Bnp Paribas Ord

Good afternoon, ladies and gentlemen, and welcome to the presentation of the BNP Paribas Third Quarter 2024 results with Jean-Laurent Bonafé, Group Chief Financial Officer, and Lars Maschineel, Group Chief Financial Officer. For your information, this conference call is being recorded. Supporting slides are available on BNP Paribas IR website, invest.bnpparibas.com. During today's presentation, you will be able to ask your questions by pressing star 1 on your telephone keypad. If you would like to ask a question, please make sure to be in a quiet area to maximize audio quality. I would like now to hand the call over to Jean-Laurent Bonafé, Group Chief Executive Officer. Please go ahead, sir.

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

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

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

Ladies and gentlemen, if you would like to ask a question, please press star 1 on your telephone keypad. Please lift your handset, ensure that the mute function on your telephone is switched off and that you are in a quiet area to maximize audio quality. We will take a question as many as time permits. Again, please press star 1 to ask a question. The first question is from Tariq El-Majad with Bank of America. Please go ahead.

Hi. Good afternoon. A couple of questions from my side, please. First on the equities and prime services division, I think the market was a bit disappointed by the performance there, especially, you know, after Q2, strong Q2 punchy message during the quarter in different occasions. I know you're still up 27% in nine months and 13% year-on-year for the quarter. But, I mean, would you suggest there are some higher than you anticipated in Q3? Or what we should have in mind when looking at the 820 million in EPS in the quarter? Should we look at actually EPS on a yearly basis? And, you know, and if you can maybe give us a bit more indication how we look at that post the Q2 kind of finalization of restructuring of the division. I mean, the second question is more general. I know you'll give guidance for the full year results for the 2026 and maybe an update on 25 as well. But can you run us through the main growth levers? Obviously, not the whole thing you've done in the presentation, but just the two, three areas that you think really will be a swing factor for you from next year, given the rates. I noticed in your presentation that, you know, I have this red and green arrows, and apart Arval and Belgium, everything looks green and the right direction. But What can you tell us in this stage, what you have in your mindset for 2025-2026, and what's the market missing, you think? Thank you.

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

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

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

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

Okay. Thank you very much.

The next question is from Aturag Welfi with CT. Please go ahead.

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

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

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

Hi, good morning. Thank you for taking my question. I have a question on personal finance and or ARVAL. I know you are more skewed to corporates within your leasing book. The recent developments in the motor finance consumer lending in the UK, do they impact BNP at all? I know that you have some presence in the UK on consumer finance and leasing. So if you can just give us some sense, that would be great. And then my second question, more strategically, can you tell us about the benefits you're getting from the partnership with Apollo, and more in general how you're thinking about private credit as an opportunity, as a threat. Yeah, I would welcome your comments there. Thank you.

On the motor, right.

Yeah, so on motor, there's two things. So on the personal finance, there's basically we have no exposure. When it comes to leasing, we have some activities. But what I can tell you is compared to the other players, it is marginal. So that's on PF.

And sorry, last, marginal means like less than 100 million sort of potential impact or?

Yes.

Okay, thank you.

The next question is from... Oh, no, wait, wait.

I think there was still a question on Apollo and on the... Julia, did we answer your question or do you want us to come back to your question on Apollo and the private credit?

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

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

Thank you. The next question is from Delphine Lee with JP Morgan. Please go ahead.

Yes, good afternoon. Thanks for taking my questions. I just have two quick ones. Just on the cost from slide 11, So there is still another 200 million from your 400 million of additional cost savings to come in Q4. So just wondering in terms of how we should think about the seasonality of Q4, because generally you have a bit more cost in Q4. Should we expect it to be less pronounced than usual? If you don't mind giving us a bit of color on this. And secondly, just wanted to ask, you're going to – it comes into that you will provide an update of your 2026 outlook, taking into account the redeployment of capital, you know, sort of with the Q4 results. Just trying to understand a little bit, is that – are you going to give us, like, more, like, new targets in 2026, which we don't have, or – Would that take into account AXA? I mean, just trying to get, you know, a bit of feel what, you know, what you mean by that. Thank you.

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

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

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

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

Great. Thank you very much. The next question is from Flora Bocco with Barclays. Please go ahead.

Yes. Thank you. Two questions. One is going back to the C21 ration, please. Obviously, it was flat this quarter if we put aside the Arval consolidation impact. So that means that the growth you had this quarter was essentially too capital intensive. It didn't allow for organic capital generation. I hear the comments you made last around OTD having been delayed a bit by a quarter and securitization coming into fall. But isn't there anything more to add to that? I mean, I was looking at the RWA move Q and Q, credit risk as well as operational risk. RWA, I think, went up. So Any comments you can do on that and the lack of organic capital generation this quarter beyond the OTD delay would be useful. And then the second question is going back to Eurozone retail banking revenues. And, I mean, obviously it's important because I think CIB is doing okay. We agree on that. IPS is also doing okay. It will do better with lower rates. There are external growth coming in. The market concerns remain very much on the lack of revenue momentum in Eurozone retail. I think essentially the question I have for you because the messaging you have is clear on why you think it rebound in 25, 26. The question is really about the timing of the bottom because if I look at Q1, Q2, Q3, Eurozone retail banking revenues have been kind of flattish in 3.4, 3.5 billion. Do you think it's a question of like one quarter or do we have to wait another two to three quarters before we start to see the decent pickup? So really about the timing here of the pickup in the momentum. Thank you.

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

The next question is from Stefan Staumann, Autonomous Research. Please go ahead.

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

With respect to AXA, so the thing is once it gets closed, of course we will have the earnings that generate from it, so that is on the bottom line a positive thing. But then it's not impossible that we will basically come up with a plan that will need some whatever restructuring costs that are going on. So intrinsically, there is the contribution of the deal, but there will be initially some costs related and some depreciation costs related. So that's basically on the AXA bottom line.

Lots of that mean that there could be, you mentioned depreciation. Could there be meaningful depreciation or amortization charges of acquired intangibles?

That is, if there would be intangibles, they will have to be depreciated. So for those who are on the call, it is goodwill and intangibles. So goodwill under IFRS is basically what it is. It is not depreciated. It is tested. Intangibles are basically depreciated over time. Again, this is a thing which doesn't impact the capital and whatever. So but that's a form that could be part of those restructuring costs indeed.

Right. Okay. Thank you.

Operator, I think I didn't answer Stéphane's question on Q4. Listen, on the cost, what we have is the cost that we basically control. We have settled sales. That's what we said earlier. We have the remainder of the billion to come, and so that's basically that. And on the revenues, Stéphane, I typically say I don't know where you were a year ago, but I have this funny feeling that I know where you were. You saw that there was, given the uncertainty and with respect to the central banks which are coming, there was basically a gridlock when it came to markets activities, and that was a lower kind of review. So I don't have a crystal ball. I cannot say anything. But given what you see with whatever is around, there's probably going to be some volatility in the market. So on the horizon, you don't anticipate a repeat on the market's activities of last year. But again, Stéphane, this is just what I see at this moment.

Yeah, okay, very clear. Thanks a lot.

The next question is from Joseph Dickerson with Jefferies. Please go ahead.

Hi, thank you for taking my questions. Just two questions. First on the Italian business in retail and commercial, it looks like the margin is trailing off now for about the third quarter. It looks like we're back to the Q4 level. Can you just discuss the rate sensitivity and the structure of that business anymore? I would have thought we would have seen a little better performance, but maybe I missed something on rates. And then I think I heard – can you clarify what you said earlier? You were asked about, I think, the UK motor finance market, and I heard $100 million. Can you just clarify what that was in relation to? I mean, I can go back and look at the transcript, but if you could just clarify that here, that would be great. Thank you.

sure so i clarify the uk and you should rephrase if you made your italian question because i don't know if you talked about the cost of risk or about the other one but i'll answer the uk so the uk we are basically when it comes to to the leasing we are a small player yeah and so the color i gave is that for us compared to the other players that are active our impact should be rather limited. But again, there is not much more that I can say. I don't know how this will evolve and what it is, but I should just say that we are not a major player in that activity. That's the UK. And so can you rephrase your question on Italy?

Yes, sorry. It was just the, if I look at your net interest income, the average loans, it's been kind of tapering off over the past couple of quarters. It reached on our numbers about 2.5% in the first quarter. and it's kind of coming back to Q4 level. So I was just wondering what's the dynamic around that business in terms of rate sensitivity or, you know, loan and deposit mix just for going forward. Thank you.

Listen, as a quick reminder, particularly in Italy with B&L, what we aim to do is we aim to position on customers and needs where we can make a difference in serving them because they need international exposure, they need trade, they need whatever. So those things, that is where we can make a difference. So there are other kind of local kind of products that we don't compete in and that we step out. And that is why you see basically the loans going down. And therefore, you also see the net income margin being impacted by it. But that is basically more than compensated by the effect that the cost of risk is tapering down. So that is the dynamic that we pursue at BNL in Italy.

Great. Thank you.

The next question is from Kiri Vijayaraja with HSBC. Please go ahead.

Yes, good afternoon. Thanks for taking my questions. So the first one, with the prudential consolidation of Arval, is anything likely to change in how you actually steer the Arval business? You know, is Arval now under a bit more pressure to be efficient with the capital consumption or, you know, the required level of profitability, the hurdle rates? internally that he said he's now higher for the Arval business, you know, with the potential consolidation. And then my second question, you know, with AXA and the TrinkHouse deals, does that mean you as a management team are now tied up with integration projects? I know the full run rate of synergies for AXA I think isn't until 2028. So, you know, if other assets potentially come up for sale, You know, there were rumors of stuff, I think, coming available in Germany potentially. So would you as a management team be kind of too busy to really participate if further kind of sensible or attractive deals were to come up on the market on the next, say, 12, 18, 24 months? Thank you.

Kerry, first of all. So on one hand, as you mentioned, what it basically means by consolidating it prudentially, that also basically means that the whole setup, as it is now more integrated within BNP Paribas, becomes more efficient. So there are elements of that that will basically come into play and therefore ensure that we have the right level of profitability for that activity. So that's basically this. And then with respect to the acquisitions, I'll give a quick first stab on it. In a typical base, we are somewhat getting to the end of the redeployment of BNP Paribas, of Bank of the West. But we typically have, if you look at our earnings and what we have done in the past, There is something like an orientation of 20 basis points that we redeploy on an ongoing basis. And so that is something that we will continue to do. And yes, you are right, the AXA-IEM will be an activity that we integrate and that will take time. But for having been there when we integrated another bank in Belgium, that was on the level of complexity, which was still something else. And so we kind of have... kind of procedure and approach that allows us to do these things. So we will keep on keeping our eyes open on 20 basis points kind of things. Great, thank you. Would you have something in mind, Kiri? Otherwise, I'll pick up my phone. I'm just joking. I'm just joking.

The next question is from Chris Hallam with Goldman Sachs. Please go ahead.

Good afternoon, everybody. I want to come back on equities and that sequential performance, maybe by business line. I get the performance was very positive on a year-over-year basis, but it was quite weak versus Q2, even when we look at yourselves versus European peers. At the same time, you said in Q2 that that didn't include anyone else, but that perhaps all the stars were aligned in Q2. So I just wanted to dig into what part of the business weakened Q on Q for BNP in Q3. Maybe if you could give some color in terms of that sequential performance in derivatives versus prime versus cash. I know prime was up a lot year over year, but it looks like that business must have probably reduced quite a bit Q3 versus Q2, but the balance sheet only was down about 3%, so I'm just a bit confused there. And then the second question, I think I know the answer to this, but is there any chance you could give us a group NII sensitivity to 100 basis point moving rates? Just given the volatility we've seen in the rates world in the last few weeks and the relative rates insensitivity of your P&L, it would be helpful to get that number because obviously there's the shortcomings with the number we can get from the IRRBB disclosure. Thank you.

Listen, Chris, I'm wondering if you will be working for another bank active in prime brokerage. So, no, the thing is, so as a quick reminder, in the second quarter, indeed, all stars were aligned, and that's why basically all of the services, be it cash, be it derivatives, be it prime, the demand was very strong. And basically, there was even a pivotal point with the election, so there was actually kind of a double demand. So that's what we saw. So if you now look in equity, and listen, we don't give the breakdown in each of those activities, but in the order of things, you can assume, and particularly if you look in the third quarter, that in the order of things, if you look in the market again, the demand for prime was higher than what you saw for cash and derivatives. So that is a bit the thing that you see. And when you look at the overall, when you take a look in the balance sheet, Listen, this is, again, what I mentioned earlier. We are having these activities that are going on, and the picture is, for example, in the originally to distribute, you keep it into the balance sheet before it going out. So that is basically the link on what I said with respect to the impact also that you saw on the common equity tier one on equity. And then you had a question on what, on?

So the second question was just if you wanted to give us an I.I. sensitivity for the group for 100 basis points move-in in euro rates.

The thing is, listen, the thing is if you look at what we have, what we typically publish in our annual results is that – the mechanical kind of impact is an impact which is like for 100 basis points. I don't have the number in mind for 100 basis points because that is basically not the one that we do. But if you look at the typical stress test that we have, you are rather in an impact of a couple of hundred million, but that is rather on a 50 basis points. So I will have to look. I will come back to you on the 100 basis points question.

Okay, thanks a lot.

The next question is from Anke Rengen with RBC. Please go ahead.

Yes, hi. Thank you for taking my question. The first is on capital. I just wonder, I mean, I guess you have 12.7, and we already know 50 basis points. and 25 basis points, which takes you close to the 12%. And I just wonder, I mean, should we expect, which doesn't seem to give you much flexibility with respect to any potential headwinds or the 20 basis points of fees that would come your way, should we be prepared that your ratio could fall below the 12% or would you consider more or accelerated optimization measures to give the capital ratio a boost to have more flexibility? And then the second one is on the 2026 update with Q4 results. I just wanted to confirm, I mean, the current base case is a 12% ROTE target. I mean, it's not specifically reiterated in the slides, but I just wanted to make sure I have the right base case. And the fact that we're looking at 26, does that mean we're moving away from this typical three-year planning process? Thank you very much.

Ankur, I'll start with your last question. Listen, what we have said, remember, is that given all the headwinds that we had in front of us, we said that the 12% would be basically pushed into 2026. So that's basically what we said. And that is why, as that is in 2026, that we will give an update on that trajectory up to then. So there is basically no change on that front. And then when it comes to capital, Ankur, you know it in the meantime, yeah? I mean, we are managing capital close, yeah? We don't want to have sitting on an excess of capital. We want to redeploy it. So we want to fly at the 12%. And, again, I typically would say I don't know where you've been the last couple of years, but I know where you've been the last couple of years. And you've seen that we have been spot on managing that. And so that's basically what we do. And so we accelerate sometimes the securitization or whatever we have to remain in line with that limit where we want to fly. And that is what we will continue to do.

Okay.

Thank you. The next question is from Pierre Chedeville with CIC. Please go ahead.

Yes, good afternoon. Could you give us the revenue growth in asset management, ex-principal investment and real estate? It would be interesting to compare with other players. And also, could you give us a little bit color regarding net inflows in this division that were quite good from what type of customers and what type of products, short-term products or long-term products. And regarding the cross-revenues, cross-selling revenues at 32%, I'm not sure, but did you give any guidance or target in terms of these types of revenues? And if not, do you have any, even if you don't communicate it? And lastly, regarding insurance, could you give us the combined ratio of the PNC activities you have, which are more like linked to credit insurance? Thank you.

Thank you. Listen, Pierre, you know, in the divisions that we have, we bundle them, and that is basically what we publish. So within what we have bundled on asset management, the other activities that you talk about are in there, and so that's the global direction of what we are having. The color I can give, and that is probably what you hint at or explore, is if you look at the real estate, we anticipated that there would be a pickup in 2025. If we look at the overall environment, that pickup will be rather in 26. So that's the kind of color. When it comes to the... When it comes to the cross-sell, the 32% target, no, we have not given an explicit target on that, but you can clearly see that we step it up year after year, and with the advent of XIM, as I said, the cross-sell of that kind of activities will further step it up. So that's basically this. And on the combined ratio, so the combined ratio is basically the ratio what you see with the claims that you include. And so we are well below 100% on that. So we are in an environment that is basically coherent on that.

And regarding net inflows in asset management?

Yes, so what's the question? Do you want the amount?

No, the amount you give it, but I would like to know what types of products and customers. Is it third-party customers? Is it insurance? Is it monetary products? Is it long-term products? Could you give us a little bit of color on the composition of these net inflows?

So if you look at the loss for a long part, for a major part, it has been medium to long term that basically customers are picking up. So that will be our answers.

Thank you.

The next question is from Sarat Kumar with Deutsche Bank. Please go ahead.

Thank you for taking my questions. Still have a couple. Firstly, on EuropeMED, the revenues have been very volatile. I appreciate there are a lot of moving parts, you know, with Ukraine being reconsolidated, FX depreciation of the Turkish lira. But is there anything you can guide in terms of how to kind of look at the sustainable revenue run rate for this on a constant currency basis? I think this is a business division that most analysts kind of struggle to model, so that would be my first question. Second would be on R1. Would the contribution from leasing and service margins not be enough to compensate the normalization of used car sale services? Also, if you can comment on the sustainability levels of the 15% growth in leasing service margins with rates getting further lower, would they be able to sustain at this level? And also, if I am allowed a clarification on wealth management, can you provide us the rough split of revenues between NII and fees just to help us model for revenues going forward? Thank you.

Thank you for your questions. When it comes to EM, if you look at it in the intrinsic business, the intrinsic business in basically Ukraine, Poland, and Turkey, intrinsically, they are fine. Now, there is one thing you have to be aware of. That division is impacted by a law, an accounting law that is dating pre-IFRS. It's called IAS 29 on hyperinflation. So this is what we see in Turkey, and that hyperinflation has an impact which, bizarrely enough, if you look at the P&L, has been positive basically in the previous year, and that effect is tapering off this year. So that is the delta that you see, but intrinsic to businesses are doing well. When it comes to Arval, so the fact is there's basically three levers into the top line of Arval. So there is the financing of the new car, the whole services that goes around it, and then the resale of the second-hand car. And so what you see is that second-hand car that is going to continue. So it's basically high still dating from the COVID period. So the whole supply chain was blocked. So the new cars were limited, so the used cars went up. And so that's basically normalizing. And so on your question, so what you basically see in the third quarter is something that you could see if you take kind of a worst-case scenario that could continue still a couple of quarters. And again, sorry, on your question on WM, we stay onto the bulk. We don't give the breakdown of the elements of WM in that. So that will be the answers.

Thank you, Bas.

Gentlemen, there are no more questions registered at this time.

So once again, thank you for your time and your attention. So have you seen CSB is a strong performer this year? We should stay that way for the years to come, looking at the business model, the comprehensiveness of the platform, and the fact that business is getting market share through EMEA quite regularly. IPS is doing well. We're investing a lot. External growth is there. There are a couple of major moves, so we should see more, much more of IPS in the years to come. And CPBS, that is under heavy, I would say, pressure this year, probably more than anticipated, even if we mentioned that at the very beginning of the year. We will benefit from a kind of pivotal moment beginning of next year. And we gave a number of, I would say, guidance regarding France, Belgium, personal finance. So this clearly will help next year in 26. So thank you so much for your time. And see you soon for the annual results in February next year. Thank you so much.

Ladies and gentlemen, this concludes the call of BNP Paribas third quarter 2024 results. Thank you for participating and you may now disconnect.