Societe Generle Ord

Thank you for holding. The conference will begin shortly. 🎵 🎵 Thank you. Welcome to the Societe Generale conference call. At any time during the presentation you may press star and 1 to enter the queue for the Q&A session. Thank you for holding. The conference will begin shortly. © transcript Emily Beynon Thank you for holding. The conference will begin shortly. Thank you. Thank you. Thank you. Thank you. © transcript Emily Beynon Ladies and gentlemen, welcome to the Societe Generale first quarter 2026 results conference call. I will now hand over to Mr. Slavomir Krupa, Chief Executive Officer. Sir, please go ahead.

Thank you. Good morning, everyone, and thank you for joining us today on what I know is a busy morning. Leo and I are very pleased to present our results for the first quarter in what is the final year of our current strategic roadmap. We all know the volatility of the environment we operate in. It's complex, to say the least. And yet, once again, we continued our strong momentum in Q1 26. Here are some of the highlights that demonstrate how we are progressing with discipline towards the targets we have set for 2026. We delivered a strong profitability with a ROTI of 11.7% in Q1 26, which is well above our full-year target. Specifically, our revenues are slightly up by 0.3% versus Q1 25 on a reported basis and up 4.4% at constant perimeter and exchange rates. As you know, our absolute commitment to cost reductions continues to yield results. We further decreased our costs by minus 6% versus Q125, and minus 2.6% at constant perimeter and exchange rates. This translates into a cost-to-income ratio of 60.9%, or 57.6 when linearizing IFRIC 21 taxes, which were fully paid in Q1 26. It's in line with our end-of-year target of a cost-to-income ratio below 60%. We maintain a low cost of risk at 25 basis points for the quarter, and it is at the low end of our guidance for the year. We achieve this through rigorous risk management, and the quality of our credit portfolio is strong. Finally, we maintain a solid capital position with a C2 on ratio of 13.5% at the end of the first quarter of 26. These results, made possible by focused execution and discipline, are what we expect of ourselves in delivering on our financial targets. Now let me hand over to Leo to review our Q1 26 performance.

Thank you, Slavoj Mir and good morning, everyone. Moving on to slide six, we can see the key drivers of the revenue evolution in Q126. We posted a 0.3% increase in reported revenues versus Q125. First impact that we can see on the bridge, it's driven by the impact of disposals completed in 2025, with an overall impact amounting to minus 154 million euros in Q126. It's worth remembering that the overall revenue disposal impact for 26 versus 25 is largely concentrated in Q1 26. As a reminder, the main disposals completed in 25 were SCEF, private banking activities in the UK and Switzerland, and Guinea-Conakry. On the other hand, at constant perimeter and exchange rate, group revenues are strongly up by 4.4% versus Q1 25. Focusing on the businesses, Revenues in French retail, private banking, and insurance increased by 10.7% at constant perimeter and exchange rates, mainly driven by a strong momentum in net interest income, which grew by 13.8%. Revenues at global banking and investor solutions were slightly down this quarter by 0.5% at constant perimeter and exchange rates versus a very high Q125 due to less conducive market conditions. Finally, revenues in mobility, international retail banking, and financial services continue to grow by 2.9% versus Q125 at constant perimeter and exchange rates. As is already stated, our commitment to reducing our cost base is absolute, and this is precisely what is shown in this slide. are decreasing by 6% between Q1-25 and Q1-26 on a reported basis, and by 2.6% at constant perimeter and exchange rates. This decrease is resulting from disposals, which explain a variation of 100 million euros, an FX impact of minus 57 million euros, lower transformation charges as guided by 62 million euros, and a net cost decrease of 55 million euros, reflecting the savings generated quarter after quarter. The result? the group's operating leverage is improving, as you can see on the right-hand side of the slide. Indeed, the group customer income ratio is falling by more than 4 percentage points from 65% in Q125 to 60.9% in Q126, or 57.6% with IFRIC 21 linearization, which will already be below our below 60% 2026 targets. One last important point I would like to highlight on this slide is that all pillars are within their 2026 customer income radio target. Moving on to cost of risk on slide seven, cost of risk for the quarter stands at 25 basis points. This is at the low end of our 2026 guidance range between 25 and 30 basis points, thanks to our sound risk management framework. The cost of risk this quarter mainly comprises of the Stage 3 provisions, which account for €348 million and declined by 20% versus Q4-25. In Stage 1 and 2 provisions, we had limited net allowance of €7 million, which conceals our prudent approach in an uncertain and complex environment, including forward-looking overlays relating to the geopolitical crisis, which were broadly offset by some reversals. As a result, Total outstanding Stage 1 and Stage 2 provisions remain stable at a high level of 2.9 billion euros, representing around two years of cost of risk. Overall asset quality, on the other hand, remains very solid, as illustrated by the NPL ratio at 2.75% in Q1-26, decreasing when compared to both last quarter and last year. And finally, the net coverage ratio remains high at 82% in Q1-26, stable versus Q4-25. Let's now turn on to slide eight, where we can see the evolution of our strong capital position. Group CT1 ratio stands at 13.5% at the end of Q126, representing a strong buffer over MDA of around 325 basis points. It is stable compared to Q425 level. Going through the bridge on the slide from left to right, retained earnings contributed to an increase of 20 basis points after accruing a 50% payout. RWA organic growth represents an impact of minus 2 basis points. Given the evolution of market parameters during the last quarter, OCI and PVA represent an impact of minus 3 basis points. As stated in the UOD, the consolidation of Bernstein activities in the U.S. had an impact of minus 6 basis points. And finally, we have regulatory and other impacts which represent minus 7 basis points. In addition, as you can see at the bottom right-hand side of the slide, All other capital ratios are comfortably above the regulatory requirements. On slide 9, liquidity reserves remain high at €334 billion in Q126, with a balanced mix between cash and securities. The liquidity profile of the group remains strong, with sound liquidity ratios. The LCR ratio stands at 149% this quarter, and the NSFR ratio was 117%, both well above regulatory requirements and in line with our student targets. 55% of the 2026 long-term funding program has already been completed, driven by a good access to liquidity in all currencies on the back of strong long-term ratings from all agencies. The deposit base remains strong, granular, and highly diversified. And overall, the loan-to-debit ratio stands at 76% at group level. In slide 10, we show a summary of the P&L of the group for Q126, which we will cover in more detail in the following slides. Let's move now to the individual businesses, starting on slide 12 with subject network, private banking, and insurance. In Q126, loans outstanding were stable compared with last year. It would exclude state-guaranteed loans, this is BGEs. Outstanding deposits fell by 2% versus Q125. Within a context of continued growth, of retail savings and investment products. These off-balance sheet products contribute to the continued strong momentum in overall assets gathering. On one hand, AUMs in private banking reached a record high of 138 billion euros at the end of March 26, increasing by 6% versus Q125. On the other side, life insurance outstandings reached record level of 159 billion, increasing by 8% versus Q125, thanks to record high net inflows. Moving now on to BursaBank. As we can see, commercial performance remains very strong within the asset and administration gathering, which continue to grow steadily, reaching 80 billion euros at the end of March, or around 9,000 euros per client. This represents a 15% increase versus Q125, helped by the continued strong increase in deposits of 12% versus Q125. Similarly, life insurance outstandings increased by 14% versus Q125, with a high proportion, 48%, of unit-linked products. Ursabank also saw record number of market orders at 4 million, representing an increase of 30% compared to Q125. On the lending side, total loans outstandings are up by 8% versus Q125. Ursabank serves now 8.9 million clients, This quarter, Bruxelles Bank achieved the best NPS score in the French banking sector. The bank was also awarded the number one position in customer relationship among French banks. In Q126, Bruxelles Bank's net income stands at €92 million, well on track to reach the 2026 target of €300 million. Finally, the RONI for the bank stood at 65.9%, a very good proof of the profitability of this model. Looking now at the whole pillar on slide 14, French retail, private banking, and insurance posted a strong increase in revenues of 8.9% versus Q125, which include a 12% growth in NII. At the same time, operating expenses fell by 4.6% from Q125. As a result, the cost-to-income ratio stood at 59.7% in Q126, which represents a substantial improvement of 8.4 percentage points since Q125. All in all, the net income lands at 625 million euros for the quarter, or 48.4% up versus Q1 2025, with the revenue at 13.7% versus 9.5% last year. Let's move now to global markets and investor services on slide 15. Global markets consolidated another good quarter compared to a high base in Q1 2025, with the revenue decrease of 3.9% versus Q1 2025, and a slight increase of 0.5% at constant currency. Equities posted a record quarter with revenues up 5.5% versus Q1 2025. If we adjust for the material depreciation of the U.S. dollars versus Q1 2025, equity revenues would have increased by 10.9% at constant currency. This sound quarter was supported by strong activity levels in flow products. Performance in financial activities was also strong, showing increased volumes in prime brokerage. In fixed income and currencies, revenues declined by 18.2% versus Q125, or by 15.1% at constant currency. Same as in previous quarters, we were impacted by our large weighting in rates Europe. Lower revenues resulted from a high volatility, tight spreads in environment, which limited our ability to monetize flows. Lastly, security services revenues grew by 7.7%, versus Q125 on the back of a strong commercial momentum in all of the key markets. Let's turn now to slide 16 on the evolution of financing and advisory. Revenues declined by 8.6% versus Q125 and by 3.8% at constant currency. Revenues in global banking and advisory declined by 10.7% versus Q125 or by 5% at constant currency. The comparative reflects a strong base effect as Q125 was our best Q1 ever, and it also reflects softer activity in investment banking. Having said that, the commercial momentum remained solid, and origination revenues continued to increase across key sectors, including infrastructure or telecom and media. Lastly, in transaction banking and payment services, revenues declined by 2.4% versus Q125 on a reported basis, but remained stable when adjusted for the currency impact. The strong commercial activity with sustained growth in corporate deposits was upset by the negative impact of interest rates. And now moving to slide 17 for the overall view of GBIS. At the pillar level, revenues declined by 4.9% versus Q125. In the quarter, we maintained a disciplined cost margin management and the reduction of operating expenses by minus 1.9% versus Q125, resulted in a cost-to-income ratio of 62.5% in Q1-26. At the same time, cost of risk remained low at 12 basis points in Q1-26, almost as stable versus Q1-25. All in all, TBIS posted a net income of €773 million in Q1-26, down by 9.7% versus Q1-25, and resulted into a high RONI of 18.3%. Few words now on international banking in slide 18. This quarter, the business posted higher revenues up 2% versus Q125 at constant perimeter and exchange rates. We saw strong commercial momentum in both Czech Republic and Romania. Overall loans were up 6% and deposits 10% compared to Q125 at constant perimeter and exchange rates. We observed stable revenues over this period, mainly due to positive one-off on fee income in Q125 in both countries, while NII continued to increase. In Africa, mixed situations in geographies led to broadly stable outstanding in both loan and deposits versus Q125 at constant perimeter and exchange rate. Revenues, on the other hand, increased by 5% versus Q125 at constant perimeter and exchange rates, thanks to higher level both in NII and fees. Moving on to mobility and financial services, in slide 20, the division grew by 3.7% at constant perimeter and exchange rates. This is excluding SKAF, which was disposed in Q125. AVENS posted a revenue growth of 1.7% versus Q125 at sub-gen level, supported by higher margins. The strategic focus on profitability is paying off, with a strong margin at 587 basis points, up by 25 basis points compared to Q125. The normalization of results of used car sales is still ongoing, but partially upset by the lower level of depreciation adjustments. The used car sales results per car stood at 470 euros in Q126. within the target range of 600 to 200 for the year. When adjusted from non-recurrent items, the revenues in total decreased by 1.6% in Q126. Consumer finance business posted a strong financial performance this quarter, with revenues up 13.9%, notably thanks to better margins despite a challenging environment. Now, a pillar level on slide 20. MIPS delivered an increase in revenues of 2.9% in Q126 versus Q125 at constant perimeter and exchange rates. On the other hand, we maintained a very disciplined cost management, which can be seen in the strong decrease of cost by 5.3% in Q126 at constant perimeter and exchange rates. As a result, the cost-to-income ratio improved significantly by 5.3 percentage points versus Q125, standing at 53.7%. Cost of rates this quarter stood at 40 basis points, compared to the 31 basis points in Q125, which was a low base and included some write-backs. All in all, MIPS posted a net income of €365 million, representing an increase of 21.6% versus Q125 at constant perimeter and exchange rates, reaching a RONI of 13.7%, up by 2.5 percentage points. To conclude with these quarterly results, let's move on quickly to slide 21 with the Corporate Center. This quarter, the disposal of real estate property in France was booked in net profit or losses from other assets. As a reminder, in Q125, the accounting impacts from the disposals of SGEF, private banking in Switzerland and the UK, were also booked in net profits or losses from other assets. Let me now give back the floor to Stavemir.

Thank you, Leo. Now with regards to sustainable development, we continue to pursue the ambitions we set in the decarbonization of portfolios, and we continue to deliver solutions to our clients facing new challenges. With the global transition lagging, for instance, the need to adapt to climate events presents new challenges, but also new opportunities. The United Nations study projects the demand for adaptation investments to reach more than $1 trillion per year by 2030. Our deep expertise in climate transitions, our sector knowledge, and our longstanding client relationships give us a unique position to be the partner of choice for our clients adapting to climate change. For instance, we developed unique solutions with regards to water, providing financing to landmark projects around the world, notably in desalination and large-scale water treatment projects. We also supported one of the largest projects in the U.S. to establish new forests on lands that were not forests before, a process called afforestation. All these efforts continue to be recognized by external stakeholders with top ratings and industry awards. Disciplined execution, higher efficiency, higher profitability, and consistent performance quarter after quarter. These are the cornerstones on which we deliver on our targets. And continue to expect this from us because this is what we expect of ourselves. Thank you very much. We will now open the Q&A session and kindly remind everyone to limit themselves 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 touchstone telephone. The first question comes from Tariq El-Majad of Bank of America.

Hi, good morning. So two questions, please. The first one, I mean, it's good to see that earnings grew and you reported a good ROTE despite a weak CAB. And also the mix looks better with more sustainable, I would say, retail business in France. But, I mean, can you still comment a bit on the CIB just to understand what worked and did not work in this quarter, especially in regards to the U.S. banks' performance? I know it's different geography and mix, but there was some good and bad volatility in how actually your business performed that environment. And maybe you can comment on the FX effects from Q2 and how that could impact your business in the IAB. And the second question is on Bursa Bank. Thanks for sharing the net profit for the quarter. You are good on track for the $300 million for this year, but we cannot notice that you've slowed down a bit the client acquisition. I mean, the question is more, to be fair, on Beyond26. Understand how do you square or reconcile between big ambitions to grow clients in Bursa Bank and actually the profitability of this division. Thank you.

Thank you. Hello, Tarek. So on the CIB, you see it in the figures. You have markets down 3.9%, which is a combination of a very strong record quarter for equities, which rode the market conditions, if you will, very well across the entire product suite. And another performance of fixed income, which is due largely to the mix, right? So remember, our main business within our fixed income division is euro rates. And I'm sure you've noticed across the publications of most of our publications that this particular business, because of the moves in terms of rates, short-term rates in Europe and volatility, was one which was dragging the performance down because basically the hedging conditions were much more difficult. And so that's the heart of the answer. I'll point to another very big difference in the mix is that what we call principal commodities, which is a business which we used to run, I don't know, six years ago or so, and which we closed back then, was a strong contributor to the fixed income mix of some of our competitors. I mean, nothing else than simply market conditions which were particularly unfavorable to what is the biggest business we have in our mix. So I just want to still point you to, indeed, the RONI of that subdivision, Global Markets and Investors Solutions, which is 25.4%. So that's for the market. And you have a forex effect indeed, and it's well seen, for instance, in the F&A numbers, which are roughly 10% down on the reported basis, which translates into a 5% down at constant rate. FX rates, and this is mostly explained by, first of all, a very high performance record quarter last year, the FX, as I just gave you the figures, and yes, slightly subdued market conditions in the pure IB space for obvious reasons. But again, nothing structural nor... particularly strong in terms of effects there. So going forward, I mean, we have a portion of our business which is in CIB dollar denominated, and you know, of course, there will be impacts both ways, depending on what happens on the macro side on the FX front. In terms of Boursaubanque, I mean, yes, of course, there is a slowdown in acquisition, and this was exactly the commitment we made, which is to deliver a certain level of bottom line. And as I commented in the past, which also gives us the opportunity to challenge ourselves in terms of the acquisition cost, the acquisition strategy, and so on and so forth. But indeed, in 2026, the mix that we chose to deliver is a mix where growth slows down significantly and where the profitability goes up significantly, as you can see in Q1. Beyond 2026, the Bourse Bank assets and opportunity from a strategic standpoint is one of substantial growth and substantial profitable growth and this is how we will be managing this and at 10 million say at 10 million clients this is not a mature level for this asset we believe that down the road target in terms of number of clients on the French market for Boursaumont will be more 20 to 25 it's going to take the amount of time it's going to take and the way to deliver this growth will be a way where we balance in a slightly different way the growth versus the profitability. And we will be targeting basically the maximum amount of growth above a certain hurdle rate in terms of returns. And we will be discussing this in detail in September. Thank you.

The next question is from Flora Bocahut of Barclays.

Yes, good morning. I'd like to ask a question on BOSSO again. Obviously, thank you for providing us with the net profit number this year, this quarter, and it's a lot more than expected. Can I just ask you for more details around the P&L drivers of that performance? Because I see also you call out in the slide that you had a record number of market orders at BOSSO. So I guess, you know, on the retail brokerage side. So can you maybe help us understand this improvement in the net profit within Boursault? How much is revenues, cost, you know, what are the main drivers there? And then maybe a broader question for you, Slavomir, if I may. You know, the European Commission just finished the consultation period on the competitiveness of the banking industry. So I just wanted to ask you for your view there. What would you like to see happening later this year from the European Commission? What do you think we need to do to improve the competitiveness of our banking industry? Thank you.

Thank you. So on Boursaubanque, can I start by saying you're talking about an improvement in profitability, but you didn't have the starting number, right? Yes. You don't really know that. No, I'm kidding. Of course, it is improving both on a reported and underlying basis, if you will, versus what we had in the past. Why? For a very simple reason, because of the growth, which is twofold. It's an absolute growth, right, that we experienced last year at a very high pace. It's still a net growth in the number of clients this quarter. So that is obviously a driver of profitability in itself. But also... the phenomenon of maturity of the client base. And so this is something we follow very closely. Every vintage in terms of acquisition year, if you will, has an improvement curve in terms of assets that clients leave with us and products and services that they purchase from us. And so as each and every vintage matures, this is a strong driver of increased revenues for Boursauban. Now, I'm not going to give you the detailed speed. We're going to give you more color in September about how this works, but I am going to give you some color, which is it's a bank, right? It's a real bank providing the entire suite of products. And you see some of the figures about the deposits. You know that we're talking about deposits in the range of $45 to $50 billion, $48 if I remember well. and assets under administration which are much higher, above 80 billion. So this is obviously a key driver, right, of profitability, like for any bank. And then, yes, Boursaubanque is also a leading broker, online broker, and this is originally what Boursorama was, and that's also supporting the profitability. as well as, you know, our credit portfolio, which is not a focus from a business mix perspective, but there is a credit portfolio which also yields, obviously, NII and so on and so forth. And as you've seen, maybe, you know, we're building constantly the product offering, both in terms of investment products, but also packaged deals called, for instance, Bursa First for more affluent clients who choose to bank even more with Bursa Bank. So, There are multiple ways for us to make money there, like in any bank. And to your point about the costs, while yes, servicing these 9 million clients with a little bit more than 1,000 people at a very, very low cost to serve. And the combination of all this contains capital usage, strong growth, strong growth through acquisition and maturing of the client base, over time and a very, you know, full-fledged offer creates a lot of opportunities to generate money and because of the cost to serve at a very high level of phony, as you can see. In terms of the EU Commission and competitiveness of the European banking sector, I mean, this could be a very long conversation and I know you guys are busy today. You're always busy, but particularly today. And so I would point to, in the end, we, I think, in the banking sector, seek very simple things. That the overall capital requirements across all the stack, across all the buffers, across all the ways capital requirements are set in Europe, that this is simplified. We don't need ten lines. We could leave with three, so to speak. It's an image that I'm using here. That while simplifying, you also take a hard look at overlaps. Because it is obvious that between pillar one and pillar two, you have overlaps, sometimes conceptual on specific lines of the requirements and buffers and so on and so forth. but also profoundly by the sheer virtue that the increase of RWA consumption, the Pillar 1 and all kinds of other actions, Basel III endgame model requirements and so on and so on, the inflation of the underlying RWA obviously create a mechanical overlap because the Pillar 2 is expressed in the percentage of the Pillar 1, right? And so... What we want is the simplification, right, and the recognition, simply the recognition that there are inflationary overlaps in the mechanics. It's pretty simple, straightforward. Why? Because we believe that, and you know the macro numbers in the last 15 years, that European banks as an industry are well capitalized and that technology, In the end, the resilience is ensured by both the existing level of capital and by sound practices in terms of risk management and sound practices in terms of supervisory functions. So that's a big one. And there we all believe that there's room to at least contain the inflation and hopefully... find mechanisms, I'm not saying it's easy from a regulatory or legislative perspective, find mechanisms to ease burden from this perspective in order not to please us, although there's nothing wrong with that, but in order to make sure that Europe has the proper resources to support its growth, hopefully growth agenda, and the investment needs and investment opportunities financing gap that was well identified over the last couple years. This is the heart of it, right? And then, you know, in details, you know, we can argue this or that technical aspect, but at the heart of it, this is what we, I think, all look for.

Thank you. The next question is from Delphine Lee of J.P. Morgan.

Good morning. Thanks for taking my questions. Just the first one, if I could ask on French retail and just to understand a little bit, you know, sort of given inflation data going up and rates potentially as well, short-term rates, what are your expectations for, you know, the impact of Livreia, you know, later this year? What's your sensitivity and do you think this could create more turning out of deposits and change in the deposit mix and derail a bit that recovery in the NII? My second question is on capital. Just to go back to your slide on CT1 bridge, just a quick question, first of all, what the regulatory impacts are and And then also, like going forward, I mean, we're going to get more clarity around FRTB. Just wanted to know your thoughts a little bit about, you know, what your expectation is. And also just to confirm a little bit, like the impact of, you know, the ECB systemic buffer, which will raise that capital requirements for you. So, just trying to think about how that impacts your distribution. Thank you very much.

All right. Thank you. I'll take the NII. I'll start on capital and give the floor to Leo for some more detailed elements. So on NII, as we've I told you in the past the positive trend that you see is fundamentally supported from an NII perspective by indeed lowering cost of fund, and in particular, but overall that was the trend, and it is supporting in Q1 this, and the repricing of the back book in a context where volumes are let's put it at the strategic level, are very stable, right? A little bit up private clients, a little bit down, I'm talking about the loans here, a little down in SMEs and so on and so forth, but broadly stable, same for the deposits, right? So this is the trend, and this trend caters for modest to moderate increase tailwind from an NII perspective for the foreseeable future. Now, indeed, if inflation spikes up, the main direct impact is the increase of the rate of the and also potentially, and you're mentioning this in your question, impact on behaviors and therefore on volumes, in particular in terms of interest-bearing deposits across the board. So here, two things. At the current level, so say slightly above 2% of inflation, knowing that the formula is 50% raise, 50% inflation, we have something which could be, right? We'll see what the situation is at that time, which could be a very, very slight increase of the liveria pricing in August, which, well, first of all, we already have in our trajectory, so to speak. in our budgeting exercise, but it's a really minor, say, 10, 15, I mean, 10 basis points of potential impact today if we were to project what we see today. So not something significant, which brings me to the fact that if the inflation, you know, spikes somewhat slowly, right, and obviously if it goes down afterwards because the Let's imagine the conflict is shorter and that things normalize, et cetera. So this is really depending on the macro scenario. But if inflation spikes slowly, then you have, in my view, also complexity there where you don't have a linear impact on the behavior of clients as this rate goes up, if the rate goes up slowly. So that's the current assumption that we have. Obviously, taking everything I said today, if you have a different scenario, you will have different outcomes if things were to move more significantly or faster. That's the situation. But again, today, in our central scenario, we don't see that dynamic that we experience right now in terms of an AI to change substantially. In terms of the capital, I'll address Two aspects. So the regulatory is the business as usual. We discussed that many times in the past in Europe with the supervisors. You have impacts going both ways. We had positive ones last year. This time it's a few basis points the other way around. It's the, let's say, business as usual in terms of the supervisory actions in Europe. IN EUROPE. AND SECOND THING FROM I'LL LET LEO COMMENT MORE SPECIFICALLY THE BRIDGE AGAIN AND MAYBE ON THE BUFFER ON THE SYSTEMIC BUFFER THAT YOU REFERRED TO BUT THAT WE PUT IT THIS WAY WITH THE KIND AND THIS WAS THE WHOLE PURPOSE OF THE STRATEGY WITH THE KIND OF BUFFERS THAT WE HAVE WELL THE ANSWER IS THERE WILL BE NO IMPACT ON DISTRIBUTION BECAUSE WE BELIEVE THAT CURRENTLY AT 325 BASIS POINTS OF CET1 ABOVE REQUIREMENTS WE HAVE MORE than ample room to manage whatever headwinds happen on that front. And so no impact on distribution. Leo, maybe just to... Sure.

I mean, on the reg, I think it's clear. It's just normal cause of business. Some quotas, we have some releases, as we saw last year. Some quotas, we have a few impacts already. few basis points of impact, but nothing out of the ordinary. On the other systemically important institution buffer, as you know, in Europe we need to take the maximum of the GSIB and the OCI buffer. The GSIB is assessed by the FSB and the OCII. This is where the change has been. So previously it was assessed by the national regulators, so in our case it was ACPR, and from this year onwards, it's the ECB who can override on this buffer. The buffer has increased, for us it's 25 basis points, so because we're in the bucket number five, as many other banks in Europe, and these will come in the form of plus 12 basis points next year, in 27, and another 12.5 basis points in 28. Obviously this was well known and it was already included in the group's capital trajectory and therefore it doesn't change at all, you know, our mind with regards to the steering target for CT1 because it was already included, nor, as is just mentioned, you know, the potential excess capital.

Thank you. And FRTB?

Any thoughts? Looks like our concerns about level playing field are shared more and more by a wider group of decision makers, right? And I think this topic is going clearly in the right direction, but we like to have final written confirmation, so to speak, before we take this into account directly in our thinking. But things are going in the right direction, clearly.

Thank you very much.

The next question is from Julia Mioto of Morgan Stanley.

Hi, good morning. Thank you for taking my questions. I have two. So about the overlay that you took in the quarter, which was offset by provision, by releases, sorry, in stage one, stage two, how large was that? And how do you see the situation evolving? As in, you know, what oil price are you assuming? Could you take some more in Q2? Any thoughts on that? And then secondly, sorry, going back to Bursa Bank, as Lavomir, you mentioned 25 million clients long-term goal. Does that imply also moving the current clients, the retail part, not all the clients, but the more retail part of your networks on to Bursa Bank, or is that just organic growth that you envision for this asset? Thank you.

Thank you. Hi. Thanks for your questions. On the overlay, it's a simple answer. It's 80 million euro. And it's within a view that today the base case scenario we have is for the conflict to ease rather in the short term rather than medium term. And the macro impact to be contained yes, shaving off, say, 50, 75 basis points of GDP growth in Europe or in France, which we potentially already see happening, but something which is contained in nature in terms of depth, if you will, of the impact and something which does not trigger a monetary policy response. That's the base case scenario, right? Then, again, you know, if this central assumption of the length of the duration of the conflict is proven wrong, well then, of course, the impact on both growth, on inflation, on supply chain, and so on and so forth, and therefore potentially on more sticky inflation, and therefore a policy response will be higher, right? And therefore the impact on GDP will would be higher as well, in which case, obviously, we will re-evaluate that. We will obviously re-evaluate that also in Q2, going more into the details, because the way we work on forward-looking ways or assumptions is, among other things, by looking at the in-depth analysis of the potential sector-specific impact. That's the logic of the modeling that we have there. And so we will be updating this constantly. But within our current central scenario, we don't believe that the impact would be very significant. And one last comment here. I want to point you to the fact that in the end, if we look at this, it's that central, central piece of our risk management strategy, which is diversification from a business perspective, from a geographies perspective, industry sector perspective is the key, and we believe that from this perspective we're rather well paired, so to speak, to go through all kinds of scenarios. In terms of the Boursaubanque, I mean, my statement is a strategic one, and so it means that we're talking here about what is the size of this banking asset in France, at, let's say, maturity, right? So today, in that strategic long-term statement, there are no assumptions about the transfers from the SGRF, like our historical network.

Thanks. The next question is from Andrew Coombs of CITI.

Just a couple of follow-ups from me, please. Firstly, on the markets revenues, I think you addressed fixed income. But if I could just touch upon equities, this is the first quarter where you had the full consolidation of Bernstein US. And I don't think that's in the year-on-year 11%. So it looks like your equity revenues were probably flat So perhaps you could just touch upon why your year-on-year equities progression is also less than the counterparts. And then second question, French retail, just coming back on the cost opportunity, you've obviously seen good progression on cost there, but can you just touch a bit more on how far you are through planned branch closures, how the natural attrition run rate is looking in terms of voluntary redundancies? Any more color you can give there would be helpful. Thank you.

Thank you. In terms of equities, the way you should think about this is that the biggest difference, there are, let's say, peers, but then, of course, it depends if you're looking at the Americans or the others, but the biggest difference is, one, obviously, the share of the U.S. in our business is, you know, smaller, significantly smaller, of course, than the U.S. banks and smaller than some of our European peers. So that's one explanation factor for the trend that you described. That's one. And second, it's the prime brokerage business, right, which is different, first of all, in size and obviously in a quarter like the one we've just closed. that business is a big contributor at some of the other houses in terms of revenues. And so it's both in size as far as we're concerned, in particular on the cash equity prime brokerage. But the second piece is also like the equity content in the prime business that we have is also lower at our shop versus the big American peers and some of the European ones that are active in prime brokerage. So this is the heart of the explanation indeed. And remember also a strong, strong performance last year in the context of Liberation Day and so on and so forth and all the stress that was happening around the tariff narrative back then. In terms of the costs, hopefully you see it in the figures, we're working hard across all the topics, right, from efficiency in terms of the structure and nature and sheer efficiency of the spend in technology to very granular thousands of initiatives across the entire group, aimed at looking at everything that can be done better from an efficiency perspective. So I would say we're full steam on something which is not only a plan with a list of things to do, but also something which changes the way we operate the firm, the way we engage basically in terms of spending. And it is producing results which... just structural, and which will continue to fuel both our performance in terms of reaching the targets that we have for the year. Longer term, and again, we'll have a deeper discussion in September, but we will continue to fuel longer term. Our focus on efficiency, which remains, as you know, and you've heard me say this many times, one focus for the firm.

The next question is from Chris Hallam of Goldman Sachs.

Hello, I've just got two, I think, quick numbers questions left. So BRD, the disclosure in constant currency, I just wondered how we should think about BRD contribution in reported terms for the rest of the year given the FX moves. Anything we should think about carefully there? And then second, the RWA disclosure in GBIS, I just wondered if you could give us any steer on how you'd expect leverage exposure in the markets business to trend either this year or over the next few years. Appreciate that. Maybe that's a question for September, but just any comments you have on leverage growth, leverage exposure growth versus RWA growth in that business.

Thank you.

Thank you. I'll start with the leverage exposure growth. You have, I mean, strategically... We do plan on, and we said this already, and there is an RWA growth on an organic basis forecasted for this year. A notable amount of this is allocated to GVIS, mostly on F&A, but not only. And from a leverage ratio perspective, we don't plan to adjust our current targets and our current delivery, which, as you've seen, is fairly consistent around 4.4 in terms of the ratio. And that's our policy. We don't plan on changing that in any way, right, any substantial way. It's certainly not a strategic way. In terms of the BRD, Chris, I'm not sure I got the exact question. Can you repeat it, please?

It's just a big move in FX if I think about the year-over-year considerations through the rest of this year. And obviously, the numbers you're giving in the presentation are on constant currency. So I was just trying to square the disclosure between what they give in local currency and what you're giving in constant currency and trying to figure out if you already knew off the top of your head how to think about loans and deposits through the rest of this year on a reported basis.

Listen, I'll ask the team to get back to you precisely. I mean, there's nothing strategic going on there, but let me ask the team to address this with you directly. Okay, cool. Thank you. Thank you.

The next question is from Joseph Dickerson of Jefferies.

Hi, thank you for taking my question. Just on the Borsal Bank numbers, it seems pretty clear that the improving profitability was driven by the falling customer acquisition costs in the quarter. I'm just trying to quantify potentially the uplift on the revenue side, which would seem to me like you spent probably last year something like $230 to $250 million on customer acquisition costs. costs, if my estimates are right. So if that can fall, say, by half, that's a pretty sizable uplift. But it would get you, probably on my numbers, into something like a low 40s cost income for this area. Is there an ideal cost income ratio on a forward basis with which you'd run this business? I mean, you're already delivering a pretty stellar RONI, but I'm just trying to think through, I suppose, the uplift to the numbers in the near term versus outer year delivery. Thanks.

So, let me put it this way, right? I mean, without answering directly your question, I'm going to give you color and point to a few elements, which is, you know, we've been consistently saying that Boursaubanque was profitable in the last few years, right? Actually, throughout the trajectory of the CMD. You know, and you see this in acquisition numbers that... in order to deliver on the commitment that we have in terms of the bottom line of $300 million, which is $400 million of top line, basically. The $300 million bottom line is a $400 million roughly top line. Well, you see more or less what the uplift is, right? And indeed, we commented on this in the past, it is a substantial input into the overall cost to income of the entire pillar, right? RPBI. So these are the numbers, right? Going forward, and again, we'll give you significantly more details in September, but the logic is not so much to cost to income as the RONI, right? So the idea is we'll find the right balance, and we will discuss that in September, between maximizing growth, because this is what this asset is, it's a powerful, extremely efficient growth asset that is building, not only delivering, but building a platform for high profitability on the French retail market. And so we have to, from a strategic standpoint, fully lean into the potential that this asset represents for the group, but also as The maturity of the overall organization there, so to speak, has, you know, maturity increased at now 9 million clients while delivering above a certain hurdle level of RONI. And, you know, that is going to be discussed in September. But that's the minimum RONI. And then above that, everything's going to be invested in growth. But again, you know, maybe with a better mix in terms of how we do this, right, maybe not only fees but some different channels as well. So we are challenging ourselves in terms of the cost of acquisition in absolute terms and also in the mix of that cost of acquisition. Also, you know, observing and paying attention to our competitors.

Thanks for that, Savamir. It seems very interesting indeed. And I ask the question because if you look at, you won earnings from Borso. It's probably, in my estimation, not far off of what you would have earned. It's probably a bit below what you would have earned in the full year of 25. So I think it's a very interesting point for September. Thanks for the answer.

Thank you. The next question is from Anke Rengen of RBC.

Yeah, thank you for taking my question. I just wanted to ask about the RWA growth, especially in the DBIS division. I guess a number of players saw quite meaningful increase here that also led to somewhat more stronger revenue growth. And I mean, I guess you could have said we put less capital to work, and that's why our revenues are maybe not as strong. But the fact that you didn't mention it is that basically just not the driver. It's just down to... to your business mix and positioning. And then following on from the RWA growth, I think you guided previously for this year, you expect organic growth to take off around 25 basis points of the core T1 ratio. Q1 was seven basis points. So do you think the growth that might be the headwind to cap it from growth at the current stage might be somewhat lower than you predicted? Thank you.

So bear with me as I try to answer your question and you tell me if I got you well. So on the first one, yes, I mean, you have allocation of capital, but indeed in Q1, I mean, long story short, the two big impacts are the ones that you're pointing to, which is the mixed impact on the fixed income side, and which is not, again, driven by, either way, by capital, right? I mean, it's hedging conditions mostly, and the nature of the commercial activity, and again, with the mix that we described, without the principal commodities business in particular, which I think is a big differentiator this quarter. And the second thing is the effects and some, let's say, slowing down on the fee business, which is also not RWA-intensive in GLBA. So it's exactly, I think, what you said, which is the mix and the effects and the slowing down of the non-capital-intensive businesses, which explain the trend of Q1. In terms of the organic growth for the year, I mean, we have an allocation of organic RWA to Q1, to organic growth, which is 2% growth this year. And that's it, right? I mean, it's going to be generating revenues at a significant marginal rate of return. But obviously, right, I mean, just for the sake of the reasoning, if we had other quarters where either hedging conditions or a combination of hedging conditions and fee income, not capital-intensive fee income, would be subdued because of market conditions, you would see similar patterns, right? If I got your question well.

Yeah, that was the question.

Thank you very much.

Thank you.

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

yes good morning gentlemen well done for the quarter actually despite where the stock price is doing uh two questions the first one even if it didn't matter before you took over uh slabomir you're now operating with minority interest which represent about a billion of net profit annualized isn't that really something that start to bug you and which is not effectively a quite a major issue in sort of like getting this investment case further and the second question really I'm surprised. I mean, the economic data we're getting are really bad. We have the Brent 125. We have German employment going up. France is really going more or less nowhere. And, you know, isn't that in your interest, considering the culture you have and what you have shown so far, to really play a lower profile by the time you get to the CMD rather than going, you know, all out with targets that would be difficult to actually meet? Thank you.

Very subtle question about September actually and targets for the next plan. But I'll start with this one. Listen, I mean, don't you know us?

Yes.

So you should expect from us what we have delivered so far. Let me put it this way, yeah. In terms of how we think about targets, how we think about the path of the bank, We want to be a reliable partner to our clients, to our investors, and to all our stakeholders. And that's the paramount in how we think about strategic planning. So that's for September. And in terms of the minorities, I mean, we've had this conversation recently. many times in the end is taking a situation which is indeed an inheritance, how do we take it forward? And you know the parameters, right? And we've been clear in the past that the usage of capital and excess capital has to be rational from a return perspective and from a strategic perspective. And so consideration of both the implied prices for changing the situation that you just described, plus our vision in terms of the balance, in terms of concentration risk in the business mix of the group, lead us to lead things as they are as of now, especially in a context where so far other uses for returning the capital to shareholders were clearly uh you know more efficient right so uh i mean you know you know the conversation we've had it in the past but um but is this theoretically optimal yeah it's not thank you so much the next question is from sharath kumar of deutsche bank good morning uh thank you for taking my questions too please firstly on asset quality um

with oil prices around $120 a barrel, assuming it kind of persists for some time. Interested in hearing your thoughts on any direct risks for Sockton. And when it comes to Middle East exposures, previously you had said single-digit billion exposures. Can you give more color and any risks you foresee if the current conflict persists? And secondly, a follow-up to the French retail NII. Previously, I remember NII sensitivity of around 50 million for a 25 basis points change in rates. Would this still be the case, or is there any change in your edging policies? Thank you.

Thank you. On asset quality, so again, Direct impact of a sustained high prices in terms of energy is twofold. On the one hand, it's slightly supportive of some of the businesses in the markets because while we don't have principal commodities, we do have prime services business, an exposure to the market. to the commodities markets and therefore it's a slight positive from this perspective. The implied volatility when it's within range is also, as you've seen in the past and to some extent this quarter in equities in particular, is also moderately supportive. So that's the very short-term impact. And on the negative side, there is no material short-term impact, right? Now, the big question is a little bit what we discussed earlier, which is, obviously, there is a macroeconomic impact, which can be significant, widespread, through the transmission of mechanisms of both energy prices themselves as a production factor across the board throughout the economy, and, of course, as a factor for inflation increasing, right, and therefore the potential impact on monetary policy and, I mean, you know, the drill, right? And so short-term, and again, this is why in the central scenario that we have, which is the conflict doesn't last very long from now on, we have something which is moderate to moderately positive, although, right, the growth rate will go down, right? Our assumption is by 50 to 75 basis points for the Eurozone across the various countries. And so it's going to weigh a little bit on the asset quality. But again, in that central scenario, not that much in our view, but it is going to weigh on the volumes, right? And on the volumes in terms of business opportunities. So that's the central scenario. And then again, you have all the colors of the that you can imagine, all the shades that you can imagine, depending on how long the conflict lasts, how high the prices are, how big the impact on the macro side is. But today, we don't expect at this point something that would be particularly problematic in terms of asset quality. In terms of the Middle East, it's 8 billion exposure. very diversified in terms of geographies within the Middle East, and very importantly, it's also very high-grade exposure as far as we're concerned, and often secured. So this is something which is extremely contained, and we feel comfortable with that. In terms of the NII, the sensitivity... Yes, it's still true. I mean, we have an overall sensitivity for a parallel shift up of the curve, which is positive to rates going up. So that's the heart of the matter. Although I want to highlight that as far as SG Retail is concerned, we have a policy which is one of maintaining a very low sensitivity for this business, right? So we hedge year one and year two of the NII to a very, very low sensitivity. When I say low here, it's close to zero, right? That's the policy. And so the purpose of this one is really to follow in a smooth way whatever the rates are doing. It's the philosophy of the hedging there. But overall, there is a sensitivity, a positive sensitivity for a parallel shift of the curve Thank you.

The next question is from Matt Clark of Mediabank.

Good morning. So two questions retreading old ground, I'm afraid. Firstly, going back to the financing and advisory division, risk-weighted assets there have increased 9% over two quarters, if I've got it right. Is that the bulk of your kind of additional deployment there? done are you you happy with your kind of capital deployed in that business or should we expect it to keep going up and what kind of lag until that capital deployment reaches kind of run rate profitability and revenue generating terms and then second question is on french retail banking uh net interest income earlier you described a modest tailwind on nii from the I guess, the rollover effect on the back book. But you've seen what I would think is much more than a modest NII tailwind over the past couple of quarters. Would you agree with that? We should impute that the growth we've seen over the last couple of quarters has been driven more by other factors rather than purely the rollover tailwind. Thank you.

Thank you. Hi. In terms of the F&A question, it's clear the one of the, if not today, the preferred spot for organic capital deployment. So you should expect us to be within the overall guidance that we have, but fairly focused on allocating capital to this division. The lag is in terms of, you know, reaching the full return on these investments. I mean, it's dependent a little bit on the market conditions, right, especially on the fee-generating businesses. And so here there's some macro-cyclicality to the equation, if you will. But it's fairly... quick on the other hand, right? So in normal market conditions, you know, we should continue to generate the kind of NVA and RWA that we're used to generate there, which on a marginal basis, right, are driving substantial returns, net returns on a marginal basis because of the fixed cost base that we have there, right? And then obviously the variable being mostly modest investments and variable compensation. So a high operating leverage investment spot for us. In terms of the NII, well, let me put it this way. Yeah, I can't disagree with your statement, meaning, you know, 10%, because if you remove the effect of, you know, this French thing, which is called Pell Cell, where you have regularly updates to duration metrics. It's a French peculiarity. And this quarter, it's a positive effect, which brings down the 13% that you see to something closer to 10%. So safe for that aspect. Yes, 10% is characterized by more than modest or moderate. And it is mostly driven, like we said, by the repricing that we were able to make. Remember, we were also very, very conservative in terms of mortgage origination at the wrong times, if you will. In the past, in the last three years, we were extremely conservative from this perspective. And so we are helped by these conservative decisions from the past as well in terms of how we That's another one. And finally, yeah, volumes which are fairly stable but with a mix which is slightly more favorable because we have a little bit of growth on the private side, private client side, and a little bit of a decrease on the SME side. The mix, and yes, it's better than... modest or moderate was suggesting.

Thank you.

The final question, sir, is from Alberto Artoni of Intesa San Paolo.

Good morning. Thank you for taking my question. I just had one on SRD. Do you think that SRDs can be, at this point in time, an opportunity to further optimize your capital or perhaps Do you fear that given the private trade market conditions, somehow it may be more complicated to refinance the existing position that you already have outstanding when it comes to maturity? Thank you.

Thank you. So two comments. First, as you know, we've talked about that in the past. We have historically not been, let's say... as active in this market as, let's say, the average of the industry. We have been active. We are active. It's business as usual for a bank to do this. But we were, on average, less active than the average of the industry. And two, we mostly looked at these transactions from a risk management perspective and not from a capital management perspective, which doesn't mean that people are wrong if they do it for capital management or reasons, but that's the nature of how we worked on this in the past. Addressing your second question, yes, we will continue to work on them, and no, we have no concerns in terms of the capacity or pricing for a very simple reason, is that again, on the private credit side, you look at the actual actual defaults and actual credit data as far as private credit is concerned, the sector is still, I mean, for every significant and good player, that is still extremely healthy, right? So actually we don't see beyond the noise about gating and so on and so forth, we don't see today a material change in the dynamics of that market, right? And lastly, when you do an SRT, obviously your own track record matters. And I would want to point you to our track record in terms of net cost of risk over the last, say, three or four decades overall on the books that are usually subject to SRTs. And it's a very strong track record, which obviously is a selling point when you either refinance or structure new SRTs. All right. Thank you very much. Thank you very much for your time. I know, again, that you were very particularly busy today, so good luck with that. Thank you very much for your time, and talk to you soon. Bye-bye.

Thank you. Bye-bye.

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