. We have goals to increase the penetration rate overall on protection at least to 30%. So that's for France. We will continue with the same approach combining retail and insurance abroad. We have very good partnerships, notably with KB, BRD and Morocco. And you know that our insurance company has also developed partnership with other distributors, which represent, I think, more or less 10% of the revenue. So we will continue also. And regarding the expansion of the range of products, I will not comment on the health, and this is not part of the trajectory. On the contrary, we have ambitions regarding all the retirement plans. And I think on this topic, we have a lot of -- we are legitimate. It makes sense and a very important need for our clients.

Okay. We just got a lady here who has a question.

Juliette Nichols, specialist sales at Citigroup. Two questions for me, if I could. Just firstly, some detail on the capital walk, please. Your Basel IV headwinds, you'd obviously previously pointed to those being 100 basis points, day 1, 20 bps thereafter, now shown on the slide at 85 bps. Obviously, your 2023 regulatory headwinds are 20 bps higher. So can I just ask what is driving sort of those different movements? And given your expectation of the Basel IV headwind has come down slightly, are there other capital optimization measures that you could potentially look at in the coming years in terms of your capital allocation to help to bring that Basel IV headwind down further? And then secondly, if I could, just on the non-cash items that you flagged for the Q3. If I could just ask what's driving the reappraisal of the goodwill in those businesses?

So I will start with your second question, what drives the goodwill, the decision to impair goodwill. The direct application of the increase from 11% to 12% of the capital assumption. So as you know, we make an impairment test on our goodwill and the direct consequence of this increase is the fact that we made the decision to impair these 2 goodwills. So coming back to your first question, which is Basel IV and the difference between the 30% and the 50% of the headwinds we anticipate by the end of the year. So second question, we had -- so the increase by 20 basis points is mainly related to an on-site inspection by ECB, which was a [indiscernible] on all banks related to structured products. And we had additional and updated feedback on this on-site inspection. And then in a prudent manner, we consider that we should consider this impact by the end of this year. So as you know, regarding ECB inspections, we always have some delays between their inspection in the final impact, but we consider that it's a prudent way to present you our trajectory to have embarked right now this impact once again a [ transactional ] mission. Regarding Basel IV which leads the improvement in our impact is, as I said during the presentation, we refined the assumptions. We worked quite hard on our impact. And then our best estimate for the trajectory represent today, I mean, between '23 to '26 is 85, the 85 basis points I shared with you today. So as you know, the Basel IV impacts are not 100% stabilized. There are still discussions from a regulatory standpoint. But as far as today, -- it's really our best estimate. We still have levers to work on Basel impacts, the last version, of course, of the regulation. We have also capability to work with businesses in order to optimize the way our businesses are run. But we consider that 80, 85 basis points is the best representation today of the impact.

Just to add on the strategic question you asked, I mean, in the end, the capital is the capital and the businesses have to cover their cost of equity. And yes, we are constantly reviewing the post Basel IV picture for some of the businesses, and then we are prepared to make decisions. I mean we will not keep any business for any reason if it does not meet its cost of equity post Basel IV, not one.

Okay. We'll take a last question.

Do we have -- I'm sorry, do you have questions online or?

Not at this stage, no.

Okay. Perfect.

We'll take the last question here. And I will take the gentleman here given we have already last questions.

[indiscernible] from JPMorgan. Can you just comment on 2 things? One, on your page, Slide 48, your interest rates, GDP forecast, you mentioned GDP is below kind of base rate forecast that's in the assumptions of euro numbers. And your interest rates are clearly lower as well, your Euribor rate at 2% forward, versus 3%. Let's assume we are taking the base assumption that the market is expecting or consensus, what would that mean in terms of your revenue growth forecast? And potentially even your ROE impact, if you assume those rather than be a more conservative assumptions? And then secondly, just on IT expenses. You mentioned EUR 4.5 billion of spend. You're right, it's more than what other spending as a percentage of expenses, EUR 600 million of cost savings. Just trying to understand the platform improvement? What are you referring to front, back office, middle office, how many platforms you have and how you integrate? And historically, these are very high expense levels. And they seem to drag on, when we talk to other banks, trying to understand how confident are you in integrating and achieving those?

All right. So I'll start with this and with also Laura Mather, our COO, who's going to complement whatever I say. And then Claire on your first question. So as I said, hopefully, clearly, during the presentation, we are -- everybody struggles with this to some extent. But one, we are above the others, right? And we just have to recognize that set of circumstances as we spoke about this earlier. We were higher, and we are higher because of not only because it just so happened, but also, as I said, because of the way we developed this firm for the last 2 decades. Where the priorities were not the ones of leaner architecture, simpler product offer, centralized tools for like some of the basic piece of technology, right? Just to give you one example. We have 2 different digital platforms from an infrastructure, architecture perspective, right, which is not necessarily the way to go, right? I mean, Laura's going to give you her view. So all I'm saying is there's a shift there that is deeper than just coming up and saying, let's merge these 2 applications and move on, right? So there's a deeper cultural shift that needs to happen and we need to make it happen, and that's what the plan is. But Laura, maybe you can give us a little more. And typically, outside in perspective on substance and culture, Laura is one of the examples of that.

Thank you. Thanks very much for the question. I think when -- as Slawomir said, the environment is very dissipated and it's very, very segmented. And I think we start looking at platforms, if we start at infrastructure as a base level, there's a lot of synergies that you can gather by just putting everybody on the same infrastructure. And so when we're starting looking at platforms, that's the base level we're looking at. And when you ask about whether we have really the ability to do this and what the cost of it is, these programs are already in play at the moment. So there's already work happening to drive the synergization and these projects have started. So I think we have a level of comfort that we are able to achieve those synergies across the environment. And then when you look at the next level up, you look at building a development platform, you look at building data and digital tools. And all of these can be shared across the various different business units, and that really drives a whole lot of synergy and cost saving across the environment.

If I may add one point regarding our capacity to deliver, I should mention the IT consolidation we have done on the French retail, this project was delivered on time, on budget, according to a plan. And it was a very significant operation. And actually, we are proud of it. And I think it demonstrates our capacity to deliver this kind of project.

And very last comment on this. Remember what I said, this whole thing is also driven by the portfolio of businesses and part of it is culture. Part of it is the way we worked. Part of it is just the portfolio, right? We have x number of countries in International Retail Banking, which basically all operate on their own IT system. And before the merger of Credit Du Nord, I mean, just think about it for a second. We ran 2 retail banking assets on the same market with the same products with the same regulation that were completely separate, right? So I mean, there's work to do, but we're going to do it.

Regarding your question about sensitivity to certain parameters, it's not possible to answer in one sentence and one figure to this type of question because we have no real sensitivity to one single parameter. It's more a global scenario, which has several impacts on revenues, but also on RWA regarding potential rating migrations, of course, on cost and inflation. So we have one parameter that has a direct consequence on the revenues, which is the interest rates and the net interest margin. And we gave you -- we provided you with the sensitivity of our position. It's currently at the end of August, EUR 28 million for a 10 basis points increase in the opposite for year 1 and a little bit more than EUR 50 million for year 2. This being said, we have seen in the previous months that for 10 basis points increase, the sensitivity is not the same that for 200 basis points, notably in the French market, where we have a lot of options that are embedded in the products and that have a nonlinear impact. So in a nutshell, on the -- in the interest rates, you have the sensitivity. For the rest of this scenario, it's more a global economic scenario that may have significantly different consequences on the ROE. And for example, on the inflation. We have slightly above [ EUR 10 million ] total amount related to salaries. But as I said, we are not always at inflation, we, most of the time below so you can't have this type of a correlation. So I will confirm the interest rate sensitivity. And for the rest, it's more a global picture than a single sensitivity to one single parameter.

And obviously, remember, I mean, generally speaking, obviously, if we have higher rates, it should be conducive theoretically for the retail banking in France. But the problem is, remember, what is the assumption you can make for sure on behavioral change and how it's going to affect inventories? If the inflation and the current situation -- economic situation, is going to continue exactly as it is and people get used to the environment and make maybe different arbitrage, et cetera. So you have to be prudent as well because of the very significant impact on what happens to the inventories on top of rates.

Okay. Ladies and gentlemen, with that, the Q&A comes to a close. Thank you. I don't know if...

So I just want to thank you once again very much for making the trip and joining us this morning. We're very grateful for this. We know your time is valuable. And let's look forward into the future, and we look forward to interacting with you in the future, obviously, as we did today and as we do every quarter. Thank you very much again, and have a nice day.