Societe Generle Ord

Ladies and gentlemen, welcome to the CCTA General First Quarter 2025 Results Conference Call. I now hand over to Mr. Slava Merkupa, Chief Executive Officer. Please go ahead, sir.

Thank you. Good morning, everyone, and thank you for joining us today. I am very pleased to be here with you to present, together with Leo, our first quarter results. I am happy with our performance this quarter. and I am proud of the work and commitment from all of the SG teams. We still have a lot of work ahead of us, but our renewed ability to execute consistently and with discipline makes me confident that we will continue to build on our strong momentum. The environment is uncertain for sure, and our progress will not always advance in a straight line, but it will be consistent and predictable. We have taken what was once merely our aspirations and transformed them into a tangible execution track record. Since the CMD, the results we deliver continue to get better. Our strategy is paying off. Revenues are up by 10%, excluding asset disposals. This is above our full-year target of more than 3% growth. We committed. to at least a 1% cost reduction excluding disposals, the reality is we did better than that, reducing costs by more than 4% in Q1. As a result, we reached a cost-to-income of 65% this quarter. This compares with our target of less than 66% by year-end. That's an improvement of 10 percentage points versus Q1 24. In addition, if the taxes that are entirely accounted for in Q1 were spread equally during the year, the cost-to-income ratio would stand at 62% this quarter. Our cost of risk is low and remains below our guidance range at 23 basis points. Leo will give you more details, but I would like to flag that it includes an increase in our S-1 provisions, reflecting our cautious stance in the current context. And all this leads to a sharp improvement in our ROTI that has climbed to 11%, well ahead of our end-of-year guidance of more than 8%. If we restate from around €200 million of gains on asset disposals booked this quarter, and if we consider a quarterly linear distribution of taxes, the ROTI remains at 10.9%, well above the guidance. And finally, and you know this is at the heart of our strategy, we have a strong capital position with a CET1 ratio of 13.4% post Basel IV implementation. Once again, ahead of our year-end target. This is a strong set of results. And as you will see on the next slide, we are in a good position to navigate in the current context. Risk management is crucial in our business, whatever the environment. And if we filter out the daily noise and focus on what matters here, a couple things could happen. The first is a global macroeconomic slowdown linked to the disruption of the international trade order. And the second is prolonged market volatility linked to the deep uncertainty. These two factors could trigger a multitude of scenarios. But whichever one ultimately emerges, we are confident in our ability to successfully navigate through it. And my confidence stems from three of our strengths. First is our capital position, with the CTO on ratio at 13.4%, which translates into a buffer of around 320 basis points over MDA. Second is our diversification. We are a very diversified bank in terms of revenue sources, in terms of geographies. And by the way, as you can see, many of our core countries are among the least affected by the tariffs risk. And in terms of industry sector, with a maximum sector concentration of 3.2% of our EAD and an average of 2.7% for the top five sectors. Third is risk management. We have a strong track record in terms of credit risk management. And within our market activities, we're benefiting from the deep repositioning and restructuring we did four years ago. As a matter of strategic policy, we maintain in this business a low-risk profile as we maintain our focus on stable client revenue generation at a fraction of the risks we used to take on. After a month operating in the current climate, we can make two key statements. One, we don't see any signs at this point of deterioration in our asset quality, and we have a robust inventory of S1-S2 provisions that we just further increase. Two, market volatility has been rather supportive so far, and we remain confident in the future performance of the global markets business. Finally, I think it's also very important to stress that in the current environment, the need for what we provide will not change. Financing, hedging, mobility services, and advisory services across the board. New opportunities arise, particularly within Europe, and we are well-positioned to capture them. Now let me hand over to Leo to go through the Q1 25 financial performance.

Thank you, Salvador Meira, and good morning, everyone. Moving on with the presentation in slide six, we show the key drivers of our strong revenue growth in Q1 25. The group reported a solid 6.6 increase in revenues versus Q1 24, and growth is even higher at 10.2 percent when adjusting for 2024 asset disposals. which amounts to 219 million euros, mainly Morocco's gap for private banking, both in Switzerland and the UK. Excluding these disposals, this is comparing the same perimeter, revenues in French retail, private banking, and insurance increased by 16.5 percent, while if we also exclude the drag on short-term hedges in Q124, the increase stands at 2.5 percent, supported by fee income. Revenues at global banking and investor solutions increased by 10 percent over Q124, driven by conducive market conditions, particularly in equities as well as in financing and advisory. Lastly, revenues in mobility, international retail banking and financial services grew by circa 0.8 percent versus Q124, again, when excluding disposals. Turning to the next slide, you can see the achieved cost reduction in the quarter, driven by the improvement in all our operating leverages. Expenses fall by 7.6 percent between Q124 and Q125, confirming our firm cost discipline. This is equivalent to minus 4.4 percent reduction, including disposals. The reduction is driven by lower transformation charges by 278 million euros as guided, which upsets the increase in the following perimeter and inflationary elements. On the one hand, we had higher taxes on higher variable competition in 2024, which accounted for 29 million euros. This is the last quarter of the Bernstein perimeter impact, which is 22 million euros, given that it was not part of the banking Q1 24. And M&A transaction costs stand at 5 million euros. As a result, we managed to improve the operating leverage of all businesses, as shown on the right-hand side of the slide, with particular attention to RPBI's evolution, which reduces its cost-to-income by 18 percentage points. The group cost-to-income ratio, as Slavoj Mir was commenting before, falls 10 percentage points, from 75 percent in Q124 to 65 percent in Q125, ahead of our 66 percent Moving on to asset quality, in slide eight, the cost of risk in Q125 remains contained at 23 basis points, in line with last quarter's, and four basis points below Q124. This quarter was largely driven by state's free provisions, which account for 330 million euros out of the total 344 million euros charges in Q125. total standing Stage 1 and Stage 2 provisions remain high at 3.1 billion euros. The balance is stable from the last quarter and falls slightly from Q1-24 due to asset disposals, mainly Morocco and SCEF. Stage 2 provisions in particular represent 4.7 percent of the corresponding Stage 2 stock of loans. The asset quality remains sound, with NPL ratio at 2.82 percent in Q1-25, and stable from last quarter. And also, the net coverage ratio stays solid at 82 percent in Q1, up one percentage point from Q4-24. Let's now turn to capital in slide nine, where we can see our strong organic capital generation capacity. The C2-1 ratio reached 13.4 percent in Q1-25, which is 300 in basis points above MDA. It represents an increase of 10 basis points versus the end of 2024, having observed this quarter the Basel IV impact. This 10 basis point increase is explained from left to right in the slide by return earnings, which represent 18 basis points after a current 50 percent payout. The positive impact from asset disposals, which are 43 basis points this quarter, which includes SGAF as well as private banking in Switzerland and the U.K. While, on the other hand, the implementation of positive four had a negative impact with 48 basis points as guided. And finally, other impacts are broadly neutral this quarter with a two basis point impact. Once again, a strong capital ratio sits comfortably above 13 percent of the target, which shows a disciplined and strong capital management quarter after quarter. In addition, as you can see at the bottom right-hand side of the slide, all capital ratios are comparably above the regulatory requirements. Let's review the liquidity profile of the group in slide 10. We have a strong liquidity profile. LCR ratio stands at 140 percent, and end-to-end ratio is 115 percent at the end of Q125. Both ratios are well above regulatory requirements. Moreover, liquidity reserves are at 316 billion euros, with 53 percent of them being cash at central banks. 54% of our long-term funding program has already been executed, including most of the subordinated issuances, on the back of strong ratings from all agencies. The deposit base remains granular and diversified. It decreased by around 3% from last quarter, in line with our steering targets and strained management of liquidity buffers. And finally, the loan-to-deposit ratio stands at 77% at group level. In slide 11, we show a summary of the P&L for the group, which we will cover in more detail in the next slides. Let's move then to the business performance on slide 13, starting with stock chains, network, private banking, and insurance. In Q125, loans outstanding decreased by 3 percent compared with last year, or by minus 1.8 percent if we exclude state-guaranteed loans, BGEs. This said, Home loan production is increasing strongly this quarter, thanks to a strong commercial momentum, and it's up 115 percent versus the figures of Q1-24. Deposits are broadly stable, easing only minus 1 percent versus Q1-24, which is reflected in the continued shift of inflows to private banking and life insurance products. As a matter of fact, in this regard, AUMs in private banking represent 130 billion euros, having increased by 6 percent versus Q1-24, if we're just for other disposals, or 4 billion this first quarter. On the other hand, life insurance outstanding grew by 5 percent versus Q1-24, reaching 148 billion euros, thanks to the continuation of a strong influx. It actually increases 2 billion euros in the quarter. Moving on to Bolsa Bank. Once again, in Q1, the bank maintained a high acquisition pace, gathering 458,000 new clients and reaching 7.6 million total clients. In terms of client satisfaction, BursaBank remains number one in the French banking sector and was also recognized as best digital bank in France in January this year. At the same time, assets under administration, this is deposits and financial savings, improved further by 15 percent versus Q1 24, reaching a total of 67 billion which shows that Bursa's bank deposit gathering remains very strong. Similarly, gross inflows in life insurance increased by 25 percent from Q1-24, with a high share of unit-linked products representing 57 percent of the total. Note that the bank posted a new quarterly record in brokerage volumes, with 3 million market orders executed in Q1-25. On the lending side, total outstanding loans grew by 7 percent versus Q1-24. Moving to the pillar level for French retail, private banking, and insurance on slide 15. I would like to stress the very positive evolution of the cost-income ratio, which goes down 18 percentage points from 86 percent in Q124 to 68 percent in Q125. This movement is driven by the sound 16.5 increase in revenues when excluding disposals and the strict cost management seen in the total expenses decrease of 6.6 percent again, on excluded disposals. In the bottom part of the P&L, we can see the cost of risk came at 29 basis points, significantly lower than the 41 basis points in Q124. All this translates into a net income of 421 million euros, equivalent to a RONI of 9.5 percent for the quarter. Turning now onto markets, global markets and investor services on slide 16. We report another solid quarter with Q1-25 total revenues for GIMIS up 10% from Q1-24. Starting with global markets, we had a strong Q1, both versus an already high base in Q1-24. This can be seen in the 10.9% increase in revenues, which reached 1.8 billion euros. Equities in particular posted a record quarter. with revenues up by 22% versus Q124. The sound performance was supported by the increased volatility during the quarter, which drove an increase in client flows. And we saw particularly high volumes on equity-listed products and flows activities. Client volumes remained also strong in derivatives, supporting a strong performance this quarter as well. Pre-revenues fell by 2.4% versus Q124 on the back of lower client activity and rates on rates investment solutions. The performance this quarter also reflects some margin compression in financing activities. Having said that, we do note that foreign rate flow performed well, benefiting from the increased volatility in the market. Lastly, in security services, revenues grew slightly by 1.4 percent, supported by strong fund distribution rates. Let's move on to slide 17. Financial advisory delivered a strong quarter with total revenues of 972 million euros, up 10% versus Q124. Global banking and advisory performed well with revenues up 10.5% versus Q124, notably thanks to a robust performance in asset finance, steady results in asset-backed products despite less conducive market conditions, and resilient performance in M&A and DCM. Transaction banking revenues grew by 8.7%, thanks to a solid organic wealth of payment volumes with institutional clients and good commercial performance on the corporate franchise. All in all, GBIS had another sound quarter, with total revenues reaching $2.9 billion and growing 10 percent versus Q124. We maintained a strong cost discipline, keeping expenses flat in the quarter, and this combination translates into a sound positive jobs. Again, the cost-to-income ratio decreased by six percentage points from 67 in Q1 24 to the current 61 in Q1 25. The cost of risk remained low at 13 basis points, and as a result of all this, GBIS delivered a net income contribution of 856 million euros in the quarter, equivalent to a 18.7 percent growth. Focusing now on international retail. Overall, revenues grew by 2 percent in Q1 compared to Q1-24 at constant exchange rates and perimeter. And this was driven by the strong performance in Europe, where we saw loans up by 6 percent versus Q1-24, notably in home loans, while deposits increased slightly by 1 percent, driven by Romania. Revenues growth was robust, up 5 percent thanks to both NII entries. Performance in Africa has been more stable. Loans were broadly flat year-on-year, the mixed momentum across geographies. Outstanding deposits, on the other hand, grew by 2 percent, driven by site deposits from corporate clients. Turning now to mobility and financial services, Avian's revenues were stable versus Q124, with increasing margins. Earning assets grew by 1.4 percent. Margins increased by 40 basis points to 562 basis points. And both drivers upset the continued expected normalization of used car sales results per unit, which fell to 1,229 euros versus 1,661 euros in Q1-24. Cost-to-income ratio stands at 58%, which is well in line with the guidance for 2025. On the other hand, consumer finance revenues were stable in Q1-25, with loans still falling by 3%, but at a slower pace. All in all, the pillar of mobility, international retail, and financial services posted an increase in net income of 14.5 percent, or 24.4 percent when adjusting the perimeter, reaching a RONI of 11.2 percent in 2025. This reflects disciplined cost management and lower cost of risk. The cost-to-income ratio improved three percentage points from 62.5 in Q1-24 to the current 59 percent in Q1-25. Revenue grew 1.1 percent at constant perimeter and exchange rate, driven by international retail in Europe, while they're down 7.4 percent versus the full numbers in Q1-24 because of the perimeter changes. Costs decreased slightly, reaping the benefits from a strict discipline, 4.8 percent at constant perimeter and exchange rate. And the cost of risk of 31 basis points in Q1, it's down from 43 basis points in Q1-25. To conclude on the financial performance, let's move to slide 22 with corporate central. In Q1-25, corporate central was close to break-even with a net profit of 12 million euros. And this benefited from, on the one hand, the negative results in NBI, which improved versus Q1-24, thanks to management actions and to a more efficient use of excess liquidity, Operating expenses, which far from Q1, due to lower transformation charges. And in addition, in Q125, it includes the accounting impacts from asset disposals of the SCEF and private banking in Switzerland and the UK. This was booked in the net profits or other losses from other assets line, and it amounted to 200 million euros. I will now give back the floor to Sal.

Thank you, Leo. I'd like to say a few words about the delivery of our ESG roadmap. We continue to move forward in line with our commitments and ambitions. And here, what truly matters are the emissions trajectories of our financing portfolios over time. And as you can see, they are going down substantially. In the long term, nothing's changed. Global warming and energy transition challenges will persist. and we are progressing with the decarbonization of our portfolios, and we are supporting the financing of the energy transition. Through our policies and actions, we have received very good ratings from extra financial agencies, and we have been recognized with awards for our ability to help our clients with their own transition strategies. In closing, our targets are clear, our performance is compelling, Our commitment is unwavering, in particular in terms of sustained and sustainable cost reduction, as our bank's efficiency remains our core focus. You should continue to expect from us a consistent execution of our roadmap. Thank you very much. Let's now start the Q&A with our usual kind request to stick to two questions per person. The floor is yours.

Thank you, sir. Ladies and gentlemen, if you wish to ask a question, please press star and one on your telephone keypad. Please ask your question in English. The first question comes from Flora Bocahut of Barclays.

Thank you. Good morning. The first question is on cost. Costs were much better than expected this quarter. It was in particular the case in the French retail banking division. So can you just elaborate on what the drivers of the lower cost base have been this quarter, and how sustainable you think this performance is. So basically, elaborate on the work you've been doing on the cost base here. And the second question is still on French retail, but this time on the RONI, the return on equity. I think you achieved almost 10% this quarter in French retail. Normally, it's only the beginning of the improvement in this division, so I'd be curious to know what kind of money you think you can get to in French retail on a multi-year view. Thank you.

Thank you very much. Good morning. On costs, it's two things. First, we do have benefits. linked to the fact that we do not spend CTA that much anymore, and that's a key driver. Let's be clear about this. Between these two quarters, Q124 and Q125, that's the most important impact. Now, as I said many times during this call and in meetings with investors, and in my conclusion, costs and the long-term improvements of the efficiency of the bank from a break-even standpoint, as much as from an efficiency, efficiency of spending, efficiency of investment, efficiency of our technology spend, et cetera, is a strategic core focus of ours. And we are implementing constantly new ideas in this space and trying to do even better beyond the big Vision 2025 project, which is also delivering its own share of savings. And so this is the combined result of this focus. Now, how sustainable that is, I mean, the efforts are targeted at sustainable cost reduction. So we're really working in the weeds of, again, cultural aspects, organization, and ways we engage our resources, again, both in terms of investments, technology spend, etc., etc., So it is sustainable, and we will continue this work. I mean, this quarter, because of the CTA, the performance is particularly strong, but you should expect from us a continued focus on this topic. On the RONI side, you're right, I think it's 9.5%, so close to 10% indeed. And normally, as you say, it is maybe not the beginning, because I think actually the bank and my predecessors have worked on this for a long time, and we are still focused on working further on improving the efficiency and the profitability of this division. So I don't think it's the beginning of the work, but it's clearly not the end. And as I said, as far as the costs are concerned, we are going to continue to focus on this. across the entire group, but in retail in particular, but also in terms of commercial momentum and in terms of making sure that we do everything we should be doing to support our clients, to acquire clients in this business, to retain clients in this business. So in a simple word, to sustain the commercial performance and the commercial dynamic, we will also do that part. So the combination of the cost action and the revenue action should continue to support positive development in terms of RONI in this business.

The next question is from Tariq El-Majad of Bank of America.

Hi, good morning and congratulations on this good quality set of results. Two questions from me as well. First, I will come back on costs. So I hear you about the focus and efforts on improving cost efficiency But if I do some, if I calculate, sorry, if I want to make sure that you reach below 60% cost income target in France and the group in 26, I calculate there's still five, 700 million cost savings to implement. This is considering actually consensus and not extrapolating the strong Q1 global market performance Where are the areas that you can still work on to address that gap and should we expect more fresh announcements in the future? And then the second question on capital return. Strong capital build this quarter. Doing some simple maths, if I start with 13.4% in Q1, I deduct 35 bps of FRTB to be conservative. and add 10, 15 bps of capital generation in Q2, that leads me to around 13.2% in first half. That's more than one basis point above 13% fully loaded Basel IV targets. Now, if I look at full year and add back FTB, because that's not being deducted this year, your CG1 reported will be above 13.6%, which actually could penalize your ROT progress growth. I mean, with this in mind, is it fair to expect more distribution in the second half this year, or is it fair to wait for the full year? And I would be happy to hear your thinking here. And last one, really little capital. I'm only asking because I'm asked 10 times a day by investors. What's your position on introducing an interim dividend for that topic? Thank you.

Thank you. Thank you very much, Tarek. So on interim dividends, I'll leave that to the one Spaniard on the team, so I'll leave that to Leo in a second. In terms of the costs first, as discussed in the past, you have two things that are stemming from the past efforts which are ongoing, which is, one, the continued delivery of the Vision 2025 savings, throughout 25, right? I think in terms of the branch mergers, we're now above 80%, well above 80% in terms of branch closures. That gives you a sense for where we are there. And so the full delivery and then in 26, the full impact of the savings there, the growth savings there, will be supporting the cost-to-income reduction, both at retail and group level. That's one factor. The second one, of course, remember, Avent is also in the middle of substantial restructuring and merger activity. As you can see in their own figures, the cost to income is now substantially better than it was last year, in line within the range of the objectives that were given there. And so you have still actually significant improvements to come in terms of cost to income from Avent that will benefit once again And then third, it's the entire scope of all the efforts that I keep on referring to across our ways of working, across our ways of spending, across our ways of engaging in technology, both investments and run the bank costs, et cetera. So we are working across the entire bank today, and we will continue to do so for the years to come. in terms of improving further our efficiency. And the combination of all three make us reasonably confident about next year's target. And, of course, I know you know, but there's also the Boursorama, the Boursobank input into this trajectory in terms of the positive GOI targets. and positive contribution of 300 million euros, which is also going to help. And lastly, as I said in my earlier answer, we are, of course, right, it's our job as bankers, we are also working on sustaining the revenue generation. And just to give you one example, so that it doesn't sound like just an empty statement, you know, our home loan production in Q1 in the French retail was up 115%. well, arguably from a low base, but still capturing a very significant market share in the French market in terms of home loan production. And as you know, it's an anchor product, and while in itself not hugely profitable, it's also a very low-risk product, but it is an anchor of the relationship and will help drive the top line up as well. So this is the combination of the factors that are going to make us deliver on our target there. In terms of capital return, well, I mean, you said it all, almost. I cannot disagree with you in terms of the fact that we have more than one basis point above 13%, and consistent with what we've said in the past, our target is 13%. As soon as we consider, as the board considers and management considers, but for board decision ultimately, that we have a sustainable buffer of excess capital above this target, we will act on it, the Board will act on it, through three ways. You know it, capital distribution to shareholders, organic growth, or inorganic growth. In the current circumstances, it is obvious that the first order analysis points to rather a combination of distribution of excess capital and organic growth than to anything else. And the main uncertainty for us to be able to qualify this excess as sustainable is indeed the FRTB. And once we have clarity about this, we will make decisions, right? And that's the spirit of it. And in terms of what's going to preside over the decision. It is clearly a disciplined and rational stewardship of our shareholders' capital. In terms of interim dividends?

Sure. So in terms of interim dividend, with my background, I think this is something that's very common in Spain. I always thought that this was very much related to the shareholders' structure, especially in Spain, where retail shareholders have... a broad part of the total shareholding space, and they're more, you know, eager for cash flows than anything else. Institutional investors have always been probably more focused on buybacks, which is financially, well, more accretive. Now, this is becoming a hot topic. On this regard, I think we, as Slavoj Mitya said, we had a very solid capital position. We are well on track to reach our return on tangible equity targets for the year, so I don't see any reason not to discuss this with the board, and we will do it, and it's finally their decision to make in the future.

So more to come, no philosophical opposition to it.

Thank you very much.

The next question is from Delphine Lee of J.P. Morgan. Good morning.

Thank you for taking my questions. First of all, I'd like to ask on French retail, just wondering if you're still confident about your previous guidance of NII being fairly stable this year. I hear your comments on your mortgage production being up quite significantly, but the volume trends are still a bit challenging, the deposit mix as well. So Just kind of wondering when we are going to see a bit of that inflection. And secondly, just a very quick one on your comment around capital and distribution. Does the general kind of environment and macro uncertainties around, you know, trades and tariffs, you know, change that view? Or do you think there is enough, considering the buffer on capital, to go ahead as soon as you have clarity on FRTV. Thank you.

Thank you. So on your first question, I see what you tried to do here, which is for me to confirm a guidance which I never gave. So that's not going to happen. There is no guidance on NII for SOCgen this year, but I'm going to give you some components which are the following, right? One, we have on the back of, as we discussed in the past, a rather conservative stance in terms of loan origination across the board. We have a trend from this perspective, which is stabilizing, but which was on the negative side in terms of growth of inventories, right? So this is going to stabilize, and we expect the book broadly to be also stable in terms of margins, right? So Indeed, this factor will be of stability, modest growth to stability. The very strong increase in terms of home loan production, as you know, is not a big driver of NII because of the net margin in France on this product, which, again, is a very low-risk product in France. is pretty low. The good news is that it's positive and no longer deeply negative like it used to be in the last two years. So this will be on the margin basically neutral. Let's call it neutral. And then from a deposit perspective, again, our expectation is that we will have something stable to slightly up in terms of inventories with potentially some, let's say, marginal negative effect from deposit beta, likely compensated by, you know, the Livret A tailwind, which we already sought to have with it having gone down to 240%, as you know. And we also expect... the formula to be applied, which today points to a further decrease in August on this point. So if you take all these factors, they point to something which is fairly stable, and I remind you that it's $1.61 billion this quarter, which points to, if you multiply by four, to a certain number, which is not our guidance. So that's on French retail. Capital and distribution. The short answer is our target is 30. So when I took over as the CEO of the group, as you certainly remember, this was a major decision that was taken by the board at my recommendation and obviously was framing somewhat parts of our strategy for this first cycle of three years. And it was precisely the idea that 12%, the previous target, was not enough. It was not enough to be comfortable, to have the right strategic autonomy in terms of weathering crisis, in terms of seizing opportunities, et cetera, et cetera. And so this is why we moved from 12 to 13, which is a substantial increase in the buffer that we have over the MDA. and precisely so that when things get more uncertain and or opportunities arise, we don't have any pressure from this perspective. So this is the answer. The target doesn't change today because of the current environment, and that's, I hope, clear.

Great. Thank you very much.

Thank you.

The next question comes from Matthew Clark of Mediobanca.

Hello. So firstly, another question on capital, please. Could you say whether VAR breaches or counterparty risk or anything like that as a result of April volatility are likely to have a noticeable impact on your risk-weighted assets for the second quarter, just any comfort you can give on how you've fared in the recent volatility? And then a sort of Similar question, but from the opposite direction. Your market risk went down in the first quarter, despite clearly lots of opportunities in the market. Do you think you were leaving money on the table there? Could you be more aggressive? Or do you think that really you were deploying as much capital as you think it was prudent to do in that environment? And then a final question on French retail NILA. Again, when I try to reverse out the scope impact of the sale of Switzerland from your year-on-year growth numbers, it sort of suggests a 30 million-ish impact there, which seems a bit high, intuitively to me. So can you just confirm what the scope impact of the first quarter versus fourth quarter was on NII, and then what the remaining impact that yet to come through in subsequent quarters is from the sale of the UK business. Thank you.

All right. So was there any noticeable impact on our market risk in Q2? Without going too much into the details, the answer would be no. So market risk down, are we leaving money on the table? I mean, clearly, right, when you run a bank, you can always take more risk, right? That's always an option. It's not ours. I think we have, and I have a pretty consistent track record of trying to balance the opportunities with risk management. And I think in specifically the global markets, as you can see, we're faring well. We are going to be... most likely in a central scenario above the top range of our guidance by the end of the year, given the performance of Q1. But I want to emphasize that indeed this performance is achieved with minus 70% on our stress test consumption versus 2020. So It is a strategic stance that we have in this business to run it with a low risk profile, and that's not going to change. In terms of the impact of the private banking disposals, it's $35 million per quarter of NII that was sold, if you will. You know, the closings were during the middle. I mean, if you balance both, it was mid-quarter, right? So you do the math, but more or less 35 million euros of NII that was sold, 35 million euros per quarter. And that's both businesses, UK and Switzerland. Okay, thank you. Thank you.

The next question is from Giulia Miotto of Morgan Stanley.

Yes, hi, good morning. My first question is on this year's target, RTE above 8%, cost income below 66%. Why not upgrade these targets? Because it seems like you're way ahead of them. Is there anything negative you see coming? Or, yeah, any comment there? And then, secondly... Finnish banks have a very good asset liability management disclosure in terms of hedges, in terms of, you know, alco portfolio duration, yields and all of that. Leo, is there a plan to bring something similar to SovGem? Because I think the market would benefit from better visibility on, yeah, on hedges. And I'm not talking about just French retailers. I know we talk about it a lot in general, but I think having a better understanding of the group and AI evolution would be beneficial. Thank you.

Thank you. So on targets, listen, I mean, the statement we want to make is the following. It's twofold. One, We historically tend not to change targets during the year because, again, right, to some extent our job is to run the bank. We gave you a vision at the beginning of the year in some form of a central scenario about where we wanted to land at a minimum, right? Of course, that's one statement. And so as a matter of policy, we tend not to change the guidance. Second statement. Of course, in a central scenario, in our current central scenario, based on what we have done in Q1 and what we see of April, so to speak, we do expect in the central scenario to outperform our targets. In terms of ALM, well, listen, you know, we have various circles, right, in terms of benchmarks. Our first circle is France, and we're trying to be among the best in terms of disclosure in France. So you have a number of data or sensitivities that we've given in the past. of course, in terms of the overall sensitivity to rates, but we also gave way back at the CMD, I think, actually, 18 months ago, some indication of the sensitivity in terms of site deposit inventories, etc. So, I mean, we are going to continue to monitor what the benchmark is, and clearly, I mean, our general stance is to be as transparent and as precise as possible. And so we will continue to try and improve that. That's all I can say at this point.

Thanks. Yes, we are asking the same question to the other French banks. I think the French are very good at disclosing these things. So I would benchmark Soggen against the pan-European banks. But thank you very much.

We choose our benchmark eventually, right? I mean, I'm with you. I'm with you.

Okay, thank you. The next question, sir, is from Pierre Chédéville of CIC Market Solutions.

Yes, good morning. I have one question regarding HGSS. I know that your strategic review is a constant process, but I was wondering if now you consider that HGSS is complementary from your activities in China. global markets, for instance, or global banking. What is your view on this asset? And regarding asset financing, you mentioned a good performance this quarter, and I was wondering what type of asset were you financing, shipping, aircraft, or anything else, and how do you see the evolution of asset financing in the current environment? Thank you. Thank you.

Thank you. On the SGSS business, let me make two statements. One, it is a business in our shop which is deeply embedded in the value chain of the group. So it's a business which obviously works with a number of our GBIS customers. clients and not only, we have issuer services, we have investor services there, we have a retail component which is also important, very much connected to obviously our retail businesses in France. So from this perspective, it is complementary to our activities and it is part of what we need to take into account when considering strategic aspects around this business. On the other hand, It is also clear that it's a fundamentally scale-driven business. And there, I would not surprise you by saying from a scale perspective, it's probably something that is a bit of a bind for us at this point. And so as in everything within any strategic consideration, you want to balance all the aspects and make sure that that you have a sustainable business. And so we're constantly, like for any other business in our portfolio, you know, making sure that we both understand what is the standalone capacity for a given business to develop, to grow at a sustainable pace and with a decent contribution to the group profitability versus what are the other options. And this is no different for SGSS. But again, it's a little bit of both, right? Scale questions, on the other hand, high level of complementarity and synergies within our group. In terms of the asset finance, it's mostly infrastructure and some real estate, which fueled the growth this quarter. I mean, going forward, the way we think about this in the end is, are we financing the right assets from an economic cycle perspective, from a long-term perspective, investment rational perspective in terms of the infrastructure. And there, many opportunities exist, as you know, because many regions and countries in the world have a profound need to deepen, expand better their infrastructure. And we are there for this all over the world. And from this perspective, it's a very diversified business. And second, at the right price. And so this is what drives... uh... our our culture here uh... because we are focused obviously on the long-term risk management of the bank in this uh... business as you know and and it has a very strong track record has uh... had uh... for a decade and so we're still focused on this we believe that depending on the macro scenario uh... within the an unchanged base case scenario of slower yet clearly positive growth globally we think it's a business which is going to thrive In a scenario where there's a bigger downturn, bigger slowdown, it's a business which is going to slow down. But again, the good news is that some of that is linked to critical infrastructure that will not be stopped in terms of investment policies, et cetera, anytime soon.

Thank you very much.

Thank you.

The next question is from Kiri Vijayaraja of HSBC.

Yes, good morning, everyone. A couple of questions, if I may. So firstly, just on your IFRS 9 provisioning and your macro scenarios, assumptions, et cetera, when I look at slide four and that box on the left, is the message that the tariff impact and the fiscal stimulus side largely offset each other? So you're kind of confident that there's no need to alter your input assumptions for now? Or is it more a case that actually you're going to have to wait until mid-year or even year-end to make a more thorough assessment as things get a bit clearer. So how should we interpret the message on the macro assumptions, you know, for the purposes of IFRS 9? And then on the excess capital position at Avens, I know it's very, very early days, but hypothetically, if Avens were to do a share buyback, you know, would SockGen participate pro rata? Would you like to let your percent ownership in Avens creep up? So just your thoughts there. Because AVENS as well is in a position where they should be contemplating extra capital return as well. Thank you. Thank you.

On the first topic, so maybe let me explain once again what we've done this quarter. You know, most of cost of risk, most of cost of risk is a fact, not an opinion, right? And there's a dimension of opinion in the forward-looking provisions, of course, but which are which still need to be grounded in a proper analysis, proper scenario development, and proper documentation. So what happened this quarter is our standard NCR on the back book, if you will, was very low. on the S1, S2 side by a write-back on a significant single counterparty provision that we had, which we wrote back. And this is why you see only 14 million, if I'm not mistaken, which went into increasing the S1, S2 inventory. But it actually is significantly more because of that write-back. So we took position to cover some of the uncertainty that was rising clearly in Q1 in terms of forward looking. And it's, you know, let's say more substantial number than 14 million. And this is why we feel comfortable at this point. Now, to your very statement, about the thorough assessment and the timing of it, you are absolutely right. It is way too soon to have a final opinion on the topic. And as I said, depending on where the tariffs land, but also on how beyond the mechanical adjustments in terms of supply chain structure, in terms of regionalization of production for our clients, etc., It will cause disruption, bigger or smaller, depending on the tariffs, et cetera, and it will impact the macro scenario in ways which at this point we cannot yet characterize. Now, we have already before that, we had a pretty conservative macroeconomic scenario, which we have adjusted slightly downward to something which remains positive in terms of global growth at this point, yet clearly muted in a number of jurisdictions and something around that kind of central scenario. Depending on the outcome, yes, we might revise that, but obviously it could be revised both ways to some extent. We don't yet know. And then the other impact, and that's not really your question, is obviously market volatility, but I spoke to this earlier. We do maintain a conservative approach in terms of working through the volatility, and it has been supportive of our business so far. In terms of the excess capital at AVENS, like for SOGGEN, we do not have as a policy to run excess capital in AVENS, and this will be considered in due time by the Board of and we will act as a rational shareholder. Now, increasing our participation further is a matter of strategic decision and a matter of managing excess capital, which is going to be assessed within that kind of effort by the SOCGEN board when the time comes.

Understood. Thank you, Slavomir.

Cheers. Thank you.

The next question is from Anke Reingen of RBC.

Yeah, thank you for taking my questions. The first one, sorry, just coming back on costs. I just noted the slow growth in the cost in CIB in spite of the strong revenue growth. And I just want to make sure that's basically because some of the cost savings coming through, not because there could potentially be like a two-up later in the year. And in terms of cost savings, I don't know if you've given it by like an absolute number, your target for 2025 and maybe just on how far or how much is realized at the Q1 stage. And then secondly, on Bolsa Banka, I mean, the new acquisitions in Q1 are still running at a relatively high level. I'm just trying to understand if you changed anything in terms of your view slowing down customer acquisitions or is it just, I mean, is it now cheaper or more opportune to go the customer base at the moment? Thank you very much.

Thank you. So on the cost side within GBIS, very simple statement. The variable compensation linked to the performance of Q1 has been accounted for. So there will be no true-up based on this, and so the number you see is the real number, and indeed it comes from a combination of higher costs mostly linked to performance, I mean linked to the higher performance, offset by continued efforts on the cost base. Like I said, the focus of ours across the entire group, I'll leave the second portion of your cost answer to Leo in a second, and I'm going to address the acquisition levels in Boursaubanque. So the strategy for Boursaubanque is unchanged, meaning it is maximizing the growth potential in terms of client base, in terms of client acquisition for this asset. which again is of strategic importance for SOGGEN and actually for the French market I would venture in terms of retail banking for the next decade. And we are going to continue to act on the opportunity, if you will, within the framework of our strategy, which was acquisition. with up to €150 million of negative GOI investment. And the good news is that we're doing much better from this perspective because we are operating the strategy, the growth strategy at basically zero net income for this business. So, Boursaux Banque continues to deliver a slightly positive net income to the group, which is again better than what we initially had intended to do while maintaining a very high pace of high quality origination. and with maintaining a very high ranking in terms of client and customer feedback, customer quality being number one once again, and with a very low churn. So right now we're operating the strategy in a very successful way. We continue to do so within the framework of the CMD strategy. Leo, just under that one last point on costs.

Sure. So, hi, thank you. Good morning. Basically, we have given a guidance for 25. Our guidance was that after disposals, we expect our cost line to go down 1% in net terms versus 2024. So this compares to the 4.4 that we had in the quarter. Of course, this quarter, it was impacted by a significant reduction in transformation charges versus Q1 last year. But there's still some more to come in terms of lower transformation charges this year. We did around 650 last year. We are expecting to do around 300 this year. So that should be a total of 350 down. We did around 280 in the first Q. And then also we have some short in Q1, which we also, I also tried to tackle before, like the taxes on the variable compensation, which is a one-off for Q1. and also the Bernstein perimeter effect, which will not be there in the coming quarters. In other words, we are very much committed to actually exceeding our target in this minus 1% net cost reduction for the year.

Thank you.

Thank you.

The next question is from Jacques-Henri Goulart of Kepler-Shiver.

Yes, good morning. Well done on the results. Two questions. First, on the corporate center on the slide 22, you're mentioning the management action to more efficiently use excess liquidity. Can I assume that this improvement is something that could actually linger now structurally in the corporate center? Just to give the guidance up there, just in case. And the second question, more generally, is on the equities business, on which really you have phenomenal performance, which is not totally intuitive, considering that some of your competitors have been much more vocal about how much they spend and everything. What is your ambition for that business eventually, I would say, two, three years down the road? And maybe a little bit link that to your fixed income business, which is probably not as big as you would wish it to be. Or do you view those two businesses are a little bit more independent? Thank you.

So on the first question, I'll leave that to Leo, but I'm going to start by answering the second one. Thank you very much, Jacques-Henri. So, I mean, on equities, we have the ambition of continuing to operate this business with a very much low risk profile and contained risk profile if you compare to our historical let's say, management of this business, especially, you know, if you take the reference point of 2020, and I've given the figure about the stress test, which I think is eloquent, and which is synthetic, but eloquent. So we want to continue doing this while continuing to enhance our client footprint. In the end, this is the strategy, right? So making sure that while not substantially increasing our risks, we continue to increase the depth of the client franchise. For instance, the investment in Bernstein was part of this strategy. As you know, only part of Bernstein is today integrated in the top line of the equities, but we continue, obviously, to go through the integration and improve our performance there. It is very good in terms of the secondary flows of the ECM part is obviously a little subdued, but we are very confident that this will contribute to this increase in client revenues at that part of the market shop. In terms of the fixed income, it is somewhat independent. I mean, it's a different asset class that has its own opportunities and challenges. in given markets. As you know, we have a footprint which is slightly different from our peers. So we tend to be overweight on rates, right? And so when we have strong trends and strong opportunities from a hedging perspective, hedging needs perspective for the clients, et cetera, we tend to fare well and better, let's say, than average. When it's more commodities or credit-driven situation in a given quarter, we tend to fare less well than the others. I'll make one technical comment on this in a second. And lastly, when it's a trend which is, and remember also commodities, is something we don't do anymore in this business, like the way we used to 10 years ago. And so these are usually like the discrepancies you will see between our performance and the performance of others, depending on what the trend were at the sub-asset class level. One technical comment. Remember, part of what is in the credit business elsewhere, part of it, like the one which is linked to asset-backed products and securitization, in our case, is largely accounted for in the global banking business, right? Because historically, this is how we developed this business. And so what you... see sometimes is that part of that credit content overperforms at the global banking division rather than at the FIG division. It was, for instance, the case last quarter. So that's for that business. And the ambitions, again, right? I mean, it is to deliver within the range, listen, most likely towards the top end of the range or slightly above the range, you know, when we will update... the strategic plan at some point. We will obviously make sure that we update very thoroughly this part of the guidance. Leo?

Sure. So just as a reminder, the corporate center has basically two main roles. First, to manage the structural interest rates and exchange rate risks for the group. And second, to steer the scale resources. This is liquidity and capital. In other words, we have the cost of the buffers about the regulatory minimum or the internal targets for both liquidity and capital kept at the group level. On this regard, we have launched several initiatives to progressively reduce the cost borne by the corporate center by, for example, optimizing the level of our liquidity, which is what we have done with this board. We were operating with high levels of liquidity last year. LCR was as high as 160% plus at the end of last year. So we have started to reduce the borne of that excess liquidity, which we don't need to steer our We have guided before that we want to run the bank with an LCR in the region of 130 percent. So what we did this quarter is we reduced the surplus of cash basically through lower borrowing of very short-term cash by the Treasury and a greater consumption of cash by the businesses. So it's the normal activity that we want to foster in the coming quarters, which is to steer in a better way the corporate center by reducing the born of this axis of liquidity and capital. Thank you.

The next question is from Sharaf Kumar of Deutsche Bank.

Good morning. Thank you for taking my questions. I just have one left. Can you provide us the USD exposures in terms of revenues and costs? Also, is there any CET1 sensitivity on account of the USD depreciation? Thank you.

Thank you. I'll leave this question to Leo.

Sure. So basically, we have a sensitivity of around one, less than two basis points for a 10% appreciation or depreciation. Actually, if the dollar depreciates, we have negative impact of a little bit less than two basis points every 10%. And again, if the DORA appreciates, it's the other way around. So, we have a positive sensitivity of around close to two basis points for this 10 percent movement. As for the P&L, actually, our sensitivity to a 10 percent move, it's less than 2 percent of GOY. Again, in the same direction. Depreciation would be bad for the bank, and appreciation would be good for the P&L.

Thank you very much.

The next question is from Joseph Dickerson of Jefferies.

Hi, thank you. Firstly, just to point a clarification on the interim dividend consideration, I presume that's for this year's dividend. Can you clarify that? And then going back to the question on Borso Bank, clearly by the end of Q2, assuming similar run rates you'll be at, are about the $8 million magic number for customers. Would you expect in the second half that some of the customer acquisition costs can fall away so that next year we're still looking at greater than $300 million of earnings? And staying on Borsa, the 16% deposit growth, has there been any amplification there in the first quarter from the Boursault first launch in December? Thank you.

So on the interim dividend, yes, the answer is yes. It's this year's business, not without prejudice to the decision, but it's this year's business. In terms of Boursault Bank, So the idea is we, again, committed to the growth strategy up until the end of 2025 with the idea that we would spend 150 million euro of negative GOI, so to speak. So we're doing much better in terms of the spend, and we're doing well in terms of acquisition, and we're going to continue to do this until the end of 2025. Also, because as you implicitly pointed out, remember the rates are going down, right? So from this perspective, the more customer and inventories of deposits and loans, et cetera, we have, the better for the 2026 performance. Lastly, in terms of the deposit growth versus client acquisition, I think it's 20% client acquisition, 16%. The deposit growth, which, by the way, shows you the value creation that happens substantially as we execute this growth strategy. It is with high content and not just client numbers. It's with high content because Boursaubanque is a full-fledged bank with a deep and wide product offer. Right. Is this helped by Bursa First right now? Not yet in a material way at the size that Bursa Bank has today. But the first results are very encouraging. And while I'm not going to disclose the number, but the average balance per Bursa First client is very high. and more of, let's say, a lower level of retail private banking rather than retail banking, right? So we're very much encouraged, but it doesn't yet show, you know, in the €45 billion of deposits for Boursaumont. So I think there's no more questions. So let me just... I'll say two more things before I conclude. One, we have posted a very strong performance, which puts us well ahead of the annual targets, right? So today we are in a position that in a central scenario we are likely to outperform them. And in terms of the capital distribution, because it was logically a focus of this call, again, right, everything above 13 sustainably is excess. And the core trigger for considering a strategic decision by the board is the final decision on FRTV, which we expect in Q2. And so based on this market factor, market fact, we will move on to make a decision on the excess capital management. With that, I thank you very much for your time, and I wish you a good, busy day, and see you, I mean, or talk to you in July for the Q2. Thank you very much. Take care.

Thank you very much. Bye.

Ladies and gentlemen, this concludes today's CCTA General Conference call. Thank you for your participation. You may now disconnect.