Bnp Paribas Ord

Good afternoon, ladies and gentlemen, and welcome to the presentation of the BNP Paribas second quarter 2025 results with Jean-Laurent Bonafé, Group Chief Executive 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. Lars and I are pleased to present today a summary of our strong second quarter results and how it confirms our 24-26 trajectory. For 25 specifically, we're also confident to announce that we expect more than 12.2 billion euros net profit for this year, as I will explain later. We will be relatively brief on divisional details as you have most of them in our documents. So moving to slide four. You can see that our year news are up 2.5% this quarter. CIB posted a 4% revenue growth despite an elevated base in the second quarter 24 and the U.S. dollar witness. For all three businesses, global banking, global markets, and security services, we had the best second year in 14 years, in 15 years. CPBS was marginally up year-on-year despite lower used car sales results at Aval. This is in line with our trajectory. The quarter confirmed the acceleration of the NII in our commercial banks in Eurozone, as expected, with a growth of more than 2%, and we anticipated the second half to show further acceleration. Yeoman once again posted very strong revenues growth at about 22%, thanks to strengthened performance in Turkey and Poland. Personal finance is starting to show acceleration and is up about 3%. Moving to IPS, it posted a 4.4% growth, particularly thanks to insurance and wealth management. We're pleased to welcome XRI employees in our group on the 1st of July. I will elaborate on XRIM later on. Finally, regarding the corporate center, we saw an improvement as mentioned during first quarter results. Our commitment to control, to cost control remains strong and we're on track to deliver our cost savings of Euro 600 this year, with Euro 190 of additional savings implemented in Q2. Overall, we generated positive Joe's effect of 1.7 points this quarter, above our ambition of 1.5. At 38 bps, our cost of risk remains without our guidance of less than 40 bps, despite a more challenging environment. Our cost of risk includes stage 3 provisions of 33 bps down 9 bps year-on-year. The second quarter of 24 saw stage 1 and 2 benefiting from 12 bps of releases compared to a small addition this quarter. All in all, our net profit was down 4%, due to a punctually low tax charge in the second quarter 24, without compromising our trajectory of profitability as this tax impact iron out over the full year 24. Our CT1 is stable quarter on quarter at 12.5%, and Lars will elaborate on this later. Finally, we confidently confirm our distribution policy of 60% and are pleased to announce our first interim dividend of 2.59 euros per share, which represents 50% of our EPS for the first half. Our 1.80 billion euro share buyback program was completed in June and the shares will be canceled. After solid performance in Q2, we expect a sharp acceleration in the second half, and I will explain on the next slide. So now moving to slide five, we're pleased to confirm that we expect our net profit for 25 to be above 12.2 billion euros, mainly driven by a strong acceleration in revenues in the second half of the year at more than 5%, excluding AXA-IM. This revenue growth is in the place that it will largely come from the acceleration of the NII in our Eurozone commercial banks and at personal finance or margins, reflecting the current rate environment. These additional revenues do not require much additional cost, which means they will feed directly to our gross operating income and profit before tax. We will also continue our cost savings measures, supporting jobs at roughly plus 2.5 points. Once we add to the strong growth in gross operating income, the first-time contribution from AXA, we expect that our net profit will exceed 12.2 billion euro for the full year, marking a sharp increase in the second half. Moving now to slide six. You are, of course, very familiar with the slide six, and I'm pleased to reiterate our trajectory for 25-26. Return on tangible equity of 11.5% in 25, 12% in 26, leading to more than 7% group net income growth CAGR, and more than 8% EPS growth CAGR. Our 26 return on tangible equity is only a stepping stone towards further improvement. Our targets will be achieved thanks to key levels that you will have in mind, starting with CIB. We'll continue to grow market shares in a capital-conscious manner, and we'll be ready for the Save and Investment Union thanks to our originate-to-distribute model. Moving to CPBS, we had two deep dives in June on CPBF and personal finance, demonstrating to you that these two businesses alone can add one full point of return on tangible equity by 20th. CBBS will, amongst others, benefit from the sharp acceleration in NII, both in the commercial banks and personal finance. We recently reinforced our governance of the commercial banks in the Eurozone in order to mutualize our investments, accelerate cross-selling, and continue our efforts on SRT. Moving to IPS, we will continue the dynamic organic growth, which will be amplified by the acquisition of HSBC Wealth Management Germany, and of course, AXA IL. Finally, we will continue our efficiency efforts with 600 Euro additional cost savings in both 25 and 26. And I now hand over to Lars, who will remind you of this quarter's achievements.

Thanks, all. If you can swipe to slide 10, where you can see that the second quarter of 25 was driven by solid business performance within each division. Overall group revenues were up 2.5% year on year, and we expect more than 5% in the second half. If we look at the divisions, CIB had a record second quarter, as Jean-Laurent said, up 4% year on year. driven by a very good performance across all three business lines. If we look at global banking, which was stable at a record high, reflecting strong commercial dynamism, but also some degree of wait and see, also the U.S. dollar impact and the negative impact of lower rates. Our pipeline within global banking is strong for the remainder of the year. If it is, we turn to global markets, where revenues were up 5.6%, driven by a very strong performance of FIC when compared, in particular, to our US peers, and FIC is up 27%. FIC was indeed strong in all regions, particularly driven by effects, but also credit. Equity and prime services was down about 15% due to the high base effect a year ago and compared with our U.S. peers who are more exposed than us to the flow business, which was very strong this quarter on the other side of the Atlantic. We were also impacted by lower demand for structured products in the context of the uncertainty post-liberation date. However, if you look at the first semester results, at 2.2 billion, they represent a record for EPS driven in particularly by prime and cash. If we now turn to the third division, security services, it was up 7.6%, driven by strong balances and transactions as well as resilient interest margin. If we now turn to the second division, which is CPBS, which illustrated and demonstrated the pivotal performance. If you look at it, the revenues are up 0.4%, but what is worth mentioning are the two main divisions within it. If we start with the commercial banks, they were basically up 5% this quarter, stronger than the trajectory for the next three years. We look at the commercial banks in the Eurozone. They grew their revenues 1.2%, and we reiterate our target of more than 3% this year. Indeed, why do we say this? Because on one hand, the rebound of net interest revenues will accelerate in the second half of this year as the lag from deposit mix has taken off. Moreover, the lower rates environment should be supportive of a stabilizing deposit mix, and the shape of the yield curve should enable us to continue our reinvestment on the long end of the curve, leading to a progressive net interest income pickup, as we have announced and as the second quarter illustrates this pivot. If with this, after the Eurozone banks, we look at Europe Mediterranean, and so the revenues were up 22.7%. This is due to improved margins, both in Poland and Turkey, as well as an increase in fees, and this in particular payments in Turkey. Of course, the environment in Turkey going forward could potentially be less favorable due to a slowing decrease in interest rates. So this is then basically the commercial banks. If we then turn to the specialized businesses, they were down 7% year on year. And this impacted by the ongoing normalization, as you know, of used car prices, and as you know, as we have flagged it before. If you look organically, Arval performed extremely well again this quarter, so up 8.3%. The growth is reported by fleet growth of 4.6%, and outstandings growing by 11.2%. If you look at personal finance, where you see a solid commercial performance with loan growth of 2.7%, combined with margin improvements coming from repricing. We have described this in our deep dive for PF, personal finance, and we are confident that the margin improvement will accelerate in the second half of the year. Last, within CPVS, a very good performance from the new digital businesses and personal investors, up organically 11% this quarter, thanks to further growth in client acquisition, as well as a high level of transactions in the light of Liberation Day. If it is, we move to the third division, IPS. We saw strong growth in fees, thanks to a high level of transactions. If we look at assets under management, they were boosted by strong inflow and strong performance effects, but were significantly impacted by the strengthening of the euro. IPS is about to become a sizable driver of our growth with the acquisition of AXA-EM, which we closed early July. If we look at insurance revenues, they were up 8.2%, driven particularly by a healthy savings in France, the increased contribution from Adidas, and the impact of recent acquisitions. Wealth management was up 6.1% on strong inflow and strong fee growth. If we turn to asset management, which was down 1.8%, despite strong inflow and transactional activity due to financial income, and in particular, real estate, you know, our asset management division includes the activity real estate, which continued to weigh. Let me add, finally, a comment on the corporate center. As we highlighted at the first quarter, the revenues can be volatile from one to another. but you see that the second quarter is in line with our full-year guidance of about zero revenues, excluding the impact of insurance-related defects. If with this, we turn to slide 11, where we show that our cost discipline is paying off. At group level, the draws stand at 1.7 points, consistent with our stated trajectory for 2026 of 1.5. We continue to allocate cost growth to fund development while we offset inflation by cost savings. If you look at CIB, positive JAWS, 0.7 points, with cost growth driven mainly by increased activity. CPVS, also positive JAWS, 0.5 points, and JAWS are positive in all activities except ARVAL, as we mentioned before. So the latter will face a significantly lower base effect from car sales revenues in the second half as previously stated. And so the tapering down of the resale had the highest impact in the first half of the year and will be materially lower in the second half. Finally, IPS reported positive goals of 5.2 points with a drop in cost of 0.7% even with our ongoing investments in the business. So goals are positive in insurance and wealth management. if we look at slide 12 where we focus on the cost savings and efficiency measures which basically allow the jaws effects and this quarter you see that we implemented 190 million of new cost savings totally consistent with our full year target and broadly offsetting the impact of inflation having looked at the those three uh first elements of the p l let's now look at the cost of risk on slide 13. On this slide, you can see that our diversified balance sheet enables us to protect profitability. Our cost of risk of 38 basis points over outstanding is at the moderate level across our activities with a base effect a year ago in the second quarter. Indeed, in the second quarter of 24, the group released stage one and two provisions for 275 million euros, notably in global banking. In particular, if we go back to the Stage 3 provisions, which have improved nine basis points year on year. So the Stage 3 are nine basis points lower than they were a year ago, and they stand at 36 basis points. And so they reflect the good quality of our portfolio despite a challenging economic environment. So if we now talk about the stages one and two, our overall stock of provisions for these is stable, and it stands at 4 billion, 4.1 billion euros, equivalent to more than one year worth of the current stage three run rate. If we now look at it by division, we know there's normalization from a low base at global banking, as we previously mentioned, Europe Med and BNL, and from a high base in France. So PF continues to represent close to 50% of group cost of risk, and the drop of stage three provisions there confirms our expectation of gradual structural improvement. If we now move to the impact of U.S. tariffs, while we observe a certain wait and see attitude among clients, mainly due to the ongoing uncertainty around these tariffs, and this is expected to ease once greater clarity emerges. In the meantime, we maintain a strong focus on high-quality counterparties, so 75% is investment rate, and continue to closely monitor liquidity, credit, and market risks. So, having looked at the P&L, let's now look at the balance sheet and, in particular, capital management on slide 15. If we start from the second quarter in 25, our financial communication will be based on the phased-in capital ratios. This, to align with the regulatory requirements comparison, so the phased-in metric is the base for MDA calculations, so the calculation that would eventually limit dividends. Secondly, it reflects the group's 2030 horizon, and thirdly, it matches the standard used by the peer group. Looking at the second quarter, our common equity tier one phased-in is stable quarter-on-quarter and stands at 12.5%. This quarter reflects the typical 10 basis points of organic capital generation, which was compensated punctually by, amongst others, model updates. Additionally, we offset our limited organic RWA growth by RWA optimization. So the quarter confirms our intrinsic capital generation and us being well on track to be above our orientation of 12.3% CET1 pre-FRTB. I don't have to remind you that our CET1 has shown little volatility through this cycle, demonstrating a tight control of our trajectory. This on the back of our diversified business model enabling us to be less cyclical than many other banks. If we now turn to slide 16, where you can see our progress on SRT. Since we started, we have a cumulative benefit of 44 billion euros on our risk-weighted assets, equivalent to 65 basis points of common equity T1. During the first half of this year, we implemented around 20 transactions for around 12 billion euros of gross RWA savings. We now expect more than 10 basis point benefits from optimization in 2025 and 2026. And so all this is within the current regulatory environment. If we move a second, looking forward to the Save and Invest Union, SIU, it should support revenue growth in CIB via securitization services and increased ABS trading volumes, as well as IPS through higher margin investment products, while, of course, also helping reduce our own, so BNP Paribas, RWAs, and improving BNP Paribas common equity T1 ratio. Although it is too early to quantify the exact impact of SAU pending final regulatory details, we believe a successful implementation could add several tens of basis points to our ROT. If with this, you can look at slides 20 and 21 where we look at the strong track record of our CIB division reaching a record level in the second quarter. We also provided you with a focus on our security services businesses, which continues its fantastic journey of growth, both organic and through acquisition, including the recently announced acquisition of HSBC custody and depository activities in Germany. Security services has expertise, has scale, and is a significant contributor to the ability of our CIB to produce revenues that are not volatile and show steady growth through the cycle. Having talked about CIB, let's turn to slide 22, 23 on CPBS. First, as we indicated last quarter, we are working hard to improve the divisions not delivering adequate returns, and we demonstrated during our deep dives on personal finance and CPBS that the target in excess of 17% RONE by 2028 will be reached. As expected, you can see the start of a sharp acceleration of the net interest income in our commercial banks in the Eurozone, thanks to a stabilization of current accounts, as mentioned before, and we expect further progress in the second half. If we now turn to slide 24-25 on IPS, this division will represent the biggest growth driver for the group for the next few years, and we welcome AXA-IM employees on our group on the 1st of July. The integration has been launched, and we will provide you with synergistic targets during our third quarter results. By year end, we aim for the legal merger of BNP Paribas Asset Management, AXA-IM, and BNP Paribas RIME, and we will follow up with a deep dive in the first quarter of 26. AXA-IM will enable us to have a greatly reinforced distribution network, a broader product range, a platform at scale enables us to take full benefit of the Save and Invest Union, a core building block in our integrated business model of originate and distribute. So having given an update on the businesses, I'll now hand it back to Jean-Laurent for the conclusion.

Thank you, Lars. So to conclude on slide 26, Our second quarter performance is solid. We will distribute on set of a service and interim dividend for 2.59 euros per share equivalent to 50% of our first half EPFs. We see strong acceleration of our revenues and preferred before tax growth in H2, which would enable us to exceed 12.2 billion euros of net profit. And we confirm our trajectory 24-26 with all levels already in place. Let me conclude by some final comments about the recent changes and approachments that we announced, them at consolidating the group's integrated model by accelerating the market share growth of our CAB based on its original to distribute approach, strengthening the cross functionality of the commercial banks in the Eurozone and preparing their future by focusing in particular on common technological investments. With the acquisition of AXA-IM, one of our largest external growth moves, we are consolidating the group's asset management businesses and accelerating the development of our IPS division in line with its insurance and wealth management businesses. We're preparing BNP Paribas for the next phase of its growth. This concludes our presentation, and we are now happy to answer 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. I would like to remind you to please limit yourself to a maximum of two questions. We will take questions as many as time permits. Again, please press star 1 to ask questions. This question is from Pierre Cheteville, CIC.

Good afternoon. My first question relates to commercial banks in general. I was wondering why, at the end of the day, there's such a difference in terms of profitability between your European path and some other of your competitors. I was thinking, of course, of Italian banks. Of course, you can tell that comparison is not relevant, but at this stage, at this level of difference in profitability, I was wondering how do you intend, how do you think it's possible to reduce this lag? And it's not only a question in Italy, for instance. When I look at Belgium, where you have a big market share, your profitability is around 10%, which is not very, very, very high. So a general comment between these discrepancies between commercial banks in Europe. And my second question relates to asset management. If you could give us a little bit more color regarding your good inflows this quarter. And particularly, I was wondering... If it comes from retail or institutional customers? Is it long-term products? And where are you about passive management this quarter? Thank you very much.

Thank you, Pierre. Listen, when you look at the performance, the main objectives that we have is to improve every single day. So if we look at B&L, for example, our priority is profitability improvements despite the challenging competitive environment. If you look, for example, at our internal metric, the RONI, which is close to 14% in the first half of the year, so nearly twice the level we saw in 2022. And so if you look at it, what are the levers that we use are the ones that are applicable for us in the environment that we are. And so for BNL, it's, for example, the costs. Costs are down 1.5%. And even if you include that the GGS has fallen off, that is what you basically see. And the same is true for the cost of risk, which was at 38 basis points. It has come down to 30. So that is the kind of things that you do. You see the same thing in France. In France, in the environment that we have, indeed, we have a yield which is single-digit. you have seen the deep dive that we have announced in order to produce it. So that's basically what we do. We adapt, and the idea is to have the profitability to increase. So that's on that one. When you look at asset management, so asset management, we have it set up to be diversified, distributing on the retail and the institutionals, and so that's basically relatively stable. If you look at that, If you look at the overall inflow that we have in the second quarter, it is gravitating towards, as you've seen, 15 billion in the second quarter. If you then look at basically what is it going into, it is flowing on one hand into monetary, On the other hand, on the medium-term, longer-term funds. So that's a bit the trade-off. And then over and above the flows, if you look at the top line, so the top line intrinsically fine. I have to remind you that our asset management, as we publish it, It also includes our real estate activities, which is intrinsically not part of the asset manager, and that activity remains in retreat. And what we see is that even if the interest rates are going down, the investment volumes are still not materially picking up. So that would be those two axes, Pierre. Thank you.

Next question is from Tariq El-Majad, Bank of America.

Hi, good morning, everyone. Thanks for taking my questions. Actually, I have mainly one on capital. Can you explain us what the rationale to move into a phased-in basis versus fully loaded? You alluded to be consistent or compliant with the regulation, but can you elaborate on what's the difference between the two? Is it only the phased-in of the output floor from 2030, or there is anything more to have in mind? And also, another question on capital. I mean, the sector is clearly moving towards higher level of CT1 targets of, don't put a number, but clearly higher than 12%. And it's been rewarded and seen as the new normal. I mean, you've been constantly repeating that managing the bank at 12% is ample and sufficient and adequate. But don't you think it will be forming a kind of glass ceiling for your valuation in I mean, especially today, I think you had great numbers showing a strong recovery in most divisions, positive draws in the costs. Can't really fault much in terms of earning recovery. I'll be interested to hear your comments on this. And then linking to that on the SIU, you mentioned a few tens of basis points of benefit from this. I understand you don't want to be more specific at this stage. A lot of things are still in the making. But, I mean, are we talking something above 100 basis points or below? And maybe actually the most interesting question would be to understand your conviction on if this project will come through and if Europe will stick together to deliver actually something that will be applicable, especially the latest, you know, EU circulation framework had all the buzzwords, but unfortunately I don't think it went to the extent we were hoping in terms of relaxing the rules for allowing banks to securitize and invest and so on. Sorry for the long question, but we're keen to hear your answers. Thank you.

On your three questions, so let's take the time. Let's do the first one. So the first one on the metric. and if you look at intrinsically the binding uh metric when it comes to calculating the mda so to ensure that you can pay dividends and the likes is the phase one yeah so that is the one that we apply that is the one that counts secondly if you then look at bmp firewall for us this phasing is basically coming in two There is a phasing happening from now until 2030, which is basically the floor. And then after that, there are the other effects that go in play. For BNP Paribas, that first phase leading to 2030 on the floor, it doesn't bite. So for us, the difference between the fully loaded and the phased is zero. There is no difference. And then thereafter, it's limited. It's 10 basis points. And so, moreover, what we see in the market is that the interpretation of this fully loaded, fully, fully loaded, I don't know how many definitions there are, it can be a bit fluffy. And moreover, that is why ourselves and basically several of our competitors are moving in the phased approach. So intrinsically, there is no difference. So as I said, there is no difference until 2030 for us. It's very minimal thereafter. We apply what is the metric that is needed to calculate the MDA, and so that's basically it. So that is on the change. On the common equity tier one. The common equity tier one, let's put it this way. If you look at the requirements that is being asked to us intrinsically, and then that's the pillar one. And then if you also look at the pillar two, and you might get an update next week when the stress test is published, you see that of the large European banks, we basically have a pillar two, which is very low, which basically reflects our low capital requirement, which again reflects the view of the supervisor of our diversified setup and our impacts. Even if you go back for a while, if you go back in the last 10 years, our diversified setup never triggered a common equity one reduction bar when Basel II, Basel III came. But intrinsically, it is very stable. So that is why we see both from the supervisor, both from what we have in the historic view, that we fly at an appropriate level. When it comes to the Save and Invest Union, it is indeed a thing that should happen. Listen, I can tell you whatever kind of numbers. I'm not going to make you dream. We just mentioned multiples of tens of basis points. What you see is that Europe is building the sales. So they have been talking about safe and invest union in February. They have added a complementary on the securitization back in June. And you might have seen that they are also working on evolving or allowing insurance companies to invest on a more equilibrated way into equities. So all of these effects are really supporting that the European Commission is setting all sails for it to improve, which is a positive thing. Now, again, taking the time it takes, it's going to take until 28, until these things crystallize, right? But that is what we see.

Okay. Just a quick follow-up. I mean, on the 10 basis points gap, which is actually in eight years' time, and the Would you be confident to actually mitigate the effects and even go beyond to convert the two? Sorry, Derek, I'm not sure.

Which 10 basis points are you talking about?

Sorry, the gap between phased in and fully loaded.

Yes?

Oh, yes.

Listen, as I said, this is coming basically down the road at – once the next phase comes in. And that next phase that comes in is basically there are products that we have that are called listen to my words, unconditionally cancelable commitments. Unconditional cancelable conditions. However, Europe at this stage is basically saying that they will not be totally unconditionally and cancelable, and so that is what we see that has an impact of the 10 basis points that we talk about. So we'll have to see if Europe comes along that basically that does not make sense, or we will see how we can evolve those products or price those products alike. So, yes, I haven't given up that we can compensate that.

Thank you very much. Very helpful.

Next question is from Delphine Lee, J.P. Morgan. Yes, good afternoon.

Thank you for taking my questions. So my first one is on Eurozone, commercial and personal banking in the Eurozone. Just trying to understand if you're, you know, confident of your path towards more than 3%, considering the first half, well, if you look at BNL, Belgium, are the trends still a bit challenging? So if you could maybe elaborate a little bit of, you know, what you do expect in the second half in terms of pickup for these two businesses. And then my second question is on capital. Just double-checking in terms of seeing your 10 basis points that you would expect for the rest of the year coming from all the re-optimization, securitization, SRTs, I think, and just on the regulatory side, on model updates or anything like that, are we still having 10 basis points regularly for this year, and does that imply any reversal of what we've seen so far, or if you could just clarify a little bit the CC1 path for us. Thank you.

Thank you, Delphine, for your question. So, yes, indeed, we reiterate the above 3%. If you look at it, so as a reminder, given the fact that we have in France and Belgium those mortgages which are at fixed rate, so the kicking in of the reflection of the higher interest rates is taking time. So that is the pivot that we talked about. That is happening. So I remind you, a quarter ago, we said that that pivot was happening and that the first one where we would see it is France. Look at the second quarter. You see it. It kicked in. You also see the pivot in Belgium. So that is why we say that that will definitely be above 3%. If indeed you look at BNL, what you see is that probably it will gravitate a bit below the 3%, but given the overall setup, the other two will more than compensate. And so, yes, we reconfirm the above 3% for our commercial and private banking in Europe. So if you basically look at the impact on capital, so we've guided that there would be a full year of 10 basis points. And that is basically what you have seen. And so that is intrinsically what we anticipate to have for the year. On the 10 basis points that we have, in this second quarter. It's a model update that if we adapt and have an evolution in our models, that zero should taper off, but that tapering off will be in 26, 27. So that's basically where we stand.

Thank you very much.

Next question is from Joseph Dickerson Jeffries.

Just kind of on the same theme, just in Italy, can you discuss on the structure of the loans? Are they fixed? Is it swapped? I was a little surprised at the decline in the margin in Italy. But more broadly, I guess, how much now of the H-225 revenue performance is effectively locked in now due to mortgage repricing, deposit mix, and replicating portfolios? Thanks.

So if you look at Italy, if you look at the retail side within Italy, BNL, this is a fixed rate mortgages type of balance sheet. very different from the average regular situation you would have in Italy. So this is first, the pressure today is coming from the, let's say, the more corporate banking business within BNL. There's a lot of pressure on lending, so margins are under pressure. So this is basically the driver for the top line within BNL. But if you look closely, for us, the point with BNL is not volume or size. It's just profitability. And remember that this quarter, the pre-tax profit for BNL is up by more than 30%. So BNL is looked at. for the profitability, we need to continue to do the ramp up that progressing well. And this is the story with P&L. And clearly, today, within the Italian market, there are some pressures on corporate banking that is, I would say, stronger than before. Then if you look at the second half, we tend to say that Most of the rebound is already plugged within the ALM, within Belgium, France, Italy. The fact that the base effect from Arval is just vanishing in the air. So it's a very... Very mechanical effect. This is going to happen. This is already in the book to some extent. And it will go down directly to the bottom line because there is no cost base associated with that. There is no cost of risk, of course, associated with that. So the rebound in the top line is most of it plugged into the balance sheet. And it will become directly a pre-tax profit. that will drive this very strong rebound in the second half. And you will be probably surprised by Belgium and France as well. So this is the story. And again, we're getting rid of most of the base effect with Arval. So this is the story. And only looking at IPS and CIB, they're going to evolve like the first half. So at a good, strong level. But the rebounds, much of it coming from the Eurozone banks. And the fact that Arval, is now free of the base effect.

Perfect. Thank you.

Next question is from Giulia Aurora Miotto, Morgan Stanley.

Hi. Thank you for taking my questions. And the first one, can I go back to slide 16 where you showed these kinds of basis points of ROTE benefit on SIU? And what exactly do you include as SIU? Because so far we only got effects on securitization, which I think can still change. I would hope that the industry lobby can improve it, but we could get some other stuff on pensions, on investments. So what are you assuming here and what do you expect we get essentially on the other legs of the SIU? That's my first question. And then the second question on the investment bank. your FIC number were exceptional, whereas the equity numbers were a bit weaker than peers. Is there anything that you want to call out there, and have the trends continued into Q3? Thank you.

Well, if you look at CIB, I mean, it's always the same story. The equity business being papered by is very different from the one You can have with U.S. banks. U.S. banks are much more kind of full business type of business. So last year, the structure of the market was very much in favor of the kind of BNP-PIPA type of business model for equities. This year, it's the reverse way. So don't forget that in two years' time, we consolidated more than 30% growth within equities. So it went up by, I remember well, by 34%. So, this is huge. So, and again, those businesses are slightly volatile. And they are very different structurally from the U.S. classical type of equity businesses. The FIT universe is, as you may know, the characteristic of the diversification of global market had been PIPAEBA. It happens quite often that either one of the two drivers are evolving in a reverse way. It's not that frequent that a certain quarter both are very strong at the same speed. So it gives diversification and stability. And once again, if you look at the global market, this is the best quarter ever we got. Once again, stability, diversification, continuous progress, market share growth with a very different business model looking at equities compared to the U.S. banks. So this is for CRB.

Yes, listen, Julia, on SIU, let's be fair. As you mentioned, the SIU, what is on the table for the moment remains a bit vague. But if you look at the access that Europe puts in motion, so they put access in motion, which is what they published in June. It's to step up securitization so that banks can offload more. So this is things like parameters that you use in the capital calculation, the criteria that you include and so forth. That's on one hand, so that's allowing the offload. And then secondly, there is also efforts that are being done to have more investment capacity. And that is what we have seen this week, where there are reflections on how to evolve the solvency tool, which is a bit penalizing for the moment for insurers in order to invest into equity products, because as you know, in Europe, typically your average individual does not go for individual tickets as he might do on the other side of the Atlantic. So he needs insurance wrappers to basically do it, which are solvency too is a bit detrimental for it. You see that Europe is also working on making those part of the aspects better. So you see several acts being put in motion, but again, it will take a bit of time for it to land, but the direction is there. Thanks.

Next question is from Andrew Combs, Citi.

Good afternoon. Two questions, please. Firstly, just a follow-up on CGBS. If I look at your net interest income rebound this quarter and if I look at the abrupt shift in deposit mix and the growth that you've seen in site deposits, I'd imagine that experience that you've seen in the quarter is somewhat better than you expected. I mean, certainly it's better than your assumption for the full year of stable deposits and stable mixer deposits. So you provide the sensitivity helping on the slide, but is there any reason why you're not increasing the greater than 3% revenue guidance to their offset elsewhere that we should better understand? That's the first question. Second question, just a technical one, but... On the insurance business, you've had two consecutive quarters of revaluation of stakes, this time in China. What's your process for doing the reval on those stakes and any more that we should be thinking about? Thank you.

Thank you, Andrew, for your questions. Listen, on CPBS, you're absolutely right. So the deposit mix, is intrinsically a tad better than what we had anticipated. But that is why, listen, we don't give an update every week as passes by. That's why we said that the top line growth will be above 3%. It's the same thing with the 12.2 billion euro profit. We said it will be above 12.2 billion. I let you do what your estimate is, but I do confirm that the deposit mix at this stage is better than what we had initially taken up. on the revaluation. So indeed, if you look at our activities that we have, one of the levers that our insurance had to grow is they have that technical skill. They bring that technical skill by having distribution within BNP Paribas, distribution to other banks and partners with other players. And so what can happen when you look at several of these players, take them in your balance sheet to equity state because you don't have a consolidation effect. And then it can be that in one quarter or another, there is an exceptional dividend or there is a review of the accounting norms. And so these are the things that can happen. These are exceptional kind of elements, one of elements that we mentioned that there is not more to read into it. Thank you.

Next question is from Stefan Stallman, Autonomous Research.

Yes, good afternoon. Thank you very much for taking my questions. I would like to start with a relatively high-level question about the economic environment, in particular corporates. You mentioned a challenging environment and that corporates are holding back because of tariff uncertainty. At the same time, your big German competitor has given a very bullish impression view on the corporate landscape that they are seeing in the prospects, everyone looking at fiscal stimulus, spending, et cetera. And I was wondering if you see the same, let's say, difference in optimism between German corporates and the rest of Europe, or whether you see any spillover of this apparent German optimism into markets like France, Belgium, and Poland, or whether that has simply not arrived yet. And the second question goes back to the equities business. I don't think that you disclosed the split of your equities business by cash derivatives and prime at the deep dive. Maybe you did, and please correct me if I'm wrong. But if you didn't, maybe could you give us a rough sense of how that splits? I do remember, though, that at the time you gave a split by basically client segments where you had – substantially less exposure than the street, in particular to, I guess, hedge funds, alternative investment managers. Do you think that was the major reason why you had so much less momentum in your equity business than the US peers? Thank you.

Stefan, thank you for your questions. If I look at the economic environment, what we have in our outlook, which is reflected in what we assume for GDP growth, in what we assume in our adverse scenarios taking into account in the cost of risk, is that basically the elements that could be weighing that have been a bit to wait and see is that uncertainty on tariffs, but we anticipate that that uncertainty will disappear. That uncertainty disappearance will come with some tariffs. So let's assume that in our central scenario, we have like 15% of tariffs, and that is what we reflect in the economy. And you can see that we anticipate European-wide We anticipate a GDP growth. That is what we see. That is what we anticipate. And it's a bit different between countries. But intrinsically, overall in Europe, that is the growth we see. We have this, again, with those tariffs, uncertainty coming to an end, we see a pickup all over Europe. And then on your equity, if you look at it, the spread between the three is, if you wish, is 40-40, roughly, right? 40-40-20. But if you look at what is basically the impact, So there's two. If you look at the results, first of all, our results in equity and prime services, if you look at the first six months, it's a record level. So that's the first thing you would need to do. Now, if you compare the second quarter, there's two ways you can compare it. You compare it within BNP Paribas itself, and then if you go back to a year ago, remember, in June, there was a lot of uncertainty ending, and particularly in France, in the middle of the month. And so that basically meant that there was a double demand of program. Everything which was taken as an orientation at the beginning of June had to be moved in the second half. So the demand was very high, and so that is what we saw in a very steep evolution. So that is the reason. So overall record level, however, if you compare it to the second quarter, which was impacted by this, And the second thing, if you compare it with the U.S., if you compare the quarter. So what we are mainly doing, if you look in Europe, one of the key things that we are having is the structured nodes and all of these services around it, less flow. Whereas in the U.S., if you look now, the flow, which was rather reduced a year ago, really stepped up this year. And so we also participated in that growing flow within the U.S. But, of course, our European activities are more dominant in activity versus the other one. So that's the two things. So record level in the first half, if you compare the second quarter with ourselves, the second quarter, given the uncertainty that we had a year ago, there was like all stars were aligned. The demands were very high. And if you compare with the U.S., it was more flow, whereas the elements were that. And if you look at it, the important thing, if you look at how we have those records and why we keep on taking more market share, if you look at the kind of clients, if you take the equity space, so equity and prime services, so there's basically three products. There's cash, there's derivatives, there's prime. And if you take those three products and then you look at the top 100 institutional clients, In the past, we said that, and when you were at the deep dive, you saw that we had like 52 of the 100 institutional took those three products. Today, we are at 63 of those institutional clients taking the three products. So that is what we keep on doing. So we keep on taking market share record level in this semester, and then those two axis of differences when you compare in the second quarter. And those would be my two answers.

Last one, maybe just quickly clarify when you said 40, 40, 20, was the 20 the cash portion?

Yes.

Thank you. Great.

Next question is from Alan Criss, Goldman Sachs.

Yeah. Hi. Good afternoon, everybody. So this is just a follow-up, I guess, the first one from Stefan's question just now. But looking forward, I get what you've said about, you know, the difficulty versus the comp last year. But if we use this quarter now, is that a logical comp to look going forward when we think about year-over-year growth in 26 or maybe the sequential evolution Q3 versus Q2? Just is there anything in this quarter that we should also keep in mind? And then secondly, staying in EPS in prime, you mentioned brokerage balances held up well. Is that a comment in euros or in local currency? Because I guess you're absorbing a sizable FX headwinds there and some of your peers maybe you don't have that headwind of talks about growth imbalances. So just maybe a comment on the sort of organic versus headline evolution of those balances versus competition. Thank you.

All right. Thank you, Chris. So just could you rephrase quickly your first question?

Yeah, basically are there any one-offs in EPS and Q2? So when we have the call this time next year, whether we need to be thinking about the comp at all?

No, if you look at EPS, if you look at the evolutions, again, the best metric what I can give is indeed we have record levels, and those record levels come from the fact that there was still volatility, right? I mean, what we had on the Liberation Day. So you know the story. If you look at the volumes that were done, and then you know that we gradually step up our market share. So from that point of view, we have been able to step up market share, and so we have been taking more than our part every time, a bit more than the volume. So it's always the same question. So we will continue that. What will be the overall demand that is happening? Typically, in the third quarter, it's a tad less than in the second quarter. But we keep on stepping up. That's basically the story of CIB. We step up our market share. when you look at when you look at the the the prime brokerage so if you look at the consumption of the scarce resource if i can say on prime brokerage it's not capital right because everything is hedged that's that's limited so it is balance sheet so it's balance sheet pure balance sheet or leverage so the exposure use in in um in in the leverage ratio so the one which is Most talking, I guess, is the balance sheet by itself. And so what you see is typically that is expressed in dollars, yeah? And so for us, we are at the record level, and we are at the record level of $500 billion in exposure.

Okay, thank you.

Next question is from Anke Rengen, RBC.

Yeah, thank you for taking my questions. I just wanted to ask firstly about the at least 12.2 billion. I mean, you said the number of times it's at least, but I just wondered in terms of the second half versus first half, I would obviously... sort of like a step down versus a 6.2 billion.

Okay. I'm not sure I can hear you very well. Can you rephrase the question?

I tried to speak a bit louder if that helps. But please let me know. So on the 12.2 billion, you stressed it's an at-least target. But what should we think about as the potential headwinds? Because I guess it looks a bit of a step down versus the first half, and so far you mainly talked about the tailwinds. So I guess there's a cost seasonality, investment banking seasonality. And just to confirm, the $12.2 billion includes a contribution from AXA. And can we use on slide five the bars as sort of like an indication of what you could have penciled in? And then secondly, on the Jaws CIB, the 3% cost growth, is it also because Last year, the costs were a bit lower. Would you think this year you managed the costs? I mean, obviously, it depends on the revenues, but there will be less of a volatile. You think you managed the costs better in CIB rather than having a Q4 step-up? Thank you.

So for the yearly guidance, so we said a minimum of 12.2. This is already with some headwinds included, so we're – to some extent, room to maneuver. And yes, it includes the extra net, of course, of some restriction costs. So it's the situation. So we tend to say that the 12.2 is a minimum and factored in a quite cautious way.

On the cost base and the JAWS at CIB, as you know, we operate at marginal cost. So at CIB, when you have more revenues, you basically have more variable costs. Now, from time to time, there are also some investments we have to do. That comes with whatever regulatory and other kind of investments we have to do. Now, on top of that, we have to take into account, which is a bit perturbing in it, but you have to take into account to explain some of the volatility, is that we have the revenues that are generated in dollars, for example. If you see the costs that come with it, part of them are dollar-based, but part are European-based. And so the effect of the dollar on the JOLs also plays into this. So that's a bit it. There is nothing you should read into it. We go for operating JOLs. Sometimes it can be a bit different for the two reasons that I just mentioned, Anca. But we are very focused on costs. Don't get me wrong.

Thank you. Next question is from Sarat Kumar at Deutsche Bank.

Good afternoon. Thank you for taking my questions. I have a couple. Firstly, on asset management, can you help us understand the moving parts of revenues in more detail? I know revenues are down sequentially despite the Q&Q rise in AEM. Maybe can you break down the impacts between FX impact, free margin pressure? Also on real estate, is it possible to quantify and maybe how far is it from the recurring rate and when do you think it can go back to those levels? That is on asset management. Second one is on R1. I note your comments about R1 being freed up from base effects. My question is on the sustainability of the organic fleet growth, which is trending above your main tier. So do you think this level of growth is sustainable? Or other way is, if fleet growth slows, do you think this can be compensated by higher leasing and service margins? Thank you.

So thank you for your questions. When you look at asset management, indeed asset management, you should be aware that within the division that we call asset management, there is also real estate. And I know we don't give these activities, but I can give you color. So that activity on real estate, even if rates are lower, has not, in the areas where we are, have not picked up. And so the contribution of it remains negative. Let's put it this way. So it has a negative contribution this quarter. So then if you look at asset management, and this should be back towards the end of 26, 27, that should turn around. Then if you look at asset management, within asset management, there are indeed several effects. The negative market effects that we have is indeed the market and the forex effect on the fees. So the fees are driven by that. Well, there is a forex effect that we mentioned, so that whatever is in dollars get translated, and the same is on the market that happens. Moreover, asset management, on top of that, we do have a participation, for example, in coming from co-investment funds that we have, and also they are impacted by that, and they have a lower contribution. So that's a bit where we stand. That's the thing that weigh a bit on this quarter. but that should normally iron out going forward with both the market and the forex effects stabilizing. And indeed, if you look at Arval, so whatever what we see with the setup that we have, we confirm in what we see that we have more than 10% inorganic growth. So if we discard for a second, the resale value, if we look at the growth, both in the growth of the financing of the cars and the servicing that we charge, we are clearly on track to deliver 10% growth in 2025. So that would be my answers.

Next question is from Flora Buchholz, Barclays.

Yes, thank you. The first question I'd like to ask you is on asset sales, simply whether this is something that you would consider, rethinking also some of your business mix, without giving us names or divisions, obviously, on this, but just simply is this something that could happen and what would be the considerations for that to happen? And the second question is on the recent changes that you have announced on the governance. which I think are ahead of your next business plan and also in light of the SIU. I didn't see EuropeMED mentioned in there, so I was just wondering how EuropeMED fits in your strategy into the next plan. Thank you.

So I guess this is the same question. Asset disposals and EuropeMED. So we are continuously monitoring all businesses, Even within businesses, pieces of a certain business, looking at the past five, eight years, we did a lot. Potentially, we can still continue to move in a number of situations. Honestly, we have no situation that are, I would say, non-core. I mean, most of the businesses we're having are are called to the company, of course, you can have some pieces that are slightly not 100% core, but this is very different from the situation we were having, let's say, five years, seven years, eight years ago. So we are monitoring. And sometimes we are offered to exit some situation, and the key point is about the price we are being offered. So there is no need for us to move, but you never know. Sometimes someone can be better positioned than us to run a certain business. So this is the rule of the game. Governance, I mean, for CAB, it's going to be a different organization. It's going to be very much aligned with this idea of origin to distribute, not anymore two major blocks, one being global market and one being, let's say, the corporate bank. It has to be totally integrated, so it's going to be much more efficient with CAB. less capital consumptive type of approach. And looking at the commercial bank within the Eurozone, one of the major issues to deliver a common approach in terms of investing in technology, digital apps, and so on and so on. We need to... to go one step further we had a lot of cross synergies in between those different countries these different let's say markets but we need to go even further in terms of integrating those businesses in terms on how you invest the cash flow of those businesses and we need to invest that in a very much disciplined way so we can leverage the same way a certain euro invested in technology for the benefit of the different local markets. the fact that we are going to have one person in charge of this perimeter is going to help and to deliver that discipline. There's nothing new, but it's going to be much more, I would say, that way, and we can probably extract some and even a lot more profitability for such a kind of an approach. We need especially looking at I would say personal individuals need to deliver something that is more, I would say, common to the platforms and not every time. just delivered in a slightly different way in the different banks. So this is one of the issue. And of course, this will help also integrating those markets within, I would say, the global group, CIB, IPS, asset management, and so on and so on. So once again, these... Little changes are not that little, in fact. For CFB, it's going to be one step further in terms of aligning the business model with the prospect of origin to distribute and Eurozone Commercial Bank trying to behave as one bank and not four or five different banks with investments that are going to be repeated one after another, but just one for the sake of the whole project. the whole Eurozone region, to put it that way, in a very simple approach. And we need to do that before, of course, the next strategic plan is going to be looked at in more detail next year, starting in 26, beginning of 26, and we will announce that new term plan beginning of 27. So we need to look at that very closely so we can deliver the the best numbers looking at the the targets and clearly one of the key element is going to be uh the return on tangible equity there's a lot to come we already said that those i would say uh programs that are already uh Disclose, AXA-IM, French Commercial Bank, personal finance and so on are going to provide with 1% of return on tangible equity on top of the 12% in 26. But we can do better and do better. If we look at the situation in a more integrated way, and this is very much the focus of the next plan, to extract more value from a higher integrated model and, of course, probably dropping some businesses that could become in that game slightly less core, as someone said before. So, well, this is the rule of the game.

Thank you.

So that was the last question? Yes. Okay. So thank you so much for your time. So once again, as you can see, we're very much on track looking at the trajectory. We're not speaking of that year. And you can very much count on us in terms of delivery. You will see the, I would say, the second half, the impact of what has been, I would say, already organized, prepared. And the 12 billion is, as we said, the minimum. And next year is going to be an even better year. And rapidly we'll be beginning of 27 with this new term plan. And this is the story of the company. Thank you so much.

Thank you.

Ladies and gentlemen, this concludes the call of BNP Paribas second quarter 2025 results. Thank you for participating. You may now disconnect.