Societe Generale SA
PAR:GLE
Societe Generale SA
PAR:GLE
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Earnings Call Transcript
Earnings Call Recording
Other Earnings Calls
Hello. Good morning to everyone. Thanks for participating to our call. I'm with our new CFO, Claire Dumas, and all our management team. As usual, we'll make a presentation. I know you have a very busy day with many presentations of results, so we'll be really short, and then we'll go immediately to Q&A. .Let me just say a few words looking at the presentation Slide 4. I will not go through all the details. You know you might have seen the figures, obviously, the best ever in Société Générale history. Strong revenue growth for all businesses in a favorable economic and financial environment, very good discipline on the cost that remains a key, of course, objective for us. Very low cost of risk, including in the fourth quarter, even lower than for the first 3 quarters, 13 basis points for the full year, 6 just for the fourth quarter. So we have a very strong high-quality credit portfolio entering 2022. And let me just comment perhaps on the distribution. We are at a 50% payout ratio or earnings per share. It means EUR 2.75 per share. We've decided this year, and I will comment again any further when we come back to our previous breakdown and policy. But we have decided to make an exception this year to have a cash dividend of EUR 1.65, that means 3x of the dividend last year and a yield of 5% plus and effectively a share buyback, which will be twice -- close to be twice the one last year for the equivalent of EUR 1.1 per share. We think it makes sense with a share price which is catching up, but nevertheless, remains, of course, relatively low compared with the net asset tangible value. Next slide, just to say that when I look at 2021 beyond the financial results, of course, as you know, we've made very strong progress in some key strategic initiatives, which will shape the group going forward. And it's very important, of course, you have in mind they are [ with LeasePlan ]. Boursorama, we will comment more in detail. It has a very strong year. It is accelerating in terms of organic growth. And of course, you have the recent announcement of ING. And across the board, we will pursue the development of our activities, while also further improving step by step, our efficiency. I will turn immediately to Claire in order to be again short, Claire.
Hello. So as mentioned by Frederic, Société Générale achieved this quarter another solid performance with strong earnings growth across businesses. Reported net income stands at EUR 1.8 billion at constant [indiscernible] interest rate and the underlying net income at EUR 1.2 billion, translating into an underlying [ ROTE ] of 9.2%. As in Q3, this solid performance mainly results from strong growth, improved pre-provision operating income, which is up 24% versus Q4 at 1.9 billion, plus 16% versus 2019. Once again, we show high positive jaws this quarter, with revenues up 11.4% year-on-year. And in the meantime, the underlying cost base moderately increased by 6.9%, plus 5.6% at constant [indiscernible] ForEx rate. mostly due to variable items linked to business performance. All this translates into a decrease in the underlying cost/income ratio at 71% this quarter, confirming the downward trend observed since 2019. Let's move to Page 12. Cost. So underlying costs are up by a moderate 4.3% compared to last year. This increase is fully explained by higher variable compensation linked to performance and to an increase in the contribution to the SRF. Stripping out those items, the underlying cost base is down versus last year, despite inflation. This is a concrete materialization of the continued efforts on costs. We end this year with high positive jaws and an improved underlying cost/income ratio at 67%, which is down 7.6 points compared to 2020 and 2019. Cost discipline remains a key focus for the group. Despite the inflationary context for 2022, we expect our underlying cost/income ratio to remain moderate between 66% to 68%, excluding SRF, and we expect this ratio to improve going forward. Let's now, slide 13, have a look at the cost of risk. It remains low across all businesses. It stands at a low 6 basis points at group level in Q4 and 13 basis points for 2021. Our NPL ratio decreased to 2.9% and our gross coverage rate remains satisfactory. In line with the approach we adopted last year, we indicated at this stage that we anticipate the cost of risk to be below 30 basis points in 2022. The key factors behind this low cost of risk remained the same as in the previous quarter. Move to Slide 14. First, we continue to see a very limited number of defaults, leading to low Stage 3 provisions. This reflects the interest in quality of our loan portfolio. And second, we continue to take a prudent approach with very few write-backs. Our inventory of stock of provisions remained broadly stable at EUR 3.4 billion. By way of comparison, it covers 2.3x the Stage 3 2019 provisions. Let's turn to capital and liquidity, Slide 15. Our balance sheet structure remains very solid. The core Tier 1 ratio increases to 13.7%, leading to a buffer to MDA over 470 basis points. In Q4, the group generated 18 basis points of organic capital post provision distribution provision and 80 in 2021. On top of that, we account for the sale of Lyxor with a positive core Tier 1 impact of 18 basis points. Proforma new SREP requirements applicable at March 2022 we observe to stand at 450 basis points. Going forward, we intend to maintain a minimum buffer of 200 to 250 basis points above the MDA, increasing under Basel 4. Our strong capital ratio at 13.7% along the group. First, to continue to fund the growth of its businesses; second to apply its decryption policy while absorbing the regulatory impact, such as Basel IV, but also IRDrepair and the remaining [indiscernible] . For the last 2 items, we expect the total impact of around 40 basis points in 2022, with an important part in the first quarter. Other capital ratio are all comfortably above requirements, and the liquidity profile is very solid. I will now come on Slide 16, and I propose you to move to Slide 18. Let me turn to business news with the main 2021 achievements. So I will not comment in detail, Slide 18. You have very detailed information in the slide. Just keep in mind that concerning our network, several key steps have been reached this year. And regarding Boursorama, Frederic already mentioned the strong acceleration of the client accretion growth. More specifically on the merger road map, I propose to turn to Slide 19. The different streams are progressing as planned, with a legal merger and the IT migration delivered in H1 2023, the group will have secured its ability to benefit from cost savings materializing mainly for 2024 for onwards. By 2024, the group will have to book the residual amount of the restructuring charges around -- between EUR 500 million and EUR 600 million, the bulk of which about 2/3 should be recognized in 2022. The merger is expected to generate cost savings of more than EUR 350 million from 2024 and full benefit of it EUR 450 million in 2025. Regarding detail of customers, Slide 20, I will not comment once again on the slide in detail. Just keep in mind that loan production has proved very dynamic in Q4 with home loans production up 33%, corporate medium-term loans up 45% and deposit collection, which remains strong. With regards to [indiscernible] savings, we continue to see solid growth inflows in life insurance and prime banking. Regarding Boursorama, Slide 21. We have once again detailed information in the slide. Just keep in mind that Boursorama, posts strong growth on the client base, reaching 3.3 million clients, 1 year ahead of plan. And we now expect the client base to be above EUR 4 million by the end of the year. And in parallel, Boursorama continues to progress in monetization. Looking at the P&L, Slide 22. Revenue, Excluding PEL/CEL, are up 4.8% versus last year. Net interest margin is up 2.1%, benefiting from TLTRO and PGE up -- state-granted loan catch-up effect and fees increased by 5.1%. Costs are up 4% versus last year due to variable costs linked to the group's performance and also client acquisition initiatives. In these conditions, jaws are positive and RONE adjusted for PEL/CEL is strong at 13.1% in 2021 and 14.4%, excluding Boursorama. Let's turn to IBFS, Slide 23, where the year was also very dense. Once again, I will not comment in detail on the slide all the achievements of the year. Just keep in mind that in our international banks, digitalization is accelerating, transformation is well on track to improve the cost/income ratio of our international subsidiaries. That means the interim segment 2021 was a record year with high assets-under-management level in life insurance as well as higher share of unit-linked above competition in France -- and that ALD posted a record financial performance in 2021 and is positioned to become a global leader in sustainable mobility with the proposed acquisition of LeasePlan. Regarding International Retail Banking, Slide 24. The commercial dynamics remains solid. Loan outstanding is up 6% versus Q4 and deposits are up plus 9% at constant perimeter and foreign exchange rates. With a good commercial activity in Central and Eastern Europe, and in Africa, the rebound started at the end of the quarter, the NIM is one oriented in Europe at 9%. Let's come to Financial Services slide 25. They booked an excellent quarter. Please note that insurance revenues are up 8% and Life insurance reached a high level of outstanding at EUR 135 billion and with 37% share of unit linked. In ALD, strong momentum to continue this quarter. The funded fleet grew by 4% versus December last year, and ALD still benefits from a favorable remarketing environment with used car sales results of more than EUR 1,400 per unit sale. In a summary, for international retail and financial services on Page -- Slide 26, revenues are up 9.9% at constant perimeter and foreign exchange rates, reflecting positive jaws gross operating income is up 18% and RONE is at 20.3% with a contribution to group net income of EUR 2.1 billion. Moving to GBIS, Slide 27. Once again, I will not comment in detail the slide. Just keep in mind that GBIS has delivered on the road map presented in May 2021. The reallocation of capital to financing and advisory paid off in a record year. The cost/income ratio improved by 10 basis points versus 2019, and the repositioning and derisking of structured products proved to be efficient as illustrated by the strong performance. Turning to GMIS, Slide 28. Total revenues are up 9%, versus Q4. More specially, the performance of global market was solid in Q4 with a 10% increase in revenues. Thanks to dynamic client activity. Equity has continued to be strong, supported by favorable market environment. At EUR 727 million, NPI increased by 23% versus normalized Q4. Fixed income activity remains resilient in a challenging market. Revenues were down 9%, but in line with peers. Overall it was an excellent year for Global Markets with revenues amounting to EUR 5 billion in 2021. Financing and advisory, Slide 29, registered this year its highest performance on record with an excellent performance across businesses. And the revenues are up 15% versus last year. We have captured sustained growth opportunities in asset finance, natural resources, TMT, health care, equity, we have also benefited from the good momentum in investment banking. Performance was excellent in Q4 with a new historically high level of revenues. Momentum was strong across activities in financing, but also in investment banking, with a 48% increase in revenue versus Q4 and in Transaction Banking, up 25% versus Q4. Last, revenues were up 6% versus Q4 in assets, Asset & Wealth Management. Commercial activity continues to be strong in private banking. And in 2021, net inflows steadily grew by EUR 8 billion, and asset under management were up 12%. To sum up Slide 30. GBIS delivered an outstanding year driven by, on one hand, excellent business dynamics, revenues are up 25%. And on the other hand, the contained increase in cost by 4.7%, mostly due to variable costs and higher contribution to SRF. Coupling with a low cost of risk, this translates into a strong RONE at 13.9% and even 16.1%, excluding SRF and a reported net income of EUR 2.1 billion. It is 2.2x higher than 2019. I will look quite quickly on the corporate center, Slide 31. GOI stands at minus EUR 550 million for 2021 and minus EUR 294 million for Q4. And I will leave the floor to Frederic for the conclusion.
Thank you very much, Claire. Briefly, if I go to Slide 33, it is there just to reflect, again, the progress made in 2021 versus in 2019. You can see on these figures, how performance the bank has been again this year. And again, on the distribution side, you can see our policy. If I turn to Page 34, let me really highlight that 2022 will be focusing -- will be all focused on the execution, what we call the execution. The delivery of our road map in a crucial year because we are preparing for the merger of our 2 networks. In particular on the IT side, it's going to be a critical year to be ready for the first half of next year. Of course, with Boursorama, as we've said, the capacity to bring this bank, if I may say, to maturity, both for ALD growth and with ING is very important in terms of future contribution to our profit and growth and of course, pursue the commercial activity. Regarding international banking and financial services, same thing, we have in mind to close the transaction with this plan in the next 12 months. It's a very important element, of course, to our business model going forward, but beyond to pursue the good development that we have seen. And then Global Banking & Investor Solutions, it's really about sustainable contribution to our profit and then pursue the efficiency plan. Transversally, we will maintain a very strong discipline on cost and, of course, accelerate ESG and digital transformation. Just would like to say to again conclude definitely. First, beginning of the year is good. We are providing you with some guidance, which, I would say, are prudent, taking into account a certain number of normalization of revenues. I had in mind capital markets, for example, more something like EUR 4.5 billion. As a way for us to put pressure again on the cost in the budget construction. On the cost of risk, it's a little bit the same. As I said, I've never seen a situation as good as beginning of this year. But as we did last year, we will refine the guidance step-by-step during the year. And we will also take the opportunity of this first quarter to put all this development in perspective and give you the midterm financial road map. We have announced in the last 18 months, a series of initiatives. We have given you different figures. But I think it would be useful to put all that together, including the most recent announcement and to explain what it can mean in terms of profitability for 2024/2025. So we will do that with the first call. That's it for the presentation. And now we are happy to take your questions. As you know, please let's stick to this good discipline, if possible, 2 questions per person.
First question is from Madam Delphine Lee from JPMorgan.
So I have 2 questions. My first one is on your new cost income target range of 66%, 68%. Just wanted to understand a little bit the -- what that means for the absolute cost base, is the intention to reduce the cost base without the restructuring costs? Or I mean just wanted to get a bit of direction about what you're assuming in this guidance? My second question is on capital. So you're basically saying you're going to be above 200, 250 basis points over MDA, even on the Basel IV. And given your starting point, end of '21, it does sound like your Basel IV guidance has changed? Or just kind of wondering if you could just give us a bit of maybe an updated number for Basel IV and also the different moving parts because you're also having 40 basis points regulatory impact in '22. So if you could just explain a little bit that new guidance as well.
Yes, Delphine. I will turn the floor to Claire to answer your 2 questions.
I will start with the second one. So regarding Basel IV, our guidance hasn't changed. I guess at the last time we had confirmed an impact around EUR 35 billion [indiscernible] , less than 115 basis points for both Basel IV and FRTB. So we confirm that. As I explained in the presentation, we confirm our tiering buffer between EUR 200 million and EUR 250 million on capital. It's comfortable right now, but we confirm it, and we don't change our guidance on Basel IV. This is the answer for your second question. The first one, coming back to cost. So as I say that when it comes to 2022, we expect underlying income/cost ratio between 66% and 68%, excluding SRF. It's worth mentioning that this guidance detail on the run rate, the mid-life cycle of market revenues are in a uncertain environment. So it is, let's say, cautious or conservative. This guidance, we consider illustrates our ability to contain rising costs in a final inflationary environment. If you come back to 2021, we have been able to demonstrate that our cost base is decreasing excluding variable costs linked to performance and, of course, cost linked to IFRS, so down the trend. We have a lot of initiatives in order to contain our cost base. You have, for example, the Revision project, the merger between the French network that should deliver EUR 350 million cost base below 2019 in '24 and EUR 450 million below the 2019 cost base in 2025. We have also the initiatives in the investment banking regarding the refocus. We have a lot of initiatives in Central and Eastern Europe regarding digitalization that should lead also to improve our cost income.
Next question is from Madam Giulia Miotto from Morgan Stanley.
So 2 questions from me as well. So the first one is on ROTE, return on tangible. So 2021, we can say was an exceptional year, SocGen delivered underlying 10.2%. How are you thinking about this through the cycle ROTE target, especially, for example, in 2022, as you have already mentioned some normalization expected in your guidance on the investment banking side. So that's my first question. And then on ING. So I understand that Boursorama will basically acquire around 1 million customers from ING. But in terms of revenues, costs -- what can we expect from those? Because I think you're not taking over the loan book. So yes, how can we think about the impact on financials there?
Giulia, I will leave the floor to Philippe for your second question. Can I say we will answer actually your questions more in detail in the first quarter. Really, we'd like to give -- to just take the time -- the coming 3 months to fully digest precisely all our initiatives to provide you with the answer. May I say, yes, we factor the normalization of certain parameters in the P&L. I said on certain revenue lines or on the cost of risk, a progressive one.But of course, what we have in mind is that all our initiatives and thinking about the merger of the French networks, the efficiency plans, of course, the benefit of acquisitions, which are relative, will help to precisely compensate for the normalization of this parameter. So as I said to you, first quarter, you will have -- but clearly, we have in mind to deliver an acceptable return on equity -- tangible equity to our shareholders is, of course, also on the core tier 1, as we said, with this buffer of 200 to 250 basis points above MDA. So really, this is a plan we'll be able to give you really more detail in the first quarter. But Boursorama will be also part of it, but what can you say, Philippe Heim?
Yes, of course, we'll disclose more information later because, as you know, we are still discussing with ING. What I could say is that it's not an acquisition per se. I mean it's a referral agreement, so which means that the clients will have the possibility to come to Boursorama, and we are fully convinced that we have the best offer for them in terms of product, services, digital experience. What I can also share with you is that it will not be a transfer of 1 million clients, first because some of these clients are already inactive. So the number will be smaller. And after, once the clients have -- will be transferred, of course, as we do for the existing clients, we will develop the relationship selling all our products and services because as you know, Boursorama has a full range of product set services. And of course, the priority for us will be to develop with -- our relations with these clients, which are -- who are clients with high potential and clients who are already familiar with a 100% digital experience.
And if I may, Giulia, I would like you to consider ING, if I may say, should be a nice acceleration, but of nonorganic growth, which is accelerating itself. And -- we were able to capture 100,000 new clients just in December last year. So it shows the -- really Boursorama is, I think, a very successful model. And at the end of the day, we are able to have -- we are a year ahead of our plan. So it will be also reflected in the financial trajectory of Boursorama. And again, we will elaborate on that in the first quarter.
Next question is from Mr. Jacques-Henri Gaulard from Kepler Cheuvreux.
One observation and 2 questions. The observation, congratulations for the return for having done all these initiatives. When I think we were at EUR 11 back during the pandemic, we can actually look back. So congratulations on your guys. First question on the back of this observation is you are well known as a management team to really get out of very, very difficult situations, and you've proven it. The counterpart of that is in development times, it's always a little bit more difficult, and you don't really fulfill your promises. So what is different this time? That's the first question. The second question is on the second resolution fund, your competitor from the other side of the Seine is probably going to pass a lot of the single resolution fund down to the P&L to accelerate the cost income ratio decline. What is your thinking about what you will do about the SRF release, if any?
Jacques-Henri, first of all, thank you for your comments. If I may, on your first question, First of all, maybe we are precisely changing the present guidelines. But beyond, I would say, there is a very strong focus on execution. And that's why really -- so to us to demonstrate quarter after quarter, I think we did it in 2021, not just on dealing with difficulties, yes, on the capital market. But what I would like to highlight is we have delivered also on the rest of the businesses where there were no specific difficulties, actually. But I think here, again, all the management team is focusing on this. And let's deliver quarter after quarter. And as I said, we will give you a little bit more flavor on what will take place. But I agree 2022 to a certain extent is as important as 2021 because it's around also getting ready on all our projects to enter 2023. And I'm very confident with the current momentum, the positive energy across the board to deliver. Regarding your question on single resolution fund. To be frank, it will be a pure benefit for the bank. If I may, first of all, this tax is really the results of the bad negotiations by the French government in 2014. It's a tax paid by the large French banks, largely to finance the hypothetical bankruptcy of small banks in Europe. So let's face it. As we say, yes, there will be a further increase in the next 2 years, just because mechanically, the way it's calculated, belies in practice the French. And this is true for us -- at the end of the day, again, we -- that's why we try to communicate, if you wish to make it easier for you, excluding the SRF, which again will increase in the next 2 years. After this, it will disappear, and it will be, of course, a structural benefit for the bank because it absorbs if you wish, to a certain extent, the capital in a way capacity to invest. But again, the idea is that we want to look at the cost/income ratio, excluding SRF, precisely to show you the progress that we will make from 2022 to 2024 to 2025.
Next question is from Azzurra Guelfi from Citi Group.
Two questions from me. One is on the CIB business. You've done several restructurings in the last few years. And finally, we are seeing a good outcome of all these restructuring, both on the revenue resilience but also on the cost. Can you give us a little bit of color of if the market conditions that we have seen at the beginning of the year were to characterize the rest of the year, how this could impact the revenue environment? And how do you think the structure -- how do you think the cost reduction that we've seen in the fourth quarter is going to be more structural going through? And the second question is on the rate sensitivity -- on the rate sensitivity. Can you give us some indication of the group sensitivity?
I will turn the floor to Slawomir answer your first question and Claire on your second one. I just would like to say on this theme of inflation and interest rates, I think the jury is out, then, regarding how long inflation might last. Clearly, I think we will see a pretty strong figures this year again. But the question is what kind of growth shall we have going forward? There are structural elements such as the demography, the aging population in Europe, which in 2 or 3 years' time, if I may, at least, with the excess of spending et cetera -- of savings, sorry, which contribute to moderate increase of inflation. Let's see how it goes. But at least what is fair to say is probably we are now facing a better environment potentially going forward in the midterm than the one we could have had in mind 12 months ago with this extraordinary situation of low and even negative interest rates. Soon Claire will answer your question. Now, Slawomir on CIB.
Let me put it this way. So we have grown the business 25% and grown the costs by 4.7%, and mostly because of variable costs linked to compensation and increased SRF. So this is what we want to do. Because this shows you that our structural costs have declined on the back of all the efforts that we have already made and the ones that we are currently making in relation to the road map that we laid out last May.So we will keep on doing this, meaning reducing structural through the cycle cost while making sure that we can take full advantage of all the opportunities for growth that given market conditions offer us. And so this is the thing. So we will continue to decrease our structural cost base according to the plan that we laid out, making sure that our breakeven point gets lower over time.Now in terms of the revenues, the way we see 2022 is a year of somewhat normalizing conditions in a post pandemic world, which faces a number of tail risks and also more traditional macroeconomic risk, as you know. And so we expect overall the year to be normalizing in terms of revenues, especially on the global market side. And we will, therefore, decrease the variable cost associated with the top line.Now it is a fairly cautious approach in terms of how we look at the year. And I would say that we see some upside potential should the scenario materialize on the base case, which is inflation slowing down and no materialization of the tail risks that are out there in the market. So if that's the scenario, we could see some upside because we see a lot of activity and markets which remain, let's say, acceptable.
Thank you, Claire.
Regarding interest rate sensitivity, so we have a positive sensitivity considering our business -- our retail businesses. You've seen this year, for example, that in Eastern Europe, we did benefit from an increase in interest rates. This being said, our rate sensitivity comes from 2/3 from short-term rates and 1/3 from long-term rates. Our sensitivity is positive mainly in the long run because at very short term, there is a lag effect. -- for example, for 2 years, our sensitivity to a 10 basis point translation interest rate is positive by around EUR 80 million. So short term, you have a lag effect in medium and long term, we have a positive sensitivity at constant balance sheet.
Next question is from Mr. Omar Fall from Barclays.
Just trying to see if you could help us with some guidance on the top line in French retail into 2022? Because I guess I'm trying to understand the quarter-on-quarter change in TLTRO contribution, in particular this quarter? Because I thought it would go down a bit, which would imply that NII has jumped quite a lot this quarter despite loans only being up 2%. So if you could maybe clarify some of that.And then secondly, I recall the target with something like $200 million of net profit from Boursorama in a couple of years. Once you cut the presence, the cashbacks and acquisition costs, does that go up in line with the higher client base? Because I guess the idea was that Boursorama was unprofitable because of these high acquisition costs that presumably you need less of those given how far ahead you are on client acquisition.And then sorry, I'll sneak in one. I see that Mr. Krupa was on Bloomberg saying that bonuses in GBIS will rise massively, I believe, were his words. Could you give some color on that statement because as you stated earlier, if I look at markets, revenues were up almost 40% last year, but OpEx is badly higher on an adjusted basis. So -- just some color on that, please. Sorry for the extra question.
Yes. No, Omar, I will leave Philippe and Sebastien to answer your 2 questions, Slawomir is there also -- what I can just say is the bonuses have been provisioned. So it's in the cost line. So I don't know if they're massive, but it's compared with past but at least we reward performance. Slawomir will comment also -- I'll say first we don't give a guidance for 2022, but it is to explain the dynamic of the revenues and the parameters.
Yes. Omar, maybe let me start by talking about Q4 net interest margin evolution. Because I mean, as you said, on a year-on-year basis, it's plus 6.7%, which is solid, obviously. And so the main drivers. First, we rebound in credit production, mainly as Claire just told in home loans and in long-term loans for corporate, excluding PGE. Second factor is better credit margins, again, in investment loans for corporates and to a lesser extent in home loans. Third point, deposit margin, which is slightly down compared to Q4 '20, but with a slight decrease because we were quite successful in converting site deposits into saving an investment product. And the last factor is the where TLTRO catch-up effect this quarter again because co-Crédit du Nord, which the target at the end of 2021. So there is a benefit of the second modification of TLTRO at Crédit du Nord level in Q4. So that's for Q4 regarding 2022, as Frederic said, it's really too early to give you guidance at this stage. Let me just say that commercial activities since third day of January is good. Obviously, we will have to absorb in 2022, the increase of -- the increased interest rates of the Livret A, this saving French product. And also, we would have a negative base effect mainly due to the TLTRO and PGE catch up effect we got in Q3 and Q4, 2021. But having said that, we will come back to you early May with the Q1 results and give you a more precise color on the guidance on the French retail revenues.
Thank you. Philippe on Boursorama.
Yes. So again, we cannot disclose today too much detail. But yes, the more clients, the better profitability of Boursorama will be. Again, one of our core priorities is to make sure that we have a full range of product services in order to monetize the relationship with the clients. So this means, for example, in 2021 new savings products is -- means also a huge effort regarding mortgages, and you can see on the numbers. It also means an effort to develop nonbanking products.If you go to Boursorama website, you have the corner and we are selling the products of 70 partners. So definitely the number of clients will be a huge asset and that's ultimately the goal for Boursorama to have this strong client base. And after -- and we have already started to develop the capacity to sell products, services on the long-term basis with all these clients.
Thank you. And Slawomir, your comments on Bloomberg.
So let me put it this way. First of all, I encourage you to read the entire article, which will give you the exact context that you are referring to. And the context was you were massively down in the context of the performance, which was what you know it was last year. And in the context of the competition on the market. And my answer was, yes, we have an outstanding performance, and therefore, we have -- it's very significant that we can debate whether massive or very significant is the most appropriate adjective here. But -- we have obviously rewarded the performance in a market which is competitive and in which we want to be competitive. And now more precisely, I told you earlier, without the SRF and without the variable compensation costs, our costs are down.
Next question is from Flora Benhakoun Bocahut from Jefferies.
The first question I wanted to ask you is on financing and advisory revenues, which continue to show very good momentum. Based on the comments you make in the slide, this seems to be a bit across the board. I just wanted to ask you on the outlook there. Obviously, we have a high base now after the strong performance in the past 2 quarters. But do you think that you can grow the revenues further on that base and especially this year in '22? And then I have just 2 very quick clarifications, if I may. You just talked about the TLTRO bonus from Crédit du Nord this quarter. Can you maybe quantify how much that contributed this quarter, please? And just on Boursorama also, you have presented us a plan in December 2020, where you were saying, once you get to 4 million clients, you want to switch to a less aggressive customer acquisition phase, which I think you call the stabilization phase. And at which point, we have this huge swing in the profitability of Boursorama. Is it still the plan? The 4 million number is the number at which you see the swing in profitability?
Hello, Flora. So yes, I'll turn the floor to Slawomir and then Sebastien and Philippe to answer briefly your 2 questions. Slawomir?
So let me put it this way. Why do we have this kind of performance because we have a combination of factors. One, we are strong in these businesses with a very high level of expertise from the sector and product and advisory perspective. You couple this with additional capital in line with what we said in last May, we are rebalancing the capital allocation towards this business. So there's more capital there. And three, you have a conducive market. And four, you have trends in these markets that are particularly well matched with what we do and where we are active. You take these 4 features and it has the kind of performance that we are showing. For the following years, we intend to keep our focus on this business. We intend to keep on supporting it. But it will obviously somewhat depend also on the market conditions. So our current view is that it will remain fairly conducive, obviously, with the base effect, we don't necessarily expect 15% or 20% growth rate in 2022, but we expect to do well.
Sebastien?
Yes, Flora. I will not give a precise number you know. I mean it's -- we detailed. Let me just say that this overbonification at group credit at level, it is not big in a month, and it doesn't change the picture, i.e., even if we benefited in Q3 and in Q4 from this TLTRO overbonification. The NIM increased even without the overbonification and it's true also in Q4 compared to Q4 2020.
And Philippe, Boursorama?
Yes. I mean the 4.5 million clients is not the end of the game. I mean, we do consider that it was necessary to reach this number, which is 4.5 million, 5 million is a kind of critical size. But thereafter, as long as we can monitor the acquisition cost, we will continue, of course, to accept clients.What is interesting in 2021 is that we have acquired a lot of clients not because we have spent more money, but because we have improved the onboarding process. We have also improved our digital marketing tools. So as long as we are able, again, to continue to monitor and to control the acquisition cost on one hand. On the other hand, to continue to develop our capacity, as I said before, to sell products and services. We will be happy to continue to improve our customer base. If you look -- I encourage you to look at some numbers. There is a press release today of Boursorama, 750,000 clients 6 years ago, 1.7 million 3 years ago, 3.3 million today with 800 people. So again, I mean, what is very important is also to continue to control the acquisition costs and simultaneously to develop revenues with these clients.
Next question is from Mr. Kri Vijayarajah from HSBC.
A couple of questions. So firstly, in terms of the approval process with the ECB for the buyback, I was just wondering, when we're in the middle of reasonably large acquisitions like LeasePlan, maybe ING France, not so large. Is there an expectation from the ECB that you need to take a bit more of a cautious approach around sort of payouts and buybacks? And when these deals are hopefully out the way at some stage that it's got to be more aggressive when you next sit down with the ECB, perhaps. So just wondering how the ECB approaches these kind of payout discussions when banks like SocGen is very much in sort of acquisition growth mode? And then second question, just quickly on the corporate loan growth in French retailer. I know you said the new production is pretty healthy, but when do you think we're likely to see more sustained growth in the actual stock of loans. I guess there's a lot of short-term stuff that's rolling off at the moment. So just the volume dynamics there, especially with regards to what you're seeing with the business loans in French retail.
Kiri, just -- I will just -- let's answer your second question. No, no, absolutely not. We have always been very clear with you as well the same on our payout ratio policy to maintain it to 50% for the next 3 years. We said that it was well suited for a bank with organic growth opportunities as well as, of course, acquisitions and we had in mind, as you know, of course, the ALD we presented to the SSM with an optimized structure, which means a 40 basis point impact is very manageable. So the 50% is not a surprise. And the share buyback is within the 50%. But it's not on top of that. So I see absolutely pursuing no difficulty with the SSM. But we have, of course, to go through the formal approval, we can't escape that. Now Sebastien on the outstandings.
Yes. So for major networks outstanding are down quarter-to-quarter, I mean, year-on-year Q4 2021 compared to Q4 2020, but up versus 2019. So you're right, clearly, the evolution was penalized by the short-term activities, still under pressure on consumer loans and short-term credit to corporates. I mean in this environment of excess liquidity. Having said that, credit production was very dynamic in Q4 for mid long-term credit to corporate and home loan. Keep in mind that more broadly, we have a selective -- or we keep a selective approach in terms of credit production in an environment which remains quite uncertain.In the context of low rates, we want to protect our margin. We are quite selective in order to get also the positive impact on our cost of risk. So at the end, it's the combination of all of this, which explains our credit policy, which is, again, quite selective in order to protect our margin and the cost of risk.
Next question is from Mr. Tarik El Mejjad from Bank of America Merrill Lynch.
Allow me to come back please to the costs in CIB. I am really struggling to make my head around this evolution of cost versus the revenues. You've been mentioning a few initiatives and to be fair, a lot bit quarter after quarter on where you are, at what level of achievement from that. Maybe to help us -- can you give us the breakdown of your cost between fixed and variables as some large CIB banks do? Because that will help us to understand yes, your variable is higher from a very, very low base, as you just said. But I'm interesting to see what's the risk of acceleration costs from the variable because competition for talent is clearly there in Paris. Then my second question is more general. Frederic, you seem to be suggesting, I mean, you've done 10% ROTE in the line this year. The plan could be around these levels. Yes, you have normalization in CIB revenues, higher cost of risk, inflation picking up. And also you don't have really normalization of your CET1 ratio because you're already kind of there on above floor basis after LeasePlan. So you have some offsets to that.So -- but we'll be really firing all cylinders with no room to issues in execution or unforeseen circumstances. Is that thinking correct? Or -- and just on that, for the CET1, as I said you are 12% above the floor you won't have this element where you will have some ammunitions to do more M&A and grow faster organically if the growth is still there. So do you think you can have some extra cash at the plan -- when you present the plan to be able to fund that growth?
Tarik, I will -- let me answer as much as possible on your question on the variable cost. Briefly, can I just say, I see 2 different years. From now to 2024, if I may, with what we announced, we have a lot already to do and I think we have a lot of benefit for our shareholders. And effectively, as I said, and I can't give you too precise figures, but in practice, taking into account the normalization of certain parameters to compensate by delivering on time all the different initiatives we have on our plate. And as I said, end of 2022, our shareholders will have a pretty good clarity on most of these projects, actually. So that's where we stand. And so we have enough cash to finance the organic growth. But as I said, I don't have in mind to make multiple acquisitions in the next 3 years to consume capital. And then once we have absorbed the Basel IV, we have this structural good profitability. We are generating a lot of capital. And as I said, we will have to decide how to use that payout increase acquisitions. I mean we are not looking at acquisitions for the sake of doing acquisitions to be frank. And I must say, I think we have shown also the capacity to grow very well organically. ALD LeasePlan was, in my view, a unique transaction that we have been, again, working hard for many, many years. So I think it's really a good balance for the next 3 years.It's pretty clear. Our road map is pretty clear, it's not an issue. We are going to land, if I may say, and of course, deliver on this new business model, which I think will deliver a pretty good profitability at the end of the day. Of course, we need to deliver, as I said, the execution will be -- that we are confident, and 2022 will be very important from that perspective. Slawomir?
So good afternoon. So let me walk you through my reasoning. We're not disclosing fixed and -- versus variable costs, but let me try and help you anyway. So one, we have a massive increase in revenues, which is obviously linked year-on-year to the level -- much lower level than we had -- a normal low level that we had last year. It's achieved through repositioning, restructuring, recovery and a number of things we've done. I'm talking about the top line here. But it was not done with massive recruitments, for instance, right? So we believe that with the other statement I made, which is without the SRF increase and without the increase in variable compensation, our costs are down. We are moving forward on the minus EUR 450 million of cost that we talked about last May. We're in the middle of that. And we are delivering more or less according to plan, and this creates room for maneuver to increase significantly the variable compensation.So again, without the SRF increase and without the variable composition increase, our costs are down. In terms of how we are competitive versus the market, 2 thoughts on my end. One, we obviously understand that in this particular business, it is a critical concern to make sure that you can acquire and retain and develop talent. And obviously, we are doing something that I think is responsible there, being able to be competitive. Now the real measure here is at the end of the day, your compensation ratio. So while I'm not going to disclose it to you, think about it as in line with most of our peers that have similar business models, right? So I have much lower footprint to say the least, in terms of M&A in the U.S. on the domestic side. And so I don't need to compete with JPMorgan or Goldman Sachs in hiring in this particular segment of the market in the U.S. So that's also something you need to take into account. And that lastly, longer-term view on this compensation topic on my end is that it's a cycle and at some stage, you will not be able to sustain this increase in cost.In the context of a pool, which I don't see rising at the rate -- at the stated rate of the rise in compensation costs and as you well know, in the last 10 years, you had a very significant workforce adjustments that were implemented by the same people who are now driving the increase in compensation costs. 25% cut in the total workforce of a particular business line is not something uncommon. And once these kind of things kick in, and they will at some stage, the market will normalize on this front as all markets do in a cycle dynamics.
Next question is from Mr. Stefan-Michael Stalmann from Autonomous Research.
I have just 2 small follow-ups on capital, please. The first one on the increase of your Pillar 2R requirement. Can you maybe add a little bit of color around what has driven that exactly and whether you're doing something actively to actually reverse it and what that may be? And the second point, your friendly competitors have guided to expect some small headwinds to the CET1 ratio from FX risk in the banking book and from IFRS 17. Are you expecting to see a little bit of regulatory creep there as well, please?
Stefan, Claire will answer on IFRS 17 and also the increase. You have 2 elements in the increase of P2R. Claire?
So regarding P2R, so we received the SREP notification and it led to a limited increase of the P2R from 1.75% to 2.12%. What you must keep in mind regarding this slight increase is 2 things. The first one, the SREP decision was based on data that were dated 2020, which was, of course, the COVID year, which was before all our strategic move. And since that period of time, the group has changed. First, of course, we have an increase in our revenues and in the trend. Second, you had all this workload that has been performed on the CIB business with a refocus of our activities, the reallocation of capital towards financing businesses. We had also the workload that has been performed on the rest of the capital trajectory. So since that period, that's one thing that has improved. And of course, we will have a discussion with ECB. The second thing you must keep in mind is that even after this slight increase in the P2R, we still have a very comfortable buffer above MDA because as we shared with you, this buffer is currently 470 basis points. And after the P2R, it still is 450 basis points, which is far above our steering buffer of 250. This is for your question regarding P2R. You had another question regarding IFRS 17. So we still are working on, of course, the impact of IFRS 17. It's too soon to comment. But the impact will be very limited and manageable. It's factored in completely in our capital trajectory and in, of course, our target we gave regarding the buffer over MDA. Maybe please keep in mind that we are not in the context of some banks that had to communicate on IFRS 17 the magnitude for SG is really far below. So it's constantly manageable.
And I'm going to say I don't know what our competitor was referring to in terms of impact of foreign exchange because the Core Tier 1 is to a certain extent, aligned with our risk-weighted asset composition. So...
Yes, we have a -- we can, yes.
But I don't know you need to check with them a little bit more. At least on our side, we don't have that in mind.
Yes. We had our Forex week on Core Tier 1. So I will let more in detail this. I don't consider it could be an issue.
Next question is from Mr. Pierre Chedeville from CM-CIC.
Not a lot of questions left, but 2 questions that we could maybe discuss further in 1 quarter, but just to give an introduction. Regarding your merger ALD LeasePlan, one of the key items regarding growth driver is the electrification of your fleet with a very aggressive stance compared to some peers in the way you want to develop this electrification.And my question was, Aren't you worried regarding the fact that some car builders say that it will be very difficult to provide all these electrical cars in the coming years because of shortage in supply chain. And I was wondering if it could hamper a little bit your targets in this merger, this shortage of electric cars in the coming years.And another question is regarding private bank, which is more or less the poor parent. I don't know if it exists in English, the parent pauvre of your financial communication. And I wanted to know if now you consider that your restructuring is over and particularly in your foreign setup. And what was your net inflows in this business this year? And what are your main ambitions regarding this division?
Chedeville, I will turn the floor to Jenny for your first question and Sebastien for your second one. Jenny?
Yes, thank you for the question. The drivers of all this business are quite important and truly reflect structural and long-term trends. Of course, electrification is an important one, you mentioned it, driven by indeed the need to reduce such emissions. In this year, all our clients are accelerating. We were in Q4 at already 30% in the total deliveries, which was our target for 2025. So we are really ahead of plan. And we are giving a guidance for this year, which would be the 2-year goal of 30%.There are other trends, which, of course, will favor the growth of this business. We mentioned our planned and proposed acquisition of LeasePlan is we have already commented and it will give us the scale and the firepower, which will allow us to really grasp all the opportunities of the mobility sector. So it's a secular growth, which is here to last. And we said that after the integration we expect to grow at 6% a year. Regarding the question on the shortage of supply, we don't see that. We see the contrary manufacturers accelerating the electrification of their fleet. It is pushed also by the regulatory framework, and there are strict choices you will not be allowed to drive ICE cars in a few years. We also benefit from very strong partnerships with the main manufacturers. We are, by far, the largest partner of Tesla, for instance. So these partnerships allow us to be quite present in this market, which we believe will continue to grow.
Thank you, Sebastien on private banking.
Yes. No, Pierre, thanks for your question. Private banking, that is an important business. It's not left aside in our strategy. But thanks for the question. So let me just summarize 2021 by saying that net inflows were very significant in 2021, close to EUR 8 billion with half in France, which is very good. In terms of AUM, it's EUR 130 billion, again plus 12%, 1-2, compared to 2020. NBI is up 12%, 1-2, and with strong positive effects with OpEx plus 3% and decreased cost income between 2020 and 2021.Having said that, -- the strategy is the following: First, keep working on the costs and especially in Europe, with this very important project to outsource, externalize to Azqore, a company owned by Crédit Agricole, Indosuez and Capgemini to outsource IT and operations. That's something very important. And the first migration will take place this year for Switzerland, then Luxembourg, Monaco and our U.K. business.Second point, increased synergies between our different geographies, especially using Luxembourg and Switzerland to -- in which -- the products -- the offer we made to our clients.Third point in our strategy, make the synergies between French trade and private banking in the French market, something tangible and will. And you know that we can do more with our affluent clients on the French market. We have very strong position on the private banking segment, but we could improve the equipment rate on our affluent clients -- happy clients having between EUR 150,000 and EUR 500,000. And here, that's the kind of area where we could benefit from more growth by leveraging our private banking G&A and offering.
Next question is from Mr. Guillaume Tiberghien from Exane.
Two clarifications, please. Do I understand that your resolution fund contribution will go up as much as 30% to 40% this year? And I don't really understand why there's such a massive jump. And the second one, maybe I misheard earlier. But when you talked about Basel IV RWA inflation, did you confirm the previous EUR 39 billion? Or you fine-tuned to EUR 35 billion RWA inflation?
Guillaume, yes, I think we can confirm both. Our estimate, and again, you have -- it's an estimate, which takes into account different parameters, relative sizes, et cetera. banks which are growing are by essence, been alive and also the mechanics for the French banks, in particular, there is a specific catch-up, if you wish, in the calculation for all French banks as far as we know, normally. And so yes, we are unfortunately forecasting this kind of jump -- and I'm not sure if I have understood the subtility. We said EUR 35 billion, and I think it was in line with previous guidances for all the risk, operational, credit and market risk in 2025. So all in all, something similar as previous guidance.
Next question is from Mr. Matthew Clark from Mediobanca.
Can I come back to a couple of cost targets you gave in your slide this time last year and at the retail day. So back then, you had a 2023 underlying costs to be below EUR 16.5 billion. Now I know there has been scope changes since then with Lyxor and with LeasePlan and from what you've just said, there's also a change in the systemic resolution fund contribution.But if we adjust for those 2 items, would you still stick to that kind of 2023 underlying costs to be down versus 2020 on an underlying basis guidance that you gave a year ago. And then similarly, with respect to the EUR 5 billion 2025 cost for the SocGen and credit or networks combined, do you stick to that target that was given at the time of plan announcement.
Yes. Matthew. Firstly, we confirm on the EUR 450 million target for the French retail exactly, as you said, the EUR 16.5 billion, which was given 2 years ago is not any longer anyway relevant with all the changes which have happened and including on the revenue basis. So we will update again in first quarter where we want to land in terms of cost/income ratio. We've given if you wish a guidance for 2022. What I can say is the discipline on the cost remains. And as we said, the previous plans, efficiency plans are confirmed whether it's on GBIS or the French retail. So there is no change from that perspective. But obviously, with the changes in the business mix, et cetera, we will update you in due course, but the figure is not anymore relevant, obviously, an absolute figure like this.
Next question is from Madam Anke Reingen from RBC.
I just wanted to ask about the 50% payout ratio and the mix and you reverted back to your previous mix commentary. And I just wonder under what conditions would you change the mix and is the absolute dividend you pay a consideration? So could we see a shift towards -- a higher weighting towards the cash dividend versus buyback. Just if you can talk a bit about more of the parameters, how we should think about you define the mix?
Anke, again, as I said, the idea is really to come back to the at least 80% of the payout of the -- sorry, we want to pay 50%, 80% of that at least should be the dividend, the cash dividend and max 20%, so 1/5 of the distribution is share buybacks in 2022 onwards. We made an exception really this year because we consider that there was still a good opportunity between EUR 1.65, which gives a 5% yield, and again, the capacity to buyback shares cheap. The whole purpose is to think, if I may, that with an additional year of 2022, there will be a further catch-up of the share price with more clarity on the big projects, further delivery on the quarter results. We thought it was from an opportunistic point of view, a good thing to accelerate the share buyback -- so it's not -- nothing more than that, but we will come back to the previous thinking in 2022 in our view.
We have no other questions, sir. Back to you for the conclusion.
Well, listen, thank you for attending. Again, I know you have a busy day, so thanks for your time, and see you soon, hopefully. Keep safe. Thank you very much. Bye-bye.
Ladies and gentlemen, this concludes the conference call. Thank you all for your participation. You may now disconnect.