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

Ladies and gentlemen, welcome to the Societe Generale Conference Call. I now hand over to Mr. Slawomir Krupa, Chief Executive Officer. Sir, please go ahead.

Thank you. Good morning, everyone. Thank you for attending this conference call on the 2023 full year results. And before we dive into the numbers, let's take a step back and try and highlight some of the year's key business achievements. First, the strong performance throughout the year of our core activities within both GBIS, Global Banking & Investor Solutions, and within International Retail Banking. Second, in line with what we announced in September, BoursoBank significantly accelerated its growth to reach 6 million clients in January after 2 consecutive record quarters in terms of acquisition. And today, around 1 in 10 French people are clients of BoursoBank. It's a key milestone, obviously, and something we're very proud of. At the same time, the merger of the networks is progressing well in France, and NII has begun to recover in Q4 '23 from the trough reached in the third quarter as we have previously discussed. And finally, the determination of LeasePlan's PPA was a key milestone, obviously for Ayvens whose NBI was, however, affected by non-recurring items, a strong base effect on UCS and by pressure on margins. This leads to yearly revenues standing at EUR 25.1 billion and EUR 6 billion for the fourth quarter, down from a very high comparison level in 2022, mostly due to lower NII in France, as previously discussed, and exceptional items at the Corporate Center related to TLTRO and a few legacy issues. Thanks to our initial gross savings, growth in operating expenses has been contained in 2023 despite inflation, and it's broadly stable at constant perimeter, leading to reported cost-to-income ratio around 74% in 2023. At 17 bps for the year and 24 bps for Q4 '23, the cost of risk remained low throughout the year, and we maintained a high S1/S2 inventory at EUR 3.6 billion. Overall, the group net income stands at EUR 2.5 billion for 2023 with reported ROTE of 4.2% and it is respectively EUR 430 million and 1.7% in Q4 '23. The capital ratio, CET1 ratio is strong and well above requirement at 13.1%. And in line with the distribution policy that we presented in September, we will therefore be proposing a total distribution of roughly EUR 1 billion to the AGM, equivalent to EUR 1.25 per share with the following split, a dividend of EUR 0.90 per share paid in cash on May 29 and an SBB program of roughly EUR 280 million, which is EUR 0.35 per share. If we move on to Slide 4, we can focus on 2024. And after a year of transition and transformation, our priorities can be summed up in one simple world, execution. It will be a decisive year for the implementation of our strategic road map with the launch and finalization of numerous projects and initiatives, which are listed on the following slides for the main ones. But we'll focus on a few core priorities. First and foremost, we must constantly enhance our commercial performance, our performance with our clients, which is key to generate sustainable performance overall. Equally important is our commitment to have a linear improvement of operational efficiency. And in 2024, we intend to generate around EUR 500 million in additional gross savings and a total -- within our total target of EUR 1.7 billion between '22 and '26. At the same time, we will book roughly EUR 750 million to EUR 800 million of CTA out of the EUR 1 billion tranche for the period going from 2024 to 2026. We'll also continue to make sure that our business portfolio has the right balance between diversification, synergies, risk profile and profitability. And delivering on our ESG agenda remains a key focus, which I will come back to in a few minutes. Maintaining a strong liquidity profile and a high capital ratio, obviously, are key priorities for the group. And as announced during the CMD, we will be very disciplined in terms of RWA growth for businesses and in terms of capital allocation, organic capital allocation. And for the year, the organic RWA growth is expected below 1%. We will continue to manage our businesses with strong and disciplined risk principles at the highest standards. This is our job. This is what banking is about. In terms of financial targets, we stick to our guidance of a linear improvement in profitability towards our 2026 targets. And this leads us to set the following targets for 2024: An increase in revenues of more than 5% compared to 2023, I insist 2023; a cost-to-income ratio below 71% in 2024; the cost of risk comprised between 25 and 30 basis points for the year; a ROTE above 6%; and the CET1 ratio of around 13% by the end of the year. And for 2026, our target is unchanged with the CET1 ratio at 13% post Basel IV. The main projects that will be implemented in 2024 are listed in the slide. I will not comment each and every one of them, of course, but as we indicated in September, they include both ongoing projects, which will start to bear fruits this year for many of them and new initiatives designed to structurally improve the group's operational efficiency. And in this respect, I would just like to mention the latest initiative that we disclosed last Monday related to the headquarters. We announced that we plan to implement organizational changes in our head office in France. The project is submitted for consultation to the employee representative bodies in France, and its objective is to regroup and pull certain activities and functions, remove some higher article layers, streamline decision-making and resize certain teams after review of the projects portfolio and a number of processes. And it would result in around 900 job cuts, representing around 5% of head office staff. And this project will generate gross savings, which will be part of our EUR 1.7 billion of savings we target between 2022 and 2026. In terms of our ESG agenda, as you know, building, sustaining our ESG leadership is the core driver of our strategy, and this is important to take a couple of minutes to highlight a few achievements and some priorities for 2024. We significantly accelerated in terms of ESG commitments last year. Once again, we took a leading position in taking landmark decisions to sharply reduce some of our exposure to fossil fuels and to define new targets on decarbonization. We set a new commitment on diversity and signed a new partnership with the Ocean Cleanup, for instance. It's an imperative for us and a continuing focus. Today, we published 2 new alignment targets on aluminum and shipping, which brings us to 9 sectors covered among the 12 sectors required under our Net-Zero Banking Alliance commitment, 12 sectors defined by the NZBA as the most carbon emissive. It's also part of our road map, and we disclosed recently a new collaboration agreement with the IFC to accelerate and sustainable finance and increase our positive impact and strengthen our contribution to reaching the sustainable development goals defined by the United Nations. A key milestone has been reached recently also with the appointment of Professor Subra Suresh as Chairman of our new Scientific Advisory Council. It's an honor to welcome him, such a distinguished scientific leader to chair the council, whose role will be to advise the group on long-term challenges and how we can best increase our positive impact from a science-based approach. Last and it's a good testament to our ESG leadership, we've been just appointed IFR Bank for sustainability and World's Best Bank for Sustainable Finance for the third time by Global Finance. Thank you very much. And I leave the floor to Claire. She's going to walk us through some of the details.

Thank you, Slawomir. So let's move on to Slide 8 on revenues. In 2023, total revenues reached EUR 25.1 billion, including EUR 6 billion for the last quarter. Overall, annual revenues comparable to 2019 and 2021 were down versus the high '22, which benefited from a conducive environment, particularly in markets for GBIS and on used car sales through Ayvens. In addition, as stated last year, the top line has been negatively impacted in 2023 by both the impact of the short-term hedges in French retail, which peaked in Q3 before progressively rebounding for coming quarters and some exceptional items, mostly related to the unwinding of the hedges of TLTRO, one-off legacy issues and volatile items at the corporate center. Last, the change in Perimeter resulted in a net positive contribution of around EUR 460 million in '23 due to the integration of LeasePlan, which contributed around EUR 680 million to the '23 revenue base, offsetting the withdrawal from Russia. For the fourth quarter, annual trends were confirmed with, on the one hand, solid performance of GBIS, slightly down versus the record Q4 last year and continued strong revenues in International Retail Banking. On the other hand, while progressing compared with last quarter, the NII in France Retail was still lower by around EUR 320 million, that is Q4 and revenues at Ayvens were impacted by exceptional items, in addition to continued normalization in used car sales and pressure on margins. Note that for '24, we expect the revenues to increase by more than 5%, largely thanks to the strong rebound in NII in France. Let's now have a look at the operational performance on Slide 9. For the full year, the cost base stands at EUR 18.5 billion. It's up by around EUR 500 million compared with '22 million due exclusively to the impact of the change in Perimeter. Stripping out this effect, the cost base remained broadly stable in '23 versus last year. Even excluding the positive impact of the reduction in the contribution to the SRF, the Single Resolution Fund, and the decrease in transformation charges compared with '22, operating expenses have only increased by around 1.7% in '23 or EUR 300 million despite the ongoing inflationary context. This illustrates once again our strict and disciplined management of costs. All of these leads to a reported cost-to-income ratio slightly below 74% for '23. Going forward, as indicated at the CMD, we expect a linear improvement of the cost-to-income ratio for 2024 onwards, and we first target cost-to-income ratio below 71% in '24. Let's now move on the next slide, Slide 10, on the cost of risk. It will contain across businesses, thanks to the quality of our assets with no material deterioration, but continued normalization in some sectors. At group level, it stands at 24 basis points in Q4 and 17 basis points in '23, better than guidance. For the quarter, the cost of risk amounts to around EUR 360 million. The NPL ratio remains low and stable compared to Q3 at 2.9%, and the net coverage ratio plus collateral and guarantees is high at around 80%. In addition, precautionary provision on Stage 1 and 2 assets remained stable and high at EUR 3.6 billion and still represents around 2.8x the amount of Stage 3 cost of risk in 2019. Going forward, we expect for '24, the cost of risk in line with the guidance provided during the Capital Markets Day, i.e., a cost of risk between 25 and 30 base points. Let's now turn to capital, Slide 11. At the end of December, the cost-to-income ratio lands at 13.1%. It's still around 340 basis points above MDA and 290 basis points over the new regulatory requirement since the 1st of January '24. Apart from organic capital generation, which added 9 basis points this quarter post distribution, the main change since the last quarter has come from organic RWAs, mainly due to some delay in the deal flow as we indicated last quarter, continued growth in Ayvens earning assets and modern evolution. On the regulatory front, the residual impact, which was anticipated in '23 is now expected for next year. Finally, the cost-to-income ratio benefited in Q4 from a total of 6 basis points following the publication of the PPA by Ayvens and the closing of the sale of SG. All in all, risk-weighted assets amounted to EUR 389 million at the end of '23 and the other capital ratios, all remain comfortably above requirements. For '24, we expect the cost-to-income ratio to be around 13% at the end of the year with a limited RWA organic growth below 1%. Moving on to liquidity, Slide 12. As illustrated in the chart, Societe Generale has a sound liquidity profile which has been further strengthened over the last quarter and a strong balance sheet. Liquidity reserves have further increased by EUR 7 billion in Q4 to reach EUR 316 billion at the end of the year, and the LCR ratio stands at 160%. Deposits grew by 1% compared with last quarter and by 4% versus last year. Last, around 80% of the '24 funding program has been already achieved at the end of January '24. I will not comment Slide 13, and we can now turn to business performance, starting with French Retail on Slide 15. On the credit side, loan outstanding decreased by 5% compared with last year, with still differentiated trends between retail and corporate. The activity with stock rate remains good with loans up plus 1% versus Q4, excluding PGE, state-guaranteed loans, still driven by short-term loans. On the other hand, state-guaranteed loans continued to being repaid, decreasing by 32% in '23 versus last year. With individuals, the group's selective approach in home loan production, which began mid-'22 in the context of insufficient margin continued to weigh on home loan outstanding, which are down by minus 2% compared to Q3. However, production is now restarting in a context of improving margin. On the deposit side, outstandings are slightly down by minus 1.8% versus Q3 with a continued shift towards saving products in a higher rate environment. On savings, total assets under management have grown in '23 across businesses. In private banking, they are up plus 5% compared with the last year, reaching a record level of EUR 143 billion, thanks to a robust pace of asset gathering at plus 4% for the year. In Life Insurance, outstandings are up plus 4% to EUR 136 billion versus last year, with gross inflows amounting to EUR 3.5 billion, which represents an increase of 20% compared with last year. On Protection Insurance, premia increased by 4%, that is Q4 last year with P&C premia outperforming up by plus 6% versus last year, driven notably by France. Let's now give an update on the French Retail Banking net interest income, Slide 16. As confirmed last quarter, NII reached the [ foot ] in Q3 and began to slightly recover in Q4 as expected and communicated. Based on the assumptions presented in the slide, we confirm that the linear progression of the NII is expected over the coming quarters and that we expect '24 NII to be at or above '22 level. In terms of NII sensitivity, it's now at around plus EUR 10 million in year 1 and around plus EUR 12 million in year 2 for a 10 basis point rate increase. Note that this sensitivity is in relation to the forward curve shown in the slide, which is slightly higher than the rate just taken into account in the financial trajectory. Sensitivity on sight deposits remained stable at around EUR 30 million for a movement of EUR 1 billion outstanding. A few words now on BoursoBank, Slide 17. For the second quarter in a row, BoursoBank had record client acquisition with 566,000 new clients, and '23 also marked a record in terms of annual organic growth with a net increase of 1.2 million clients in '23 to reach 5.9 million by the end of '23. As dictated by Slawomir, it should be noted that the 6 million mark was reached in January '24. At the end of '23, around 1 French person out of 10 were already clients of BoursoBank equivalent to a penetration rate of 8.8%, which is rising steadily and rapidly. Similarly, around 20% of French people under the age of 30 are clients of BoursoBank. On the commercial side, assets under administration reached EUR 56 billion at the end of '23, with notably a strong increase in deposits at 17% at base largely above market trends. Loan outstanding is slightly down, which is consistent with the positive decisions taken in '23 to reduce significantly home loan projection. On the financial front, acquisition cost per client has further decreased versus last year as LR, the cost to serve per client, which decreased by 10% compared to '22 and 27% versus '21. Once again, this illustrates the very high efficiency of the model, which can rely on a structurally low cost base. Let's now move to the P&L, Slide 18. The French Retail Banking activities, including Private Banking and Insurance generated a net profit of EUR 92 million in Q4. Total revenues, excluding PEL/CEL, are down minus 13% versus Q4 last year due to the pressure on the net interest income as explained in the dedicated slide. On a yearly basis, net interest income, excluding PEL/CEL is down minus 22% in full year, in line with the guidance provided last quarter. As in the previous quarter, financial fees remained solid and the decrease in commissions versus last quarter '22 is mainly due to the impact of acquisition costs of BoursoBank and to service fees in the networks. Regarding costs, they are down in Q4 by a substantial minus 7% compared with last year, illustrating the strict ongoing cost management and the initial benefits of the merger. Cost of risk remains contained at 27 basis point points in Q4 and 20 basis points for the full year. Finally, the reported RONE comes at 2.4% in Q4 and 3.9% for the full year. Turning on to global markets and investor services on Slide 19. On global markets, Q4 is a near record level with EUR 1.2 billion revenue contribution, slightly down versus the record Q4 in '22. Overall, equity activities performed very well in Q4, up 18% compared to last year. The revenue contribution remained high in the fourth quarter on the back of supportive market conditions for equities with notably strong client demand for derivative products. On a yearly basis, revenues are down by nearly 3% versus a record year in '22. On fixed income, performance was resilient in a less conducive market environment. Revenues are down minus 22% compared to a very high Q2 last year, but in line with the average achieved in Q4 over the last 5 years. The decrease mostly resulted from lower rate volatility, which led to lower volume in the rate flow business. On the other hand, we continue to observe the solid commercial momentum in investment solutions. On a yearly basis, FIC recorded a strong contribution at EUR 2.4 billion, down less minus 7% compared to last year, which was the best year on record. At GMIS level, revenues are down minus 9% versus last year, mainly due to a strong base effect within security services, whose revenue were positively impacted by the revaluation of our stake in year-to-year for an amount of EUR 91 million last year. Let's move to Slide 20. Financing and advisory delivered a good performance in comparison to a record quarter in Q4 last year. At EUR 826 million, revenues in Q4 are down minus 14% versus last year, with more than 20% higher than the average between 17 in '21 Q4. On a yearly basis, they are slightly down by minus 1%, that is a record 22 at EUR 3.3 billion. This trend is found within GLBA whose commercial activity has remained solid in most businesses, but whose overall revenues in Q4 '23 are down minus 14% versus Q4 '22 due to a very high basis of comparison. On transaction banking, revenues remained at a very high level in Q4 compared with past years while being down minus 13% versus Q4 last year, notably due to higher deposit data with corporates. Overall, Slide 21, GBIS delivered once again, both in Q4 and on an annual basis, a very good set of results despite a less conducive environment than in '22. Quarterly revenues are down minus 11% in Q4 compared to last year and slightly down minus 5% versus '22, which was a record year. Costs are well contained given the inflationary CapEx. They are up 3% on a reported basis in Q4, including EUR 64 million of transformation charges and a decrease by minus 1% in '23 on a full year basis. The reported cost-to-income stands at 73% in Q4 and 65% for '23, excluding the contribution to the SRF. Cost of risk has remained very low through the year with only EUR 30 million for the full year, representing only 2 basis points, thanks to both, very good asset quality and some few write-backs visibly on [indiscernible]. All in all, it's once again a solid quarter with a reported 12.3% RONE in Q4 and 17% excluding SRF for the full year '23. Let's now turn to the International Retail Banking on Slide 22. Commercial performance overall was well-oriented at 5% versus '22, both for loans and deposit outstanding. In Europe, loans were up 5% in Q4, that is last year. with a good momentum across segments in both countries. Deposits increased by 8%, driven by [ KB ]. In Africa, loan growth is driven by a dynamic performance in Sub-Saharan Africa, while the positive trend in deposits mainly comes from [ Mediterranean Basin ]. In terms of profitability, the division posted a robust RONE at 18%, both on a quarterly or annual basis. The RONE is higher by 1 percentage point versus Q4 last year and 6 percentage points on a yearly basis. Regarding our Mobility & Leasing Services division on Slide 23, total revenues increased by 9% in '23 compared to last year due to the integration of LeasePlan, which contributed for EUR 678 million in the '23 revenue base. On a quarterly basis, revenues are down minus 11% at the division level, mostly due to the decrease by 17% at Ayvens. In addition to the exceptional items disclosed in Ayvens' press release last January, notably on the negative impact of the mark-to-market of LeasePlan swap portfolio for around EUR 150 million, this decrease results from, on the one hand, the progressive normalization in used car sales results and the reduction in prospective depreciation as guided. And on the other hand, pressure on margin, mainly driven by inflation and rate environment in a competitive market. Regarding consumer finance, commercial activity remained good with loans up by 1%, deposits by 17% versus last year. Quarterly revenues were resilient compared to Q4 last year. Finally, equipment finance leasing outstandings are up by 3% versus '22. Revenues increased strongly, both on a quarterly basis, they are up 15% and on an annual basis, with an increase of 6%. Let's now have a close look at Ayvens '24 outlook on slide 24. 2024 will be a key transformation year for Ayvens, which will pursue the integration of LeasePlan with important milestones. As a result, cost to achieve will be at minus EUR 190 million in 2024 before significantly decreasing from '25. At the same time, Ayvens will begin to benefit from initial synergies linked to the ongoing integration of LeasePlan expected around EUR 120 million before significantly increasing in '25 and '26. On the commercial front, Ayvens will ensure an active portfolio and order book management to optimize the allocation of cash resources and progressively improve margins over time. On used car sales, we still expect the normalization of the used car market to converge towards pre-COVID levels. In that context, Ayvens' guide on the following for '24. First, a plus 7% to plus 9% growth in earnings assets in '24 compared to '23. Second, an average UCS results per unit between EUR 1,100 and EUR 1,600, excluding prospective depreciation. And finally, the cost-to-income ratio between 65% to 67% at Ayvens, excluding UCS results, non-recurring items and PPA. At SG levels and on a full reported basis, it translates into a cost-to-income ratio around 70%. All in all, Slide 25, International Retail Mobility and Leasing Services posted RONE at 16.5% in '23 and around 11% in Q4. On the annual basis, revenues increased by 5% in '23 versus last year, including the contribution of LeasePlans. They are down 5% on a quarterly basis versus Q4 last year, in particular due to the one-off impact at Ayvens, just mentioned. Conversely, International Retail publishes in Q4, a solid growth of 2% in its revenues. At the same time, costs increased by 26% in Q4 and by 20% on an annual basis. This rise is mainly due to the integration of LeasePlan for around EUR 620 million and to the impact of double-digit inflation in the different regions where we operate. Accordingly, the cost-to-income ratio increased to 56% in '23 versus 49%. Cost of risk, it remained low at 33 basis points in Q4 and 32 in '23, down from 40 basis points in Q4 and 52 basis points in '22. On the Corporate Center, Slide 26, for the last time, revenues were impacted in Q4 by the unwinding of the hedges on TLTRO for around EUR 30 million on a total annual amount of around EUR 330 million as announced in addition. Furthermore, in the context of sharp drops in long-term rates, volatile items related to group hedge portfolio, not eligible for hedge accounting impacted revenues by around EUR 100 million. Last, we have increased by EUR 100 million, the provision of deferred tax assets activated in Q4. As a reminder, this is neutral in terms of core Tier 1 and distribution. I will now let the floor to Slawomir for the conclusion.

Thank you, Claire. This wraps up 2023. And looking ahead at 2024, we are confident, we are committed to and focused on execution. The upcoming year will see a rebound in revenues and an improvement in operational efficiency, and we will maintain a strong balance sheet and continue to work on simplifying our business model. You will find on the last slide, how we will be presenting from now on and updating on a regular basis, the progress report showing our path to reaching our 2026 financial targets in this transparency. And you will have this presented regularly from now on. So let's now move to the Q&A. Thank you for joining the conference, for having listened to the presentation, and let's have our Q&A session with the usual rule, which we find efficient of two questions per person and the floor is yours.

[Operator Instructions] The first question is from Azzurra Guelfi of Citi.

I have two questions. One is on your target and the other one is on capital. When I look at your targets, it seems they embed quite a few degree of conservatism, for example, on the CIB revenue development or the front loading of some transformation costs. So that could lead to potential positive development over the year and possibly higher development in 2025 once the effect of the transformation are in place. Can you give us some color on how do you see the transformation anticipation into '25 as well? And when I look at capital, capital was actually better, you started to distribute a bit more than what consensus was expecting. And can you give us some color about the development of the risk-weighted assets because the improvement continues in CIB, and so that's one area that there could be more optimization on the corporate center. And the other one, if risk-weighted asset development is positive, can you give us some color already on the payout for 2024?

Azzurra, thank you for your questions. I'll take them both unless Claire wants to add something after I'm finished. But, so -- usual conversation on how conservative the CIB guidances are. I think, and I've been saying this regularly, I think it's -- you have -- it's a range, right? We try to start off the mid-range point in terms of -- just to give you some color, right? I mean just in terms of how we think about the structural, for instance, cost base of this business, right? How do we try and run the business in an efficient way and a resilient way from a cost-base perspective? And so this is why we stick to this midpoint of the range we gave you. But giving you the range, yes, we admit upfront that in better market conditions and these past few years have been on the better side if we compare them with the last 15, and so it's unchanged, right? So obviously, against a better market condition context, the target is conservative against the opposite of good market conditions, the target is not conservative, right? It's the middle of the range of, let's say, 2 basic potential outcomes. So it is a reasonable one, right? In terms of transformation cost and your overall question about how much upside -- that's how I understand your question, how much upside and maybe additional upside there is in '25 and ultimately on the target? It's a little bit of the same answer, which is, at this point, we have a lot of things to do still in terms of simplifying the business model, in terms of delivering on all of the efficiency projects and they are, again, numerous and significant in nature. And so we believe that again, right, in terms of a base case scenario, we stick to what we said. So we stick to 2026 targets and we stick to the broadly linear path to reach them across most of the indicators. So that's what I can tell you this morning. In terms of capital and RWA, again, we believe that the trajectory we described in September 2023 with various points in time is still valid. And we believe that the combination of everything we do in terms of limiting the organic growth, working on the efficiency of our capital allocation and capital usage, et cetera, we will deliver this target. And maybe to just wrap it up, so right now, the base case scenario remains the same in terms of both the goal and the trajectory to get there. But maybe I'll wrap up by saying, are we trying to do better? Are we working on trying to do better? Yes, right? But does it -- at this point in time, can we make a different commitment in terms of targets and the trajectory? No. But are we trying to do better? Yes.

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

Two questions from my side as well. First one, I will take a step back. I think you are very happy to see 2023 behind you, for sure. And you finished your remarks saying that you want to give maximum clarity and show progress in your turnaround of the story. Now I think markets get some comfort on the mechanical improvements in different retail, slightly improvement in events due to normally from the back of -- I mean, the main normalization used car sales already happened CIB resilience. But can you comment on what's the likelihood you still see a lot of noise from adjustments, one-off and so on, especially that you moved into a reported basis? I think that blurs a lot the picture and the hard work you're probably doing behind. And Corporate Center, I mean, I really want to comment on that specifically. And then on Corporate Center as well, we all assume that this is a kind of less volatile item now. But Q4, it came quite volatile and impacted your distributable income there as well. So can you give us an indication of how to look at that line, which is always difficult to forecast? And then one question on capital. Can you take us the moving parts on '24? I think, Claire, you said that TRIM will move to next year. Did you mean next year as of -- because you were talking about '23, as of this year or move to '25? And what are the other moving parts? And is Basel IV still the same number?

Thank you Tarik. If I'm good at math, this is three questions, but let's make an exception. So I'm happy that 2023 is behind. I guess I am a little bit. But in terms of the core question about the adjustments, one-offs, et cetera. Let me tell you that I thought that the previous way of reporting was blurred. So I hope that reporting on a reported basis is going to add clarity, not the opposite. I mean, that was clearly the intention. So at this point in time, we do not expect any material one-offs. That's why I mean you've been following banks for quite a long time, and it's true for any other corporate firm as well. I mean, we can encounter all kinds of situations. But right now, we don't have any execution of material one-offs to be taken in the following years. So that's one. And then Corporate Center, Claire?

Tarik, I will answer your questions 2 and 3 on Corporate Center volatility and on core Tier 1. For me next year is '24 because as the CFO, I'm still working in '23. So tonight '24 will start, but until tonight, I'm still in '23. So regarding Corporate Center, the volatile NBI is linked to hedges that are booked in the Corporate Center for our balance sheet. So as a reminder, the balance sheet of the Corporate Center is mostly composed of own equity investments in subsidiaries, treasury instruments in various currencies. So the group hedges those items against the interest risk through derivatives. And part of these derivatives are not eligible for hedge accounting. So they are accounted for in mark-to-market. The sensitivity of this portfolio is EUR 9 million or 10 basis points, but spread among currencies, which are mainly euro, Czech krona and pound, which are the main drivers of the volatility, and dollars for sure. This is for the Corporate Center. And as a reminder, we had around 1% increase. So it's slightly in line on the volatile NBI with the sensitivity of the portfolio. Regarding next year on the core Tier 1, so given all the uncertainties surrounding the regulatory impacts, which are related to TRIM on-site inspections and all the stuff, we now prefer to guide on the capital target by year-end. That's why we guided on around 13%. This being said, in '24, the core Tier 1 ratio should be impacted at least by the residual -- I'm sorry, regulatory impact that we expected last year. So this year, exactly '23, which is 35 basis points and potential additional impact notably linked to ongoing or future on-site inspection. Regarding RWA growth, we have guided on an organic growth at the maximum of 1%, and we still are completely in line with this guidance. And with regard to ongoing M&A transactions, we still expect the worst TRIM impact to be below 10 basis points. And in Africa, we have announced some disposals that should generate no significant positive impact. That's all from me regarding the '24 core Tier 1 guidance.

The next question is from Delphine Lee of JPMorgan.

So my first question is -- sorry to come back to the cost-to-income ratio target guidance for '24. I'm just wondering why the improvement from '23 to '24 should be just -- to '26 should be just linear, which would imply something around more like 69% for 2024. I mean given you have lower contribution from the single resolution fund recovery in French retail, the cost synergies [indiscernible] and the cost to achieve are similar amounts, '23 versus '24. So just wondering why should it improve even more than that? My second question is on the sensitivity to rates that you've given on French Retail, which has come down since CMD quite a bit. So I'm just wondering why that is.

Thank you I'll give the floor to Claire.

Delphine, if I come back to the moving parts of the linear improvement of the cost-to-income on, let's say, the revenues, we anticipate an increase by more than 5%, notably due to the strong rebound in the French NII. It takes into consideration the following assumptions. First, market revenues in the mid-range target, which means around EUR 5.1 billion, which means also minus EUR 500 million compared to the realized 23. And for sure, the full year contribution of LeasePlan led revenues which will be negatively impacted, as I said, by a continued pressure on margins and normalization in UCS. On the cost, you're right, we will benefit from the decrease in the contribution to the SRF around minus EUR 500 million versus EUR 23 million. And exactly an increase in the amount of the gross savings around EUR 500 million expected in '24. But we also embarked in our assumptions a significant part of the CTA. I have guided EUR 750 million to EUR 824 million out of the EUR 1 billion expected over the period '24 to '26 and also the full contribution of the LeasePlan on the cost base for sure and an impact of inflation. That's why based on these assumptions and notably the market rides guidance, we guide on a cost-to-income ratio below 71%. Regarding your second question, the sensitivity rate the sensitivity for the French Retail. Of course, we adjust -- we have adjusted hedges since the Capital Markets Day. We have, as Slawomir explained in the previous call, monthly DLM committee, which is shared by Slawomir with roundtable economies, market guide, for sure, CFO and representatives of the businesses, the retail, insurance and all the staff. We anticipate a potential decrease in rates than we show adjusted our sensitivity. And I wanted to make very clear in my presentation on the fact that the sensitivity we guided on, which is EUR 10 million for a parallel shift of the interest rate curve, which is positive for an increase in interest rates and negative for a decrease in interest rates is computed compared to the 41 rate. And this was embarked for sure, a decrease in the interest rate assumption. So our positive sensitivity means that should interest rates decrease slightly less than what is embarked in the forward, then we would improve our financial trajectory compared to the guidance we gave, but we for sure embarked a decrease in the interest rate assumption, which is the one we guided in our economic scenario.

The next question is from Giulia Miotto of Morgan Stanley.

My first question is on the business perimeter. Slawomir, I think during the Investor Day, you talked about looking at the bank and every business without a board and considering disposals. You have announced some minor ones. And I'm wondering if there is any update that you can give us in terms of -- yes, if there is anything in the pipeline which could come up in 2024 or if it is a long-term project, so to speak. And then if I -- on the flip side, look at AB acquisition, can you tell us a bit more of what when that is going to be consolidated and what that brings to the table for SocGen in light of the fact that it's a JV rather than a fully consolidated deal.

So on the business perimeter, I do not have updates because we stick to what we said, which is that we will communicate about any adjustments to the perimeter as they actually happen. So no specific updates. And to answer your more strategic question is, I mean, it's a constant exercise. So theoretically, at least, and take it as a theoretical answer, it's both the short-term and long-term project, meaning we're working on this constantly and impacts would be both short-term and long-term. On the AB acquisition, it should happen in H1 '24. We're on the final steps of the work to close this JV setup this acquisition, which results in a JV. And what it is bringing to the table, I mean, the short story, we spoke about this in the past, but it's, one, creating a leading research and cash equity shop, perfectly linked and complementary to what we're doing already. You know how significant we are a player in equity derivatives, which obviously has a cash equity component, but we're increasing very significantly the size of that cash equity component, which increases the resilience of our equity business. There's a lot of synergies there that can be done, mostly actually on the revenue side, but also on costs. So that's one piece. And the other piece, obviously, very important to us is how it enhances our corporate franchise and our ability to dig even deeper in the conversation with our clients in terms of strategic topics and obviously, in terms of the primary equity business, right? And because of the nature of Bernstein, it's a high profile and it's independent. It's culture and our own footprint in the matter today, which is obviously slightly smaller than theirs. We are creating something which is of unique nature and complementary, right? So it's a very significant business enhancement actually for our CIFs for our clients.

The next question is from Chris Hallam of Goldman Sachs.

Just two from me. So first on distribution. In the strategic plan, you talked about the 40% to 50% payout ratio from '23. I guess, towards the lower end of that range initially and for '23, we have the 40% payout ratio, but the mix skews heavily to dividends, which is about 70% of the payouts for '23. So for 2024, should we still be assuming sort of 40%, 50% split evenly between dividends and buybacks? I guess, and can you confirm that your plan for 2024, you expect EPS to grow year-over-year versus 2023? And then secondly, on Slide 17, you talked about lower client acquisition costs in Boursorama. Could you give us a sense of where that cost is now? And does that change at all how you think about the EUR 300 million contribution group profitability in 2026 that you talked about for Boursorama?

I'll give the floor to Philippe Aymerich in a second for the BoursoBank question. As far as the distribution policy is concerned, it's unchanged. And as we stated at the CMD, from 2024 onwards, we have a distribution policy, which is 40% to 50% of the reported net income restated from -- for non-cash items with a balanced mix with -- between cash dividend and share buybacks. Balance, I looked it up a few times in the dictionary means something close to 50-50 with a very little leeway to deviate from 50-50, and that's how it needs to be interpreted. And so this policy, the statement is unchanged, remains valid. In terms of improvement, well, clearly, as we progress towards our targets set for 2026 and through mostly a linear path, we do expect clearly, the distribution to increase and which should normally increase to -- lead to an increase of both cash components and buybacks. Philippe?

Good morning. Actually, we don't disclose this number. But as mentioned in the slide, it continues to improve, and that has been the case during the last quarter and even in January. So overall, we don't change -- I mean, the guidance provided during the Capital Market Days in terms of GOI during the period and the target for 2026 remain valid. But I want to stress that all the indicators are pointing into the right direction, not only the number of new clients, but the volume of deposits, number of transactions, the equipment or client. So we are very confident on the trajectory of BoursoBank.

The next question is from Anke Reingen of RBC.

The first one is going back to capital. You said for 2024, 25 basis points hit and potentially additional on-site inspections. I just wanted to confirm this potential additional is not like the size of a potential doubling like another 25 basis points because I guess in the past, these on-site inspections didn't quite have small impact. And did you confirm the 85 basis points? Sorry, if I missed that in response to Tarik's question. And then secondly, another number question on the interest on top subordinate notes in the calculation to the EPS that jumped a bit in Q4 to EUR 210 million. Is that the run rate? Or should we be more looking at the full year '23 as an outlook for this year?

Can I ask you to just repeat your second question because there was some noise here? We didn't quite hear the second question, and the first one is going to be addressed by Claire in a second.

It was just on your EPS calculation, the full year interest on sub notes is EUR 759 million, but it implies EUR 210 million for Q4. So is Q4 the run rate into '24 in terms of the subordinated notes so we can calculate the EPS and the dividend and so on and your ROE?

I don't know why, but we still have some trouble hearing you. But let's address the first question, and then we'll try one more time to get the second one. Claire, can you address the first one?

Yes. So regarding your question, you had two types of questions, one regarding on-site inspection and the second related to Basel IV. I'm sorry, I repeat because we couldn't hear you very well here. So I want to make sure that I have properly understood. So at least I will answer these two questions. So regarding on-site inflection, it's to a certain extent, it has usual disclaimer. You know that we are highly regulated, and we have on a regular basis on-site inspection. So we currently have postponed in our trajectory to '24, the 35 basis points we had guided on for the end of '23. And on top of that, we took an assumption which will rely on really a kind of cautious view to guide you on the around 13 basis points by the end of the year regarding core Tier 1. So no particular information, no particular guidance, except that we confirm the around 13 basis points guidance for the -- by year-end. Regarding Basel IV, we stick to the previous guidance, which is 85 basis point impact for Q1 '21. We didn't update this guidance in this amount. It's for sure an ongoing process, working on Basel IV and trying to manage the impact and to optimize it as much as possible for sure. So we will probably update these impacts in due course during [indiscernible], an ongoing process, but at that stage, once again, nothing in particular. And notably, no particular bad news or unfortunately, good news in the last regulatory package that has been published. So we stick to the 85.

So your second question, I mean, if it was about the AT1, the cost of AT1. So you should assume, if that's the question, but please if that was not the question, please tell us. And you should have this in the slide actually 56, and it's EUR 760 million in 2023, and '24 should be roughly in line. So if that was the question, that is the answer.

The next question is from Guillaume Tiberghien of BNP Paribas.

The first question is on the custody business. I wanted to understand what has happened, not the year-on-year growth rate because I remember the big gain of Q4 2022. But it's more the absolute amount of revenues of EUR 144 million. As far as I remember, that has not happened for 10 years, which is pretty bad given the higher rates environment. So I wanted to understand whether there were some specific hits or specific negative items. The second element relates to the 12% equity Tier 1 in 2024 on a fully loaded basis. You would still need to build about 100 bps at the end of '24. And my question, I guess, is do you expect that a big chunk of these 100 bps is going to come from disposal or just from containment of RWA? And maybe just a clarification on the 85 bps of Basel IV. Can you remind me how much of that is FRTB? Is it about half of that is due to FRTB?

Okay. So I'll address the first two and leave the floor to Claire for the third one. So on the custody business, I mean, it's a short answer. No, there is no particular one-offs apart from obviously, again, the base effect that you referred to and that we explained. It's a slow quarter. There is a slight decrease in the NII in this business and nothing really particularly significant or one-off nature in this business. In terms of the 12% on the Basel IV, I mean, as explained during the CMD, it's a number of factors contributing to this. And you said it, it's a combination of potential adjustments of the business portfolio, combined with the containment of the organic growth, which has a significant impact, and the organic capital generation as well. And so it's a combination of everything. But yes, that's it. And in terms of the last question on the FTB, Claire?

So regarding the Basel IV impact, among the 85 basis points related to reinforce Basel V. I think I had guided last quarter, and it didn't change. So it's market risk for 40%, personal risk for 45%, CVA of 10% and credit risk of 5%. So to answer your question, market risk 40, Basel IV 85.

The next question is from Jacques Henri Gaulard of Kepler Cheuvreux.

I'm really sorry. I'm going to have to come back to capital to make sure I have all my little stones gathered so that I can find my path. On an obviously fully loaded basis, RWA Basel IV minus 85, TRIM to come minus 35. Obviously, Bernstein as is going to be closed in April, minus 10 and to -- and obviously, on-site inspection, not determined yet. On the positive side, there is Africa plus 6. And is there anything else I've missed? So that's the first question to be precise. And the second one, you segregated a little bit the cost to achieve of Ayvens. I wanted to make sure that they were included into the EUR 1 billion 2024, '26, of which EUR 750 million, EUR 800 million 2024.

So on the first part, yes, that's it. And the other positives which I addressed in the previous -- in a previous answer. So you're right, the only thing is Bernstein is materially lower than 10. That's the only little adjustment, but not really material. Claire?

Yeah. So in addition to Slawomir point, you missed also organic capital generation through net result net position. And just remarked, 85 basis points, it's fundamentally fully loaded, but it's up to 25. Yes, the CTA of Ayvens is embarked in the figure, EUR 750 million to EUR 800 million.

The next question is from Sam Moran-Smyth of Barclays.

Two questions on Ayvens, please. First one is, unfortunately, I have a very quick follow-up on the last question. So the guide of EUR 1,100 to EUR 1,600 for 2024, should we assume that your group 5% revenue growth assumes the midpoint of that range? Or I guess, kind of what's the sensitivity side of that? And then secondly, just further out to 2026, it appears visually on Slide 24 that you're estimating that non-used car margins will normalize at levels much lower than 2019, 2020 and 2021. So in the context that other peers are expecting those margins to actually offset some of the decline in the used car results. Just trying to understand if that is may be conservative or if there are any reasons why the margin wouldn't fully recover.

Pierre will take these questions.

Okay. So to your first question, yes, we have guided between the used car sales before prospective depreciations and before impact of the PPA between EUR 1,100 and EUR 1,600, and I cannot give you the exact number of what has been taken in the -- to assess the -- our NBI. We don't communicate anyway on the NBI. What I can tell you maybe to give you a little bit more guidance is that net post-PPA and post prospective depreciation, we -- the guidance would be between EUR 100 million and EUR 600 million. And for the second part of the question, if I understood correctly, our view on the margin but first of all, there will be a normalization, as you said, of the used car sales in 2026. In terms of pure margins, leasing margins, we have seen a decrease in the margins, and we will remain at a lower level in '24 with a progressive increase in '25 and '26, thanks to a lot of actions that are being taken by Ayvens in their contractual and pricing policy.

The next question is from Matt Clark of Mediobanca.

A couple of questions. So firstly, on the buyback timing, can I just check you're planning to execute that after the AGM approval like you did last year? Is that the right way to think about the calendar for that? And then secondly, the slide where you show the French Retail revenue outlook, you've got a sort of a small partly stated increase 2025 on 2024. If I remember rightly from your Capital Markets Day, you had negligible kind of tailwind from hedging portfolios after the 2024 recovery. So I just wanted to check that's still the same situation and that 2025 revenue growth comes from volume growth or other type effects rather than from the swap portfolio.

On the buyback, yes, your assumption is correct. So after the AGM and all the buybacks subject to ECB authorization. And in terms of the French Retail, you are correct. There are no tailwinds from the swap portfolio in 2025. And so it's, let's say, core growth.

The next question is from Pierre Chedeville of CIC.

I have one question left. Regarding insurance, we can see that it's developing quite well this year. And I wanted to know if you were to improve your setup from a management personnel point of view or IT point of view in order to accelerate in insurance, which for sure is something that you have as a target to develop. And I was also interested by your P&C business. We can see that your business is growing. Is it due to volume? Is it due to margin? And could you also give us your technical or combined ratio?

I'll leave that to Philippe.

Yes, I mean, we remain quite positive regarding the insurance business. As you have mentioned, this is a record year for them. I mean, excellent regarding life insurance, especially during the first part of the year. And I would say, especially with our retail networks because it has been a little bit more complicated with ultra-wealth clients. But -- so very good performance. And of course, it remains one of four priorities. That's one of the key objectives of the new bank in France. We consider taking care of the savings of our clients. It's extremely important. So that's true that we'll have also to reallocate a lot of deposits, which we're collecting in 2023. And probably one of the objective of 2024 is to see how we can reallocate a part of these deposits into life insurance. Regarding protection, P&C, we still have a lot of room for improvement. I think we are definitely moving to the right direction. We have invested a lot in digitalization of the processes, improvement of clients' experience, specialization of some teams in our call centers. So we continue to leverage on all these elements. You know that we can improve there. So yes, we have definitely some potential.

And about your combined ratio, do you give it?

No, we don't disclose.

The next question is from Kiri Vijayarajah of HSBC.

A couple of questions, if I may. Firstly, coming back to your -- global Markets revenue guidance for 2024. To what extent do you think you'll be able to offset any potential revenue decline with lower costs and lower RWAs? I know your revenue guidance is pretty conservative, but just trying to work out what it might mean for the ROE in that division. And then secondly, more a premature strategic question. How do you think about your payments business? I know we've seen banks in Southern Europe sell their payments businesses to specialist providers. We may see it happen in the U.K. potentially. So is payments integral to your corporate offering? And is it feasible or practical to even carve it out from your core banking operations? So just your thoughts there, please, because I appreciate the focus of your disposals has really been elsewhere, but just your thoughts here on the payment side would be helpful.

So let me do it this way. You have two major factors. One is you have obviously one significant variable costs in the GBIS business and in the markets, in particular, which are compensation end of this year, there is a potential for adjustment there should the lower end of the guidance there, for instance, we hit. And the second thing is, I don't know if you followed that very specifically, but typically, GBIS, despite its very strong performance these past few years and current higher is part of our work on the structural cost improvement of the cost base. And typically, in the project, which was announced earlier this week, there is a component in GBIS and GBIS is contributing to these cost reductions as well. So again, right, if you have a very quick deterioration of the market conditions, well, then you will have, obviously, a deterioration of the ROE. But from a structural strategic perspective, we are still working on improving the cost base of the markets business as well as GBIS business in general. And so we're confident that it will be a resilient business, not only from a revenue perspective, but also structurally from an ROE perspective. So that's -- for your first question on the payments business. Well, as far as we're concerned, it is mostly a very deeply entrenched business in our corporate franchise. This is why it's strong, while it's something which is meaningful from both a growth perspective, from a return perspective and absolutely key in our view in terms of working with our clients, our corporate clients and institutional clients all over the world. So the idea of somehow carving this out and looking at this differently is not on the table today because of its intrinsic link to our core corporate client-based franchise.

This was the last question. Mr. Krupa, please go ahead.

Thank you very much. Thank you for your time. I know you've been very busy today in particular. So thanks for joining, and we will speak to you soon for the next release. Take care. Have a good day. Bye-bye.

Ladies and gentlemen, this concludes today's Societe Generale conference call. Thank you for your participation. You may now disconnect.