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

All right. Good morning, everyone. Thank you for attending this session. I'm Delphine Lee from the European Bank's team at JPMorgan. And I have the pleasure to have Leopoldo Alvear today, CFO of SocGen, with us. Thank you, Leo, for coming.

Pleasure is all mine. Thank you very much for having me over.

Great. So maybe we dive directly to capital and distribution, if you don't mind.

Okay.

So I mean, CET1 is well above your target of 13%, and you've just announced another EUR 1 billion share buyback. Now going forward, do you intend to assess the amount of buybacks only once a year with full year results? Or are you keeping a buffer as well for FRTB? And also, with a stronger organic capital generation than in the [Audio Gap] you consider structurally increasing your ordinary payout policy from 50%?

All right. Thank you. So I think we haven't changed our policy here. So we announced 3 years ago that we wanted to run the bank with 13% CET1. We've been able -- that was a target basically for 2026. By the end of 2026, we've been able to achieve the target well ahead of schedule. But we don't want to build a buffer on the buffer. In other words, the 13% already incorporates a buffer, a management buffer, which is the one that we announced back in 2023. So we just announced the second extraordinary buyback or extraordinary distribution this Monday. We announced the first one in July. We ended the execution of that one just before the presentation of the third quarter. And we announced the second one this Monday, basically. And we aim to keep on doing the same thing going forward. In other words, every time we have excess capital, we will decide whether to invest that in organic growth, as long as we can grow the bank without changing our risk profile while generating an extra return on the one that we are making. We can also employ that capital in inorganic acquisitions should we find anything that was appealing for our shareholders, or we will return the capital to the owners, which are the shareholders, because at the end of the day, we are only steward-shipping the capital. So depending on what's the best return, that's what we would do. And currently, share buybacks where we are trading are certainly a very good opportunity for our shareholders, especially because they entail no risk, if you wish. And again, this is always a decision that needs to be made by the Board of Directors of the bank, which is the case so far. When we look at the distribution of capital, we like to basically separate what we have, what we call, recurrent distribution, which would be the payout that we give out every day -- every year and the excess capital distribution. Within the recurrent part, last year, we upgraded and increased our payout from the region of 40% to 50% to 50%. Why? Basically because of 2 reasons. On the one hand, we had already achieved the capital targets we were aiming to achieve. In other words, the buildup phase was already behind us. And second, we had increased our profitability. In other words, with the 50% of retained earnings, we can still cope to increase the balance sheet of the bank, which at the end of the day is what we should be aiming for. In other words, this 50% is recurrent. It's something that we can do every year despite growing our balance sheet. Now with the remainder, what we say, it's this excess capital distribution. And what we have shared with the market, it's basically that we will do it if we have generated excess capital, which is what we're doing every quarter. Now we're generating capital around 10 basis points in average every quarter, and we will devote it to the 3 things that I mentioned, either organic, inorganic or excess distribution. So I don't think anything will change on that regard. And on top of that, as per the recurrent policy, what we introduced also in July, was the introduction of an interim cash dividend, which has already been paid. It was announced in July, it was paid in October, and this should be going forward. In the past, as per the payout, what we have done, it's basically a 50-50% split between cash dividend and share buyback. I think as long as the cash part of the equation can grow, perhaps we could be a little bit more flexible on the 50-50 split. But again, as always, this is a Board decision. So bottom line, I don't think anything has changed. We are delivering what we promised, which is that we increased our payout ratio. We put an interim dividend on the table, and we are distributing the excess capital when we generate it.

And do you think French politics can derail your medium-term ambitions to return that capital to shareholders or...

So while there's been a lot of noise about some of the proposals that are out there within the budgeting process, at this point, I have no further visibility. So it's still under the negotiation of the different parties. We don't know when we're going to get this kind of agreement, or if there's going to be a budget. We personally believe that the chances of these extraordinary tax on buybacks are slim, but we will need to wait. In any case, again, nothing will change from our standpoint. We will always be very disciplined as to what to do with the capital. And of course, we will always take into account what are the financials behind the potential distribution of that capital to shareholders and what makes sense from a mathematical standpoint for our shareholders. Again, my message here would be the one that I tried to deliver before. The capital is not ours, belongs to our shareholders. We will try to do what's best for them in any given circumstances.

Great. Thank you. Now moving on to profitability and costs. With expenses down minus 2% year-on-year so far this year. I mean, you've done a great job at reducing costs, but consensus is still somewhat skeptical about the target of below 60% for cost-to-income ratio in 2026. How do you intend to meet your cost-to-income target? Maybe I'll start with that.

Sure. So when we disclosed our strategic plan 2.5 years ago -- or 3 years ago, basically in September '23, we were aiming to fulfill 2 or 3 targets. So the first one, we were aiming to change the governance and the culture of the bank, and we are in the middle of doing that. We wanted to streamline the bank to basically retain what was core for the bank and dispose those activities that were not -- we didn't think were core because they were not bringing synergies, they were not in the right places, or didn't make the right profitability. We wanted to raise our capital to 13%. The fact that we did the streamlining faster and probably on the higher range of what we were expecting has brought us to the position that we have today where we're well ahead of the schedule on capital, and we have excess capital at this point. And finally, we wanted to increase the returns of the bank, and that was basically driven by the cost-to-income. When I was looking at the bank last year before joining, my conclusion was that, of course, we're in the right banking business. So we lend and therefore, there are risks involved. When I look over the last 6 years, the cost of risk has been relatively stable if we strip out COVID in '20 and the reversal of COVID in '21. And we've been in the mid-25 -- mid-20s space on that regard. So basically, the big issue of the bank was always the cost-to-income in order to foster profitability. Back in 2023, our cost-to-income was in the mid-70s space. And that's where we set this target, which was honestly a challenging target for us, to reach this 60% by next year. In '24, we brought down the cost-to-income below 70%. We were aiming this year to bring it down by 66%. In June, we upgraded that guidance towards below 65%, because we were doing better in both revenues and costs. Nine months of the year, we are around 64% or a little bit short or shy of 64%. So well on track to, in my opinion, deliver the target set for '25. And then we have a further step to take, which is the 60% for 2026. I mean the commitment of the management is absolute. We know that we have been able to regain some confidence from the market, and therefore, we need to deliver on all the targets that we promised. And therefore, our commitment for the 60% is absolute for next year. How are we going to achieve it? Well, I think, obviously, it's a ratio that combines revenues and costs as asset ratio says. On the revenue side, I think we're going to keep on seeing some expansion on French retail, just like we've seen this year for the different trends that we've seen behind. We're certainly going to see an expansion in BoursoBank, because another one of the targets and guidances that we set with the market was that BoursoBank should make next year EUR 300 million of net profit. So if you gross that up by taxes, that's basically MBI, because it will be driven significantly by a reduction of the acquisition of new clients. So that's a big boost on revenues on that side. We should also probably see some expansion on financial in the part of Financial Advisory of our CIB business. So we think that revenues can grow a little bit next year. Nothing super spectacular, but the trend should continue to be positive on that regard. And on the cost side of things, basically, what we need, we're going to see a further reduction. When we said we wanted to be in the 60% of cost-to-income, that embedded that we were going to invest EUR 1 billion in basically restructuring charges or cost to achieve, which in our case is booked in the OpEx line. So north of EUR 600 million, close to EUR 650 million of those EUR 1 billion were already invested in '24. A big chunk of the remainder will be invested in '25. That's one of the reasons cost-to-income is coming down this year, and it will go further down in '26, because we won't have those restructuring charges as part of the OpEx. Second thing that we will see next year, it's some cost cutting still coming from the merger of our 2 brick-and-mortar retail networks, so basically Crédit du Nord and Societe Generale. We will also see, obviously, some cost cutting coming from Ayvens. So Ayvens itself launched in '23, again, a strategic plan, which lasts until next year. And they're aiming this year for a cost-to-income in the 57% space and a 52% next year. So for certain, we're going to see a reduction in costs coming from Ayvens and therefore, at a group level. We're also putting a lot of cost discipline since this year on the FTEs. So basically, we have attrition. We have an attrition rate all over in the group and especially in France, and we are putting tight control on basically the replacement rate of that attrition. We are controlling all the cost. We have a cost control tower. And we are also having a different view on the IT expenditure. IT expenditure for bank is huge. It's a big part of the costs, and we are trying to reshuffle the IT investment towards a more productive one. We already saw last year that the total IT expenditure went down for the first time in 15 years for SocGen, or more. We've seen the same this year. We shall be seeing that in the coming years, not only in '26, but beyond '26, because it is more a multiyear program, if you wish. So these are more or less the context or the levers that we want to push to reach that 60%. And again, as I started saying, our commitment is absolute in that regard. And honestly, I don't think it even finishes in '26, because if I look at the landscape of banks, I mean, going from mid-70s to 60% in 3 years, in my opinion, is a good achievement. But obviously, we need to move forward. We need to go further down on that cost-to-income ratio if we want to increase our profitability beyond '26. And obviously, that is our focus. And again, it will be a mix of -- because nothing is black or white in life, it will be a mix of further increase of the revenues. And I think certainly, we will have opportunities. We will have opportunities there in French retail. We will have opportunities there in Financial Advisory. We will have opportunities in Ayvens. Once it's finished the merger, I think it will be a very profitable part of the business to put some RWAs to work. But it will also be costs, because it's not only the cost-to-income, because cost-to-income, it's comparable to other players, but up to a point, because some other bank -- for example, I don't think a bank with the kind of mix of businesses that we have can aim to have a cost-to-income in the low 40s space, because we're a different animal, if you wish. Our CIB weighs more, which has a higher cost-to-income and so on and so forth. But when we look not only at the cost-to-income, but at costs and we look at ratios like costs on RWA, we are higher than our peers. We are probably at around 4.5% and the best-in-class in that regard is probably more in the 3.5% space. So I think there is also going to be -- I mean, the discipline on cost will go beyond certainly 2026.

And RoTE is progressing well towards 9%, 10% target in '26. Longer term, why would the profitability be structurally lower than the sectors?

So again, I don't think now -- once we've streamlined the bank, I don't think there's anything in the perimeter of the bank that would prevent us to keep on increasing our profitability. And the increase of that profitability, all things being equal, will be based on a further reduction on the cost-to-income. And again, this is an expansion of revenues, which I think after '27, some of our businesses are still in the restructuring mode, like Ayvens. It's a #1 player. So certainly could expand the revenues going forward. But also, as I mentioned, French retail. Also, I think, on the Financial Advisory world of things. And certainly on the reduction and firm cost discipline on all the cost side of things beyond '26. So again, it's a cost-to-income issue.

Yes. Okay. Great. Coming back to French retail. Net interest income has finally rebounded in Q3 with some encouraging signs on the lending volumes. Have you seen any impact from the political uncertainty? And when can we see better trends for deposits? And one of your French peers expect French retail revenues to grow more than 5% in coming years. Can SocGen deliver the same growth? And if not, why?

Okay. So going one by one on the few questions that you mentioned. Yes, I think we've seen a clear trend this year on French retail. So it's been going up through the course of the different quarters. If I look at Q3 on Q2, NII was up 3.5%. So we are already seeing the realization of those trends. I think French retail will keep on this trend going forward. So we should be seeing a slight increase in revenues going forward in the coming quarters. This is driven basically by 3 or 4 levers. So on the one hand, it's by the stabilization of the mix of deposits. I think this has taken longer than other geographies in Europe for a number of reasons. Among them, for example, when I look at France, we don't have such a homogeneous loan-to-depo among the different banks as the one that I had in Spain, where all banks were below 90%. So here there's a little bit more of a variety of situations, and that fosters volumes and therefore, there's more competition. But now we see that the mix between term and deposits have come to an end or actually, it's perhaps slightly going down now in this quarter, but at least it's stabilized, if you wish. And then on the other hand, the cost of those deposits, which in France are very much triggered by the regulated products, by the Libra and the so, again, are coming down, because rates are coming down. So overall, the cost of funding is coming down, and it's coming down for everybody in the sector. So I agree with you that some of the trends that some of our competitors may be sharing, we're in the same place, if you wish. The second lever that could foster NII growth in the future or is fostering right now, it's the repricing of the fixed assets, especially the mortgages. And this is already happening, but it will take a long time, because these are relatively long duration assets, 8 to 10 years. So we will see it, but it will be slow, but it's also a positive trend, if you wish, going forward. And the third one could be volumes, okay? Volumes is very much linked to the macro and very much linked to GDP, if you wish. We are in an environment where we see that France is in the 1% space growth for this year and probably the coming years, a little bit more if we add inflation. So we could have some volume growth. Again, not something very spectacular, because it's driven by the macro basically. But all in all, these trends are certainly showing the right direction that we shall be seeing NII growing in the coming years. As to give a specific guidance, we don't provide it, honestly, because there's too many moving parts. I mentioned, it's a number of clients. It's the mix between site and term. It's the cost of funding, which is driven by external parties. It's the volume growth, which is driven by GDP or the macro. But all in all, everything, it's in the right direction. Everything shows that everything should be growing, and therefore, we should keep on seeing an expansion not only in '25, but obviously in the years to come, because we all play with the same grounds and roads, if you wish.

And you're not seeing any impact from the political...

Sorry, you mentioned that one. Honestly, no. I mean, nothing on the asset quality side, and I don't know if that was your question, but on the asset quality side, this is much more driven longer term, especially in individuals, because it's basically driven by GDP, it's driven by unemployment rate, and it's driven by real estate prices and all those things. I mean, while mild in the case of GDP, but it's positive. So it's not impacting -- we're not seeing anything on the unemployment. We're not seeing anything on the price of real estate. On the other hand, a slow growth does have an impact on loan demand, but that was already the case before. So nothing new that we have seen. And then finally, if you wish, because we're talking about NII, but it's worth remembering that the full revenues of this segment is slightly different from other geographies because, for example, if I compare to Spain, we have 50% of NII and 50% of fee business in France, while Spain is probably 2/3 and 1/3, which gives again stability to the revenue line and actually fees in France have a very good trajectory, because they're very much based also on the fact that a vast part of the savings of the country go off balance sheet towards the insurance wrappers or the mutual funds. Actually, we've seen that the client funds are growing through the course of all this year.

Great. And I now ask on the BoursoBank. The bank has already achieved this target of 8 million clients. Do you still expect to slow down the pace of client acquisitions to achieve the more than EUR 300 million net profit target for '26? Or I mean, how far are the profits from that level?

So again, we'll come back to our commitments as per the CMD. And in BoursoBank, we had basically 2. So one was to achieve 8 million clients by the end of '26, and the second one was to also achieve EUR 300 million in net profit. So we're committed to all our targets, and it couldn't be less in BoursoBank. On the client side of things, we've been able to reach the target well ahead of schedule. So basically, we were already at 8 million clients in July, basically. And at the end of Q3, we are at around 8.3 million clients. And we're going to keep on growing our clients during the course of '25 for certain with the same pace. I think, honestly, this is an asset I didn't know when I joined. I was very surprised about it. I think it's an asset that has huge potential, coming from retail, which is the vast part of my previous experience. This is an asset which is growing 20% clients every year, 75% growth in '21, so a huge expansion, while they're only losing less than 4% of the clients every 12 months, which, again, in my experience in digital deposits or digital clients or digital banking, it's a rate that I haven't seen. Especially if you take into account that by definition, when you join BoursoBank, you need to be bancarized, because that's the strategy we decided. So basically, you are joining BoursoBank, and BoursoBank is your second bank by definition, if you wish. And you're joining because you're being offered a good proposal. So the fact that 12 months down the road, you are still a client of BoursoBank, and less than 4% are leaving, that can only be driven by the fact that you're being engaged into more relationship with the bank, if you wish. And that's driven again by the fact that we have the products and we have the NPS, because we're #1 NPS in France. We basically deliver what we promised, and that's why people are retaining BoursoBank. So that has also helped on the fact that we have achieved the amount of clients with lower expense than when we thought. When we disclosed this back in '23, we shared with the market that we thought that reaching the 8 million threshold of clients was going to cost us around EUR 150 million of negative GOI, and we've never had negative GOI since '23. So it's been cheaper, if you wish, than expected. Now for next year, we want to show the monetization of our clients, again, and share it with everybody. So we're fully committed to delivering the EUR 300 million of net income. That's actually, I just mentioned before, one of the triggers that should help us reach the 60% cost-to-income. And what we're revisiting right now, it's our overall strategy, because we also think that it would probably be the wrong strategic decision to stop growing our client base, because, again, as I mentioned before, well, this is a bank which has north of 8 million clients and 1,100 employees. So this is a bank that, in my opinion, has the option to be a significant player in the French market, a significant disruptor in the French market. When I look at what a retail bank needs to deliver or provide, well, if I oversimplify, there's 3 things that you need for a retail bank to work. So first, you need to be able to provide the products. And the fact that BoursoBank started as a broker a long time ago has made it possible that they offer 40, 50 products, so basically 99% of what any given client could need, if you wish to. Second, obviously, you need to provide those products competitively. So basically, you need to be able to provide good prices. The fact that you have 1,100 workforce allows you to be cheap, so it's basically competitive. And then the third thing that you need is that the client has that need. My point being that you need to work on the vintages in the mid, long term. You cannot monetize everything in 2 years because, for example, if the amount of clients or the average of clients that we have in BoursoBank, which are obviously different from the ones that we have in the book are younger, I might have the best mortgage in place, but they need to have the need of buying a house. And it will come, but not necessarily in the first 6 months. My point being, when I look at the NBI per client in my brick-and-mortar network. And in BoursoBank, one is significantly higher than the other, because the vintages are much longer. But we are seeing already the monetization of the current vintages. This can be seen, for example, on the assets under management per client. We have 10,000 -- we have EUR 76 billion in assets under management in BoursoBank. So that's roughly EUR 10,000 per client, which is a very sizable amount in retail overall, not even in digital. So back to your question, yes, we are aiming to reach a EUR 300 million threshold of net income next year, while we're studying opportunities on how to keep on growing our client base, because I think it's the right strategic decision going forward.

Okay. Great. Now turning to GBIS. It is on track to deliver another strong year on very supportive market conditions. That said, your equities business seemed to have underperformed peers recently. What is driving this? And also, do you have any concerns on your exposures to private credit? And how is your partnership with Brookfield going?

All right. So basically, the business is doing good. So it's been doing good all through the year. It's done good in the third quarter. GBIS, our CIB business has grown -- revenues went up 2% this quarter and costs were down 1%. So basically, the jaws are expanding rapidly. We reached RONE in the north of 17%. So again, pretty healthy. When we break down that between the 2 main businesses that we have, which are, on the one hand, the markets, and on the other hand, GLBA. Markets were slightly up versus probably record year last year. So the base was very high last year, while GLBA was 7% ahead of last year. Overall, the business, GBIS, was ahead of consensus -- slightly ahead of consensus. When we look specifically -- so we're happy with the evolution of the business, if I may, on a super conducive 2024 altogether, a record year 2024. When we look at the markets business, again, we are up versus probably a record third quarter last year, as I mentioned, with a significant impact of day 1 accounting. So you might remember last year, in this business, we made in the full 2024, EUR 5.9 billion of revenues. And when we were guiding for '25, we guided for EUR 5.5 billion. That was based on 2 things and we disclosed this and shared this with the market last year. The first one was that last year, we had a positive impact coming in from day 1 accounting of EUR 200 million, which we were not expecting for this year. And a significant chunk of that was in the third quarter. So that's an impact from one quarter to the other. The second one was that last year, we had very conducive conditions, market conditions, and we thought perhaps this year, we wouldn't. I think we are now well on track to have a very, very good year overall in the markets business. This quarter, specifically, if we were to adjust for this day 1 accounting, which last year was positive. And this quarter actually is negative because we've been very active commercially. This means that we have built reserves, which has a negative impact in P&L, but it's actually good, because we will see those reserves coming through. In the future, the Global Markets business would have grown above double digit, basically with our peers, if you wish. On top of that, we have been -- and sorry, within these Global Markets, we had an evolution of equities minus 7%, which again, without the day 1 accounting, would have been high single digit, and then FIC, which was basically plus 7%, so it did well already. On top of this revenue evolution, we were very disciplined in costs. Costs went down 5%. So the gross operating income for the business year-on-year was plus 12%. As per the equities itself, we also need to take into account the mix of our businesses. We are more leveraged towards secured financing or basically quantitative market making. And for those businesses, probably the volatility in the market has been less conducive than for prime brokerage or cash equities, which is where we have a lower market share in this regard. So the combination of all things are explaining the evolution. Honestly, in our case, we are quite happy about the evolution through the course of the year.

Okay. And...

Sorry, and you talked about private credit.

Private credit, yes.

So our exposure to private credit, it's small. We disclosed it in Q3. We have around 1.3% of EAD or 1.9% if we include securitizations. We had no exposure to any of the names that have been on the headline in the last few months. We focus this business only with the top Tier 1 players, and we never write a specific underlying based on names, but based on the overcollateralization of the underlying of the specific transaction, based always on a very granular and diversified base. So that's our focus here. I mean, in general, for the banking industry, diversification is a key to control risk, specifically in this business, which is a business in which we've been working for a long time. It's not something that we are a newcomer into a crowded place. So we've been in this space for a long time. So we're certainly not going to be rushing to get positions where we are not comfortable with the risk. I mean we're not changing certainly our risk approach to this or any other business given now that we have excess capital. It could be easy for the bank, for example, a bank as large as us to grow rapidly, that would lead us probably to the wrong place in the future. We're not doing that. We are being quite cautious on that regard. And actually, you mentioned Brookfield. I think this is a good example. We're doing less good than we expected. We're growing slower than we expected within our Brookfield JV. Why? Because we're offering products with lower risk and therefore, lower yield and the market now has more appetite for higher yield. I think at some point, this will come back, and we are still very hopeful on this joint venture. And I think these kind of products will again have some demand in the future. But right now, the market is more focused on riskier products than the ones that we are offering on the table.

Great. Maybe I can ask on Ayvens as well. I mean, when do you expect to see some improvement in the fleet volumes? And how much can total margins improve from the current levels of 570 basis points roughly?

So Ayvens, the group decided last year to change a little bit the strategy based on the market conditions. So we pulled the brakes on the fleet production because we thought that the margins at which they were being printed were too competitive. And also, we had uncertainties as to the evolution and the residual value of electric vehicles. Honestly, now in hindsight, I was not there, so looking back from the future, I think it was the right decision to be made. We've seen since then a significant margin expansion towards the 570 that you were mentioning a minute ago, while some of our peers are below 500 basis points and reducing margins while we have increased margins. And also, we reviewed all the residual value of our electric vehicles last year. And although we do it every quarter, we have not had to do any further appraisals or impacts. We have not taken any impact through the course of this year. Now the fleet is relatively stable. We have around 3.2 million cars. We have been revisiting our position this year with brokers in the U.K., with the fleet in Germany or in Turkey for inflation, so on and so forth. And I think we've done that job. In the middle of that, we're in the middle of the merger of ALD and LeasePlan, which is a complex merger, because it entails a very large amount of geographies and countries, so a big number of legal entities plus the merger of different platforms plus, just not to avoid any kind of fine, becoming a bank. So it's a complex situation. We are well on track. We are aiming to have a cost-to-income of 57% this year and then 52% next year. I think next year, we should see a stability on the earning assets. And I think there's certainly an opportunity, while protecting margins, as you mentioned. And I think there's certainly an opportunity to grow that fleet from there onwards. We're #1 player. So we have the size, increasing our fleet once we have certainty, and we have the grounds for the merger in place, and therefore, we are more agile to do it, and have more resources to do it. it's certainly somewhere where the operational leverage is very high. For every other car that we sell, we don't necessarily need more people to do it. So it's a big operational leverage on 50% of the income, which is that leasing. On the maintenance part, there is, of course, some cost involved. But overall, the operational leverage is very high. So this is a business that next year shall be making mid-teen returns on return on tangible equity, so above the group. So it's going to be accretive for the group. So certainly, once the grounds for that growth are without putting in risk the margins, we are certainly going to be there.

Okay. Wonderful. Just conscious of time, so maybe I can stop here and checking if anyone has any questions in the audience. Don't be shy. No? Yes, Gigi.

It's Gigi Sparling from JPMorgan. You talked a little bit earlier about the share buyback proposals in the budget. But could you talk a little bit more broadly about the political landscape in France? Some of the comments which have come out of various political parties seem quite anti-bank, for example, cap on bank fees. Do you have any thoughts about what's going on behind the scenes, please?

So not much to say about behind the scenes, to be honest with you. I think, my personal view, what we're seeing in France, it's a very fragmented parliament. I mean it's something similar to what I've seen perhaps in the previous -- my country of origin, where we've had a fragmented parliament for a number of years already. The good thing is that the governance in Europe is very strong. So even if you don't have an agreement, the budgets are rolled over. So we can look at Spain. I think we haven't had a budget for the last 3 years, and I'm not sure whether we're going to have a budget anytime soon. But the previous budget is rolled over. And therefore, there's no lockdown like in the U.S. As a matter of fact, when rolling out budget, that's even good for deficit, because you don't roll out inflation. So if that was to happen in France, for example, we could see a reduction of EUR 25 billion to EUR 30 billion in deficit. I don't know if it's going to happen or not. Obviously, you don't have the insight, but it wouldn't be the worst scenario from a deficit standpoint. Again, what we've seen is that in fragmented parliaments, you see a lot of proposals. And again, I've seen this in my previous country of origin for a few years. The vast majority of those proposals never come through. Is this going to be the case in France? I don't know. We'll have to wait and see in that regard. But certainly, when you're talking about fees, when I look at the fees that we are charging in France compared to the fees that are being charged in the rest of Europe, in France are already lower. So there's no specific reason to push for lower fees because we are charging more than others because we are in a completely different situation in that regard.

Any other questions?

I'll ask a question.

Yes.

Stephen Kirk from Caxton. Do your cost saving targets have much baked in for benefits from AI? When you talk about your cost-to-income targets, which are already quite impressive. But it strikes me that you either believe AI is going to change the world or it's not. And if it is, I can't see why it won't have a sort of radical effect on the cost basis of banks. I mean, for instance, one of the big lawyers in London this morning has said they're going to reduce admin staff by 10%. So you're starting to see some quite dramatic announcements. Yet we haven't really heard anything from any of the banks on it.

Sure. So I think, on the targets that I set for 2026, I'm not counting on AI. So that's basically driven by other -- the rest of the layer, the levers that I tried to explain before. I think AI right now, it's very efficient on coding. I think AI is very efficient on summarizing large amounts of information or even extracting information from very different data sets, if you wish. I certainly think there is a big potential in AI for all industries. And of course, banks will be one of those. I am not so certain that, that's going to be so fast in the banking industry because, for example, I can see opportunities in AI in the models, for example, in modelization of all our relationships. But again, all those models need to go through the supervision of regulators. And I'm sure regulators will ask for a proof. So basically, some period where you have 2 models running in parallel, where you have the former old model, if you wish, and the new AI model, and they will need some time to prove that the models are working at the same speed or better speed, if you wish, that they are reliable at the end of the day. So it's not something that you -- I mean, in my experience, certainly, I've never had a model approved with the regulator in none of my shops in a couple of quarters. It takes much longer than that. So I do think there are theoretically vast opportunities coming out of AI. And for certain, that would impact the cost basis of banks. I think this is something that we will see down the road. We're not counting on that on '26. But of course, as you can imagine, we're trying to do a lot of things on that regard. But I think it's more something that we will see beyond 2026.

Great. I think we're running out of time. But Leo, thank you very much for your insights. Thank you, everyone, for attending this session. Thanks a lot.

Thank you very much.