Earnings Transcript for GLE.PA - Q2 Fiscal Year 2024

Slawomir Krupa: Good morning, everyone. Thank you for joining the conference call today. We are pleased to present Societe Generale Group's Results for the Second Quarter. They reflect the sustained improvement in profitability and the right pace towards the delivery of our financial targets. The group's net income improves by 24% compared to last year and it stands at €1.1 billion in Q2 '24 equivalent to a quarterly ROTE of 7.4%. The cost income ratio is improving as well, at 68.4% for the quarter and 71.6% for the half year, moving us closer to our annual targets. Revenues are up 6% compared to last year and this outcome is driven by an overall robust performance of most businesses, with once again, an excellent quarter in Global Banking and Investment Solutions, sustained performance of our International Retail Banking and higher margins at Ayvens. In France, NII is improving quarter after quarter, but it is facing headwinds coming from -- coming from an increased share of interest-bearing deposits and slower loan origination in a muted environment. We have maintained a strict cost management, allowing for strong positive jaws in Q2 '24 and cost of risk is in line with the target at 26 basis points in Q2 '24. Regarding liquidity and capital, the bank maintains a very strong ratios at 152% for the LCR at the end of June and 13.1% for the CET1 ratio post distribution provision of €0.91 per share. Furthermore, we move forward in an orderly and efficient manner with the implementation of our strategic road map, with the sustained development of BoursoBank in particular, which has reached now the 6.5 million clients mark, launch of the first phase of €1 billion investment dedicated to the energy transition. We continue to simplify our business portfolio and we execute our strategic plan in order to build a more profitable bank and create more value over the long term for all our stakeholders. Claire will now give you some more details of the financial performance. Claire?

Claire Dumas: Thank you, Slawomir. Let's start on Slide 5 with the operating performance of the quarter. As illustrated in the charts, group revenues increased by 6.3% in Q2 versus last year to reach €6.7 billion. They are up by nearly 3% for the successive six months versus last year. In French Retail, [M&I] has increased by 10% compared with Q2 last year and by 9% versus Q1. Fees remain solid and up 2.3% at [indiscernible] level in Q2 excluding client acquisition costs at BoursoBank. Overall revenues of the [indiscernible] by 1.1% compared to last year and by almost 6% versus Q1. Of Global Banking & Investor Solutions, the level of activity remains strong across businesses. Revenues are up by 10% versus last year at €2.6 billion. This growth in revenues is notably driven by Global Markets and Transaction Banking, which once again posted excellent results with double-digit revenue growth in both cases. Again in Mobility, International Retail Banking and Financial Services revenues are slightly down by 2.3% versus Q2 due to negative based effects at events level, linked nonrecurring items around -- by around €200 million. Excluding this effect, performance was good on Mobility. It's improving quarter-on-quarter, with an increase in margins and still good UCS results per [car], which are however normalizing as expected. On their side, International Retail Banks posted sustained revenues. On costs, operating expenses are slightly up at €4.6 billion, notably due to perimeter effects linked to LeasePlan investing from €104 million. Excluding this effect, the cost base is almost stable, including around €80 million increase in variable items related to performance. Once again, it illustrates our disciplined trust management in a still inflationary context. Overall, the cost income lands at 68.4% in Q2. It's down both versus last quarter and last quarter. Let's now move on to Slide 6 on cost of risk. At group level, the cost of risk is stable at 26 basis points in Q2 versus Q1, in line with expectations, despite additional impact of market [indiscernible] in front. Excluding these five cost of risk would have been around 18 basis points at group level. For the quarter the cost of risk amounts to €387 million. It splits between €501 million of Stage 3 position and the [reserves] of €114 million in Stage 1 and 2. The NPL ratio remains low at 3% first application of IFRS 5 on entities for sale, adjusted for NPL sales made in Q2, but settled in the beginning of Q3 the pro forma ratio is broadly stable at around 2.9%. The net coverage ratio remains high at 80%. Last, provisions on Stage 1 and 2 assets stay at high level at €3.2 billion, first application since Q1 of IFRS 5 norm on assets classified as Health sale. Let's now turn to capital, Slide 7. The core Tier 1 ratio lands at 13.1% in Q2, i.e., around 285 basis points above MDA. It's slightly down compared with previous quarters due to two main impacts that were expected. First, the creation of Bernstein in April, with an impact of 6 basis points on the capital ratio in Q2. Second, regulatory impacts represent 12 basis points this quarter. It almost entirely links to an onsite inspection made by the ECB on hybrids. At the end of June, around 20 basis points of regulatory impact has been recognized since the beginning of the year. At the same time, the group generated 12 basis points of capital through the earnings plus distribution provision. At the end of Q2, the total RWA amounted to €389 billion. Given those elements, we now expect the core Tier 1 ratio to be above 13% at the end of the year. The other capital ratios remain comfortably above requirements. [Indiscernible] now on liquidity, Slide 8. The liquidity profile of the group is sound and very robust. It was further strengthened in the last quarter. Deposits grew by around 2% compared to Q1 thanks to granular inflows spread across most businesses. Overall, the loan-to-deposit ratio stands at 75% at group level. Regarding liquidity reserves, they are up by almost €10 billion versus last quarter, and amount to €326 billion at the end of June. The LCA ratio remains strong at 152% as well as the NSFR ratio at 118%, plus repayment of €7 billion of TLTRO in Q2. It represents, in both cases, around €100 billion of [classes]. Last, it's important to remind that around 85% of the '24 funding program has already been achieved at the end of July. I will not comment Slide 9. And let's now have a look on the business performance, starting with France with [indiscernible] on Slide 11. In Q2 market environment remains subdued on the long front due to a more uncertain and wait and see context for the solution. In that context, loan outstanding decreased by €2 billion in Q1 -- versus Q1. It was mostly driven by home loans despite a continued rebound in production by around 50% versus Q2 last year, but at a level that remains around 65% below the average quarterly volume in '21. With corporates loans outstanding remains stable, excluding state guarantee loans, which decreased by €3 billion compared with last year. On the deposit form, net inflows were positive by €2 billion versus Q1. The increase in outstanding was, however, driven by interest-bearing products, contributing to a further increase in deposit beta. In Private Banking, AUM reached the record level at €152 billion at the end of March. Assets are up 6% compared with last year, thanks to robust inflows of €2.2 billion in Q2. On Insurance, life insurance outstanding are up 7% versus last year to a record €143 billion. Growth inflows amounted to €5.3 billion, which represents an increase by nearly 70% compared to last year. It's important to remind that these strong inflows will translate over time into higher revenues in line with the new IFRS 17 norm. Last, Risk Life and P&C premia increased by 3% that is the second quarter of last year. Let's now turn to Slide 12 on NII. In Q2, NII increased by more than 10% compared with last year and 9% versus Q1. As indicated last quarter, NII in France Retail was impacted for the last time in Q2 by a negative carry of the short-term booked until early '22, for an amount of around €150 million. However, NII growth has been mitigated by headwinds. On one hand, the higher deposit beta than expected due to the strong inflows towards interest-bearing products, which rose by around €4 billion versus Q1. Overall, this represents an impact of around €150 million that is the forecast we made after Q1. On the other hand, market environment was muted on loans with subdued demand. For that reason, we have adopted a prudent origination policy in advantage of high competition despite the macro environment. As for deposits, we have the adjusted downward our estimates regarding NII on loans by around €150 million. This is Q1 based on revised projections. All in all, we now estimate that the NII of the French Retail activities will be around €3.8 billion in '24 based on the updated projections. A few words now on BoursoBank on Slide 13. In Q2, BoursoBank once again maintained a high acquisition pace with more than 300,000 new clients. In line with our trajectory, we proactively decided to limit growth at this high level after two quarters of very strong client acquisition. It has contributed to decrease in acquisition costs by 14% versus Q1. At the end of June, more than 6.5 million people in France who are clients of BoursoBank. At the same time, assets under administration reached €61 billion in Q2, thanks to strong inflows both on deposits and life insurance. On loans, the rebound in production was confirmed in Q2 with a 21% increase in average versus Q1. All in all, on Slide 14. Total revenues of the [pillar] up 1% in Q2 versus last year and by almost 6% compared with Q1. Regarding costs, they are up 2% versus Q2 on a reported basis. However, adjusted from one of accounted and disclosed in 2023, they are down by 1.7%. The cost of risk has improved compared with Q1 at 29 basis points. It is still impacted by specific market price. We stated from those five, the cost of risk in France would have been around 16 basis points. Overall, the group net income of the pillar amounts to €236 million in Q2. Turning to Global Markets and Investor Services on Slide 15. Overall, total revenues are up 14% on the back of another excellent performance of market activities, whose revenues increased by 16% at nearly €1.6 billion in a conducive environment. Equities performed very well across the board with a sharp increase in revenues of 24% versus Q2 last year, thanks to higher volumes. On fixed income, revenues are up 3% versus last year, with on one hand, strong client demand in investment solutions, but on the other hand, low activity in flow and hedging with tighter spreads in rates and low volatility on foreign exchange. Regarding Security Services, revenues are up 1% with a good momentum in fee generation, offsetting the impact of the NII of the end of remuneration of mandatory reserves. On Financing and Advisory, Slide 16. Revenues are up 3% versus Q2 last year at €879 million with a stable contribution at high level for Global Banking and Advisory and a continued strong performance of Transaction Banking, whose revenues increased by 14% versus last year, thanks to interest rate levels and active commercial development across the board. On Global Banking and Advisory, we can highlight an excellent quarter in securitization and a strong rebound in IBD. Overall, Slide 17. This is once again an excellent quarter for GBIS with high positive jaws. Revenues landed around €2.6 billion in Q2. It represents an increase by 10% versus last year, while costs remained broadly stable at the same time at €1.6 billion. This translates into a reported cost income ratio of 63%. Cost of risk remained low at 5 basis points. Overall, GBIS delivered a very strong quarter with RONE above 20% and a net contribution of €770 million. Let's now move to International Retail Banking, Slide 18. Once again, the division had a solid commercial activity across regions. In Europe, loans and deposits were up 6% and 8% respectively, compared to Q2 last year at constant change in [perimeter]. The trend was also good in Africa as loans up 2% on average and deposit by 4% at constant change in perimeter. In terms of revenues of our International Retail Banks, they increased by 3% versus last year at constant chain and perimeter. Turning now to Mobility and Leasing Services, Slide 19. On Ayvens, revenues are down by 4% compared to Q2 last year on a reported basis. It includes both perimeter effect linked to the integration of LeasePlan and strong negative base effect which is due to last year. On a sequential basis, which gives a better picture of the current underlying performance of Ayvens, revenues are up by 5% versus Q1 restated from nonrecurring items. From a commercial standpoint, margins have reached 539 basis points in Q2 compared to 522 basis points in Q1. In parallel, the UCS results of the [Technical Difficulty] is normalizing as expected. Excluding the impact of the reduction in depreciation costs and PPA, it amounted to €1,480 on average in Q2 versus €1,661 in Q1. This is in line with our full year target. At the same time, the integration of LeasePlan is progressing well. Realized synergies have increased to €47 million at the end of June. The progression in line with €112 million expected for the full year. On Consumer Finance, the environment remains challenging, notably in France. Loans outstanding decreased by 4% on a one-year comparison. And margins are still impacted by the effect of the usual rate on loans originated until last year. Overall, revenues are down by 5% versus Q2 last year. And last, Equipment Finance posted stable revenues in Q2. Overall, on Slide 20, the pillar contributed to the group net income for €360 million in Q2 with a cost income ratio of 58.8%. To conclude, let's move on Slide 21 with the corporate center. Revenues are mostly composed of the cost of carry linked to the management of the group's vessels and structural risks. The improvement versus last year is mainly due to a base effect related to negative legacy one-offs disclosed last year. Overall, the net contribution of the corporate center is negative by around €200 million in Q2 versus minus €472 million last year. Slawomir?

Slawomir Krupa: Thank you, Claire. A few words now on the latest milestones in our ESG road map. We continue to innovate for our clients and to support them in their strategic transition investments and we are recognized for this leadership. We have been rated the world's leading bank by Moody's ESG and ranked the best bank in terms of Transition Strategy by Euromoney for the third consecutive year. We have exceeded our €300 billion target in terms of sustainable finance contribution with 18 months still to go. And we announced the project to acquire a majority stake in Reed Management, an alternative asset manager with the ambition to support emerging leaders of the energy transition through direct equity participation. This is a key component of the €1 billion energy transition investment, which we presented at the Capital Markets Day. And it positions us as a key player in this growing market segment. On the last slide, which is now a usual one, we show our progress towards our targets, both '24 and '26. And the figures speak for themselves. I will not comment further. Let's now have our Q&A session and stick to our usual rule of two questions per person. Operator?

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

Azzurra Guelfi: Two questions from me. One is on French Retail. If I understand well, the major driver for the change in the guidance is driven by higher deposit EBITDA and lower lending growth. Can you give us what are the underlining on this? And how do you see the recovery of French Retail into next year as well and the progression in the coming quarter? The second one is on capital. You have marginally improved your guidance to above 13%. And can you give us what has driven you to be a little bit more optimistic and constructive on capital trend and if you can share with us the regulatory situation update in terms of potential charges to come?

Slawomir Krupa: All right. Thank you. I'll leave the floor to Philippe on the first question on the French Retail and to Claire on the capital.

Philippe Aymerich: So yes. The new estimate for full year 2024 on the French Retail NII takes into account two main new elements. I mean, since the last estimate made at the end of the first quarter, basically, they have the same impact. So the first one, as mentioned by Claire for an impact of approximately €150 million. It's, as you said, a higher deposit beta than expected due to an increase in interest-bearing products, notably term deposits and notably with corporate. So that's the first impact. A difference of projection. And the second one, also for an impact of approximately €150 million. It's lower volume of loans with, I would say, two components. The first one is less conducive market than expected [Technical Difficulty] in France and that's true for both for individuals and for corporates. And also related to SG, a prudent origination policy and including from a pricing standpoint because we are operating in a very competitive environment at a certain level of margin, we are not comfortable. So basically, that's the two impact. First one on deposits and the second one on loans. So that's why we have revised the estimate and that's our best estimate to date taking into account the economic situation and also the change in the behavior of the customers, both in terms of savings and investments.

Claire Dumas: Yes. Regarding the first part of your question, which is a driver of the review of the quarter one end of year estimate. So we are closer to the end of the year. We have now a very good level of confidence with in first capital buildup through earnings. And second, the efficiency of the asset-light model we deploy and our capability to stick to the guidance we have provided regarding 1% again growth of the [LWE]. For the second part of your question, which is the regulatory impact in Q4 '23 and in Q1 '24, we had indicated an estimate of 35 basis points minimum impact for the year. At the end of June, 20 basis points have already been recognized. To date, we do not have any notification leading us to adjust what we have today. So based on this, we can firm out the quarter one end of year estimate, it should be above 13% at the end of '24.

Azzurra Guelfi: On the outlook on the NII, if I can get back to that.

Philippe Aymerich: No, no, we don't give at this stage an estimate for 2025.

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

Tarik El Mejjad: A couple of questions, please. Just a follow-up first on the NII in French Retail. I mean, I understand the drivers. But when I look at sector data, at least till May, it was available at [point this half] and the competitors as reported, we don't see that much shift in terms of deposit mix, which question basically the deposit franchise. Do you think you have slightly lower quality franchise in deposit gathering, so you have to pay up more or you don't have enough of balance sheet products to capture these deposits and to generate -- to offset the revenue loss from paying higher on drawing them? So really, I was thinking why you think you are impacting more? And then on the trajectory, I understand you don't give a guidance for '25, but it would be helpful to understand a bit the trend of this migration and what you see in the pipeline in terms of lending growth. Can you share with us what this trend has been in July and on the lending activity, why actually are you cautious? I mean, what has shifted in terms of macro that makes you more cautious into more supply? And then on capital, the -- I'm surprised there's nothing in your slides about FRTB. Is that something you assume still happen in Q1 '25? And what about the onsite inspection, I think, Claire, you mentioned something in your presentation on the capital slide that some of OSI has been already captured in Q2. Can you give us some more indication on what you see there?

Slawomir Krupa: So thank you. I'll start with Claire on the capital and then Philippe on your NII question. I'll just say one thing in terms of the [OSIs], as you know and as you have seen in the market, the ECB carries reviews constantly throughout the sector on modules and different businesses, et cetera and as part of this regular OSI program may or may not notify additional impacts from a capital perspective. And so at this point in time, and that's what Claire said, we don't have other projections to add. And yes, there was an impact in Q2 on one particular assignment, which actually was went from, I think, four years ago. So you see that the process is where it is today. We have clearly stated what the situation is. Claire, the other question on Capital and then Philippe.

Claire Dumas: Yes. For the other part of your question, which is regarding [SSTB]. So yes, regarding the SSTB, the impact will be postponed by one year according to the last delegated as that has been published in July this year. So we have guided on a total amount of 85 basis points regarding Basel IV and we have disclosed the share of SSTB. So according to what we have said now for billing of '25, we estimate that the base of floor impact excluding SSTB will be 50 basis points in Q1.

Philippe Aymerich: Yes. So regarding the shifts of deposits. So probably there is an impact of our customer base, both in corporates and for individuals with probably bigger corporates on the portfolio, which means that they are more agile and probably they move quicker and for larger amount on deposit -- and term deposits or financial products than smaller companies. And regarding the individuals, I think the underlying positive news is that we have during the last -- notably during the last six months, capture a lot of savings from the clients, so which means also that the commercial dynamism is good. We are seeing the numbers in life insurance. So yes, we have an increase on term deposit and we are also cautious with our pricing. But simultaneously, we have also this very important net inflows in insurance life. So -- and I would like to insist on that, I think, demonstrates that we are capturing the savings of our clients and help our clients to monitor the savings, which is, of course, a very important part of the financial life. Regarding the credit, as you know, we have always been very careful from an origination policy standpoint and also from a pricing standpoint and notably for the mortgages. So when we do consider that the pricing is not the right one and because we are going to book these loans for 15 or 20 years, that's who that we are adjusting our origination policy. And that's what even so there is a rebound, that's what we have done during the last months.

Tarik El Mejjad: But sorry to insist again on some moving parts guidance, not a number, but moving in guidance, what you see in terms of these trends? Because I mean, on the corporate, I think the agility of corporate and moving around and so on should persist on the retail side how that will move. And maybe as well, it's a request maybe for the IR team. I mean, we don't have the NII guidance -- sorry, the NII consensus number anymore, which I think this appears from the consensus, which I think is a very important key line, especially that share price trades a lot on this line. So it would be good to have that fact so we know where the market sits on this revenue line.

Slawomir Krupa: All right. I mean, you'll take care of this with the IR team. And again, on the first part, to your point, there are persisting trends indeed that I think in the French market materialized with a slower pace and in some other markets. And then clearly, let's say, at constant rate environment, the agility of the most agile part of the client base is here to stay. And so it's something you have to take into account, yes. Next question?

Operator: The next question is from Flora Bocahut of Barclays.

Flora Bocahut: Yes. The first question I'd like to ask you is on BoursoBank because if we just take one step back here and we look at your revenue in French Retail banking, NII is obviously under pressure if we adjust for the short-term hedge. I mean, it would be [indiscernible] even regarding the low lending growth and the deposit beta. And then the fees are also not growing, which I guess is mainly because of the acquisition cost on the clients at BoursoBank. So the question I'd like to ask you on BoursoBank, you are at more than 6.5 million clients now. The target is to get to 8 million in '26. You've been acquiring something like 300,000 new clients per quarter. So at this pace, it looks like you're going to reach your 8 million target clients for BoursoBank probably in Q3 next year. So the question is, in that regard, are you going to consider upgrading that target again towards like 10 million? Or could we expect that BoursoBank is going to turn more profitable earlier than expected, so potentially as early as H2 '25 as opposed to 2026?

Slawomir Krupa: Thank you. Philippe?

Philippe Aymerich: Yes, I think that what this quarter demonstrates again regarding BoursoBank to monitor both the pace of acquisition and the profitability. So yes, we have adjusted the acquisition for this quarter, which remains at a very high level. Simultaneously, we have been able to reduce the acquisition cost per client by 14%. And all the other indicators, I'm mentioning every quarter are into -- are in the right direction. It's the increase of the asset under management, our client. It's the rent cost of the company and all the indicators. So again, I think that this quarter demonstrates again the potential, the agility of this bank, again, both regarding number of clients and capacity to extract profitability. At this stage, we are not changing the target which we have disclosed during this year.

Operator: The next question is from Guillaume Tiberghien of BNP Paribas.

Guillaume Tiberghien: I've got two questions. The first one is on NII in French Retail. And I don't care about the guidance. I'm just trying to understand what happened quarter-on-quarter, excluding the hedge. The NII is down €80 million. And from what I read on your slide, the deposits, the current accounts are stable and the costly deposits, they're up €4 billion, but you can put them at the ECB. And I guess you make a profit on it. So I don't understand how NII can be down €80 million quarter-on-quarter. The second question is regard to your equity Tier 1 at year-end above 13%. I want to make sure that it is indeed based on plus 1% for the full year organic growth of RWA, i.e., a 2% increase in H2 because in H1, the RWA fell 1%. So that should consume 20 bps of capital and then 10 bps. So do you confirm that you intend to build 30 bps in H2 so that your equity Tier 1 is actually stable in H2?

Slawomir Krupa: Thank you. Claire?

Claire Dumas: So regarding your first question, which is the evolution of the NII. So you exclude on the short-term hedges, which is once again confirmed as the full-term hedges are over by the end of May. For the rest of the evolution of the NII, on one hand, we get the benefit of the replacement of the old deficits at higher prices. But this is offset by trust higher deposit beta. We have globally a 5 basis point impact regarding the deposit beta quarter-to-quarter that comes from both the deposit mix. And globally, the level of pricing of the deposit, which is in line with the rest of the banking industry, but which has increased. Second, we have the decrease also the evolution of the loan outstanding and the impact of the production that also explains the quarter-to-quarter trend. So from Q1 to Q2, these are the main drivers of the evolution of the NII. Second, regarding your question on core Tier 1, yes, we assume a 1% organic growth of our RWA for the full year, which is completely in line with the guidance we had given at the Capital Market Day, which is that thanks to several levels, we tend to deploy a more asset-light model.

Guillaume Tiberghien: Okay. Can I just ask to also add the revenues of Boursorama or at least the acquisition cost of Boursorama when you also give, if possible, the NII of French Retail because you don't seem to forecast very well the revenues? We are unable to forecast them. So it would be really useful if you at least give us the two data that you have to help us.

Slawomir Krupa: Well, thanks for the suggestion. We'll think about it. Next question?

Operator: The next question is from Delphine Lee of JPMorgan.

Delphine Lee: Just really two clarifications again, on the same topic, I'm sorry. French Retail, can you maybe just give us what your assumptions are on the €3.8 billion? What are you assuming for loan growth and deposit mix? I'm just thinking because at the time of Q1, you said that if the trends would continue, you would be at €4.1 billion, but the trends have continued. If you look at deposits, they have increased quarter-on-quarter and the mix is still 45% site deposits. And loan growth has continued to decline 1% quarter-on-quarter. So I agree pricing has changed, but it still seems that we're just trying to reconsolidate your NII guidance. So if you just give us maybe your assumptions on why €3.8 billion in terms of what the deposit costs you're using, the deposit volume you're assuming in mix and maybe the lending volume as well, that would be helpful. And my second question is on just a very quick clarification, might be small, but on your regulatory headwinds, the sort of 12 basis points of ECB onsite inspection you took in the second quarter, was that already -- did you expect this as part of your 35 basis points of TRIM? Or does that come on top? I mean, just kind of wondering if there is some TRIM impact that we should expect next year. Or is that just 35 and there's nothing else coming?

Slawomir Krupa: Thank you. I'll leave these question to Claire. But once again, I'll start by saying we can forecast where we have reasonable -- I'm talking about your OSI question here. We can forecast where we have tangible indications of an impact to be expected, right? So today, what we can expect is what explained earlier, is the 35 we talked about earlier, of which 20 have already been accounted for, including what was mentioned for the second quarter, the 12 basis points from the second quarter. That's the situation today. Now again, the supervisory work is a permanent work and the impact composes is something which is a potential permanent feature of the supervisory work. And once again, the guidance for the year is 13 basis -- 13% CET1 ratio. Claire?

Claire Dumas: Yes. So Slawomir answered your second question. So your second question. So yes, the 12 basis points of the hybrid inspection, which are the ones we had disclosed at the Capital Markets Day. It's exactly the same. And we were expecting them last year and they come just this quarter. It's part of the 35 we have guided for the year. Regarding the first part of your question. So the financial projections are built at a very granular basis by the business and regarding the outstanding projections and expectations about the level of margin. So it's built at sublevel regarding each deposit type and each credit time. In a nutshell, what is embarked in these financial projections because these business projections are there translated into financial projections. Even assumption for the end of the year, which is in line with the beginning of the year. This is why we revised our guidance. So we took the two first quarters regarding loan outstanding and production. And regarding deposits, both site and term and globally remunerated deposit projection and we consider that the trend will be the same until the end of the year. So it's not completely linear, but it's roughly the global trend. Regarding the level of margin, exactly same train, which drives -- we translate into the €3.8 billion. So we notably assume the fact that we still have pressure on the deposit beta in the context of higher interest-bearing deposit.

Operator: The next question is from Giulia Miotto of Morgan Stanley.

Giulia Miotto: I'll ask two, please. A change topic, perhaps. So on asset disposals, we have seen, if you in your headlines one, just a couple of days ago. So could you perhaps share with us an update on how this process is going? And if you have any outlook over the next few months around how much capital you expect to generate from disposals of assets? And then secondly, cost of risk and asset quality. It was particularly high in the quarter in France, again, and you're also being cautious on lending. So are you seeing a material asset quality deterioration? Or can you comment on asset quality trends in January? Also, the Stage 3 ratio was up. So yes, I wonder if there is anything that you're looking at, particularly closely when it comes to asset quality deterioration.

Slawomir Krupa: Thank you. I'll leave the floor to Stephane Landon, our CRO on the asset quality question on the disposals. I mean, as I said in the past, we don't comment on specific situations. I can say on the last two things

Stephane Landon: Thank you. Yes, for the cost of risk in France in particular, I mean, this is mainly due to -- I mean, the level is mainly composed of, let's say, two market sizes that have this market this quarter. But apart from that, we don't see anything but normalization of the cost of risk. I think Claire mentioned the amount of 16 basis points if you take out these two elements. Regarding the overall asset quality, we don't see any deterioration. Once again, we saw in the last quarter some normalization. But overall, the element that we see today in three are the idiosyncratic elements non-correlated. So no deterioration of the portfolio.

Operator: The next question is from Chris Hallam of Goldman Sachs.

Chris Hallam: Just two on the Investment Bank. For markets, Slawomir, I think in the press call earlier you said that markets revenues could exceed €5.4 billion this year. So is there a new guidance range you'd like to put on that business for 2024? Obviously, €5.4 billion would imply a bit of a slowdown sequentially through the second half, probably more so than the typical seasonality of H2 being around 80% of H1. So just any updated guidance on markets would be appreciated. And then in Financing and Advisory, you've said that Global Banking and Advisory revenues were broadly stable in the second quarter year-over-year. Is there anything you'd like to pull out in there? When I look at peers, they're clearly posting higher growth rates, there's just maybe anything in the comp from last year or in the perimeter versus peers that we should consider or any comments that you have on the outlook for activity levels here through the rest of this year and maybe also into 2025?

Slawomir Krupa: Thank you. In terms of the market revenues, I mean, obviously, given the performance in the first half, I can confirm that we expect in normal market circumstances to exceed the €5.4 billon level for the year. And in terms of the implied slowdown. Now to your point, there is seasonality between H1 and particularly Q1 and the rest of the year, but H1 and the rest of the year. So yes, I mean, we should exceed by a margin €5.4 billion in normal market circumstances. There is demand from the clients across all asset classes with various mixes, more flow in equity, more investment in fixed income. And -- but overall, the demand is strong and the markets are conducive. So that's for the market. And in terms of the F&A, well, one, you have to remember that there was a pretty high base to compare with. In 2023, it was a very strong quarter. So that's one. Two, there's nothing specific. There's no perimeter effect in these numbers. It's a fairly well-distributed activity across the usual infrastructure, natural resources and asset-backed products. And so where we again see a sustained demand, we have the right expertise. We have the right client relationships. So we're fully expecting to take advantage of this in the context of trying to be much more efficient in terms of the usage of capital and with some constraints on the, let's say, the net RWA allocation to the business. But it's overall a performance that remains strong and that we expect to remain strong in 2025.

Operator: The next question is from Pierre Chedeville of CIC.

Pierre Chedeville: My first question is on transformation cost. As far as I know, we are close to €350 million. And I was wondering if we could plan for the whole year, the low level of the bracket you gave between €700 million and €800 million of transformation cost for the next quarters? And my second question relates to the consumer credit, which is still in a difficult situation in terms of revenue growth. And I was wondering how do you see the evolution of these revenues in the next quarter, considering the fact that maybe your refinancement, your funding cost will decrease -- will probably decrease? And also what is your vision of this franchise in your global business, considering the fact that consumer credit is a key element for most banks currently?

Slawomir Krupa: Thank you. So Claire, on the transformation costs and Pierre Palmieri on the consumer credits.

Claire Dumas: So out of the €1 billion CTA, which is expected over the period '24 to '26, we expect to book around €750 million of CTA in '24.

Slawomir Krupa: Pierre? Pierre Palmieri Thank you. Yes. So on the consumer finance, it is true that we have been noticing a decline in terms of revenues. In terms of fees here, the activity is good. We have seen an increase in our fees. But we are suffering from transactions that have been originated and are still on the books in France, which -- with a lower margin and this will stay for some time, but will probably -- will progressively decrease. So we expect for the whole year revenues that will be probably slightly lower than 2023. But going forward from the gradual recovery on the commercial margins.

Operator: The next question is from Anke Reingen of RBC.

Anke Reingen: Just firstly, on the above 13%. I just wonder what the distribution assumption indices. And I mean I understand you currently accrue the 50%, but your previously commentary was it's 40% to 50% and towards the lower end in the early part of the plan. And when you decide at year-end in terms of capital distribution, would you consider the delay in the [FRTB] as a positive? Or will you be thinking about the fact that it's actually the 85 basis points on your capital ratio? And then secondly, just on the costs. If we look into the second half, you previously said like €500 million cost savings for '24. How much have been realized and should we be thinking about inflation or wage agreement headwinds?

Slawomir Krupa: Okay. So I'll start with the distribution and I'll leave the first question to Claire. On distribution, so yes, we accrue its regulatory requirement of 50%. The policy remains unchanged at this stage. And so it has stated 40% to 50% of reported earnings and based upon the decision that the Board makes in January next year. Now in terms of the inputs into the discussion and the decision, of course, the trajectory of capital [Technical Difficulty] we made at the CMD is a key parameter into the decision. So I can't speak for the Board six months before the decision will take place. But clearly, the trajectory is the key parameter in assessing that decision. That's what I can say. And clearly, I mean the trajectory is favorable and strong at this point in time. Claire?

Claire Dumas: Regarding the cost savings. So we're on track on the savings plan. In H1, we have realized €250 million gross savings and we expect to benefit from the same amount by the end of the year.

Anke Reingen: If I just follow up on the payout ratio. So the above 13% doesn't make a specific assumption yet on the distribution rate to be decided at the end?

Slawomir Krupa: No, no. No, no, no. No.

Operator: [Operator Instructions] Mr. Krupa, there are no questions registered, sir. Back to you for any closing remarks.

Slawomir Krupa: Thank you very much. Thank you for joining us this morning and I wish you a nice summer and look forward to speaking with you in Q3. Bye-bye.