BNP Paribas' BNPQF CEO Jean Laurent Bonnafé on 2019 Full Year Results

Good afternoon, ladies and gentlemen. Welcome to BNP Paribas' 2019 results presentation. Today's presentation will cover the first three chapters of the slides: group results, division results, and 2020 objectives. First I will take you through a summary of our group results, Lars will comment on the results by division, and then I'll update you on our 2020 objectives. As usual, at the end we'll be pleased to take your questions. So we start with slide 3, looking at our 2019 key messages.

BNP Paribas delivered a very good overall performance, with strong growth in income thanks to good business drive and on the back of our transformation process. In more detail, revenues were up 4.9% on last year, with each operating division delivering revenue growth. Costs evolved by 2.5% on the back of the continued development of the businesses in IFS, CIB, and in the domestic markets. They were down in the retail networks. Thus the group operated with positive jaws in 2019. These jaws delivered in each of the three operating divisions, with the consequence our cost-to-income ratio improved by 1.7 points. Cost of risk at group level was low at 39 basis points over our standings. The group's net result stood at 8.2 billion euros, up 8.6% on 2018, which translates into a dividend payment of €3.10 per share, fully paid in cash, as per our 50% payout target.

The group is very well capitalized with a fully loaded Common Equity Tier 1 ratio at 12.1%. On slide 6, you can see that our net result equates to a return on tangible equity of 9.8%, up 20 basis points on last year.

Turning now to the revenues of the operating divisions. On slide 7, you can see that they were up 4.9% on last year, and that there was revenue growth in each of the three operating divisions. Domestic markets showed 0.8% revenue increase on last year. The increase in business activity in domestic markets and the steady growth in specialized businesses were partly offset by the impact of the low interest rate environment. At IFS, engine of growth, revenues were up 6.9% thanks to a strong business drive in personal finance and very good performances in the insurance business and Euro-Med retail banking. Lastly, CIB's revenues rose sharply by 11.6% on the back of continued market share gains in Europe, with very good performances in global markets and corporate banking.

On slide 8, you can see that costs of operating divisions were up 3.5% on last year, with positive jaws and lower cost-to-income ratio in each operating division. In domestic markets, costs were up just 0.3% on last year. In the retail networks, they decreased by 0.5% thanks to the ongoing implementation of cost-saving measures and the adaptation of our operating model. In the specialized businesses, they were up as a result of the growth in business activity. Domestic markets delivered positive jaws in 2019. In both IFS and CIB, cost evolution reflected business growth, which was for both largely contained by cost-saving programs. In 2019, IFS operated with positive jaws of 2.4 points on a like-for-like basis, and CIB with 5.5 points.

Moving to cost of risk, starting with slide 9. You can see that at group level it clocked in at 39 basis points in terms of outstandings, at a low level. Looking at the different businesses, on the other side, in corporate banking provisions were low in absolute terms and the increase on last year was mainly due to write-backs in 2018.

Turning to the other business lines on slide 10, you can see that cost of risk was low in French retail, very low in Belgian retail, and continued to decrease at BNL in Italy. In other retail businesses, Euro-Med was up with the trend stabilized in Turkey. Bankwest cost of risk was still low. In personal finance, there was an increase on the back of higher outstandings, but that was fairly stable in basis points.

Turning to slide 11 on the financial structure, you can see that our Common Equity Tier 1 increased by 40 basis points to 12.1% compared to the level of 1 January 2019. Our Basel III leverage ratio stood at 4.6% and the group's immediately available liquidity reserve totaled €109 billion at the end of the year. The evolution of these ratios illustrates the very solid financial structure of the group. On slide 12, you can see that our net book value per share stood at €79 at year-end, up €4.3 on last year, at €69.7 tangible net book value per share. That represents a compound annual growth rate of 7.3% since 2008, highlighting our continued value creation through the cycle. A dividend payment of €3.10 per share, fully in cash, will be proposed at our annual general meeting on 19 May.

You will find on slide 13 some key points on the continuous reinforcement of the group's internal control and compliance system. Last but not least, moving to slide 14, I would like to emphasize the importance of our policy of engagement in society and reiterate our ambition to be a global leader in sustainable finance. The group has already taken positions in this area, for example by stopping the financing of new coal projects in 2017, by being the world's number three player in the green bond market at the end of 2019, being number one in the financing of renewable energy projects in Europe, number three in Asia-Pacific. €47 billion in SRI funds assets are managed by BNP Paribas Asset Management, which is number one in terms of SRI-certified assets under management in France. As you can see, our efforts are also recognized through ratings and our presence in specialized indices. These engagements are key elements of BNP Paribas' group company purpose, which was established at the end of 2019. Now, over to Lars for the divisional results.

Thank you, Lars. Let's now look at the last part of today's presentation: our 2020 objectives. On slide 44, you can see that the adjustment of monetary policies in the summer of 2019 led to a less favorable interest rate environment than anticipated at the beginning of 2019. This is impacting revenues related to interest-bearing products in the eurozone network banks. Nevertheless, according to the IMF forecasts, the world economy for 2020 should be well-oriented in the eurozone and in emerging markets, with a slight slowdown in the United States. In this environment, BNP Paribas anticipates continuing to deliver growth in all divisions thanks to its diversified and integrated model, strong business drive, and intensified cooperation between businesses.

Turning to slide 45, let's review the growth drivers of our operating divisions. Domestic Markets will continue to leverage its leading positions in specialized businesses and in the corporate and private banking customer segments, with further developing innovative digital offerings to acquire new customers and support evolving usages. IFS forecasts to pursue growth by leveraging its best-in-class offerings, platforms, distribution partnerships, and networks. As for CIB, it is anticipated to continue to leverage its steady market positions and gain market share in Europe and globally in the corporate and institutional client segments.

Switching to the objectives of each operating division on slide 46, you will see that the activity is anticipated to continue to grow in all the divisions on the back of strong business drive, strengthening of franchises, and development of cooperation between businesses. In addition, they should benefit from the full contribution of the transformation plan in terms of efficiency and new opportunities.

For Domestic Markets, 2020 is expected to be a year of pressure on the net interest income of the eurozone retail networks, which should result in a moderate decrease in revenues, as the impact of interest rates is expected to somewhat outweigh the increased business in all client bases and the strong growth in specialized businesses. Costs are anticipated to decrease, generating a neutral jaws effect.

For IFS, we foresee revenue growth in all businesses thanks to the strong business drive and the development of existing and new partnerships, while costs are anticipated to evolve at a slower pace. We expect IFS to continue to deliver a positive jaws effect.

Lastly, we forecast CIB to continue to grow its revenues sustained by market share gains, including through intensified cooperation with other businesses within the group, with costs reflecting the continued business growth while reaping the benefits of the transformation. We foresee that CIB will continue to operate with positive jaws.

On the back of continuous business development, full contribution of its transformation plan, the group forecasts continued growth in revenues and a decrease in operating expenses, delivering a positive jaws effect. We expect that the group should once again increase its net income in 2020.

On slide 47, you can see the update on cost savings resulting from our transformation plan. To date, we have achieved €1.8 billion of recurring cost savings, and as planned, these recurring cost savings should reach €3.3 billion by the end of 2020. In fact, €1.5 billion of additional cost savings are expected for 2020. With respect to transformation costs, they reached €0.7 billion in 2019, in line with targets. As indicated, there will be no transformation cost in 2020.

If you flick to slide 48, you can see that our transformation resulted in 47% of our office space in the Paris metropolitan area being marked as flex office. Accordingly, we are well positioned to adjust our portfolio of office buildings. Around €500 million capital gains are expected from the sale of such properties this year. On another note, the group envisions exceptional costs up to €200 million for the reinforcement of our IT systems, and €200 million for restructuring and adaptation measures, which will give us more flexibility and opportunities to adapt to the evolving context.

If you turn to slide 49, you will see that BNP Paribas' capital generation is regular and solid. The average growth in our CET1 ratio has reached 30 basis points per year over the period from 2014 to 2019. The target announced in 2017 to reach 12% Common Equity Tier 1 by the end of 2020 was already achieved in 2019, at 12.1% at the end of December 2019. Our CET1 ratio is well above the requests notified to us as part of the SREP.

Switching to slide 50, you will see that BNP Paribas is well positioned to face the transposition of Basel III, which is, as you know, in the process of being transposed into European Union law. The European authorities have reminded that this transposition is not expected to significantly increase the requirements for the banking industry taken as a whole. So it's very probable that the exemptions decided during the vote of CRD5 will be maintained. With this assumption, and to the extent necessary by taking management actions, BNP Paribas deems that it will limit to 10% the inflation of its risk weights as a result of this transposition.

Facing this inflation, BNP Paribas is favorably positioned, taking into consideration firstly a CET1 ratio well above current requests notified as part of the SREP, secondly a regular and solid capital generation of 30 basis points on average, the expected adjustment with respect to Pillar 2, starting with the application of Article 104a of CRD5 authorizing the partial coverage of P2R by hybrid securities at T1 and T2 and no longer by Common Equity Tier 1, and then the announced recalibration of the Pillar 2 requests.

Turning to slide 51, you will find a summary of the group's objectives for 2020. To conclude this presentation, we forecast the continued growth of our businesses in all operating divisions, leveraging our diversified and integrated model while reinforcing our franchises, in particular CIB, which should continuously strengthen its European leadership. This growth will be accompanied by the reinforcement of our leadership in sustainable finance, thus pursuing our policy of engagement in society. Furthermore, the group should continue to benefit from the transformation plan and cost-saving measures, resulting in a decrease of operating expenses in absolute terms and positive jaws effect. On these bases, we expect the return on tangible equity to further improve to a level of 10% in 2020. Lastly, our objective of a 50% dividend payout ratio in cash remains unchanged. This concludes today's presentation. As a takeaway, I would like you to keep in mind the very good overall performance of the group, with a net income at €8.2 billion, up 8.6% on 2018, positive jaws effect, and decrease of the cost-to-income ratio, Common Equity Tier 1 ratio at 12.1% at year-end, and a good position for the finalization of Basel III. The success of our transformation, our good business drive, and the strength of our franchises. Ladies and gentlemen, thank you for your attention, and together with Lars, we will now be pleased to take your questions.

So on the Deutsche Bank transaction, we're proceeding very swiftly and very much in line with the original plan, and balances are slightly moving up, so they're on track. Looking at capital, you got it right. Slide 50 is very clear. On one side, you have three elements, and those three elements are going to more than compensate the increase in the Basel 3 requirements. But what will happen to the excess capital generation needs to be understood, and this is part of the next plan. The purpose of the slide is to explain in a very clear way that this is our situation.

Looking at, and this is quite recent because the stance at the European level, looking at exemptions, keeping exemptions is quite recent. I mean, we can see very clearly the last author in the stance of the supervisor, the SSM, regarding for example the P2R, even the P2 is also quite recent. So factoring those two quite new elements, yes, you are quite right, there is room for free equity. But the answer to the question is part of the next plan. But it's a nice, I would say, so nice information that we are giving the market in that respect.

Thanks. There is no plan to continue to move up the ratio. But again, it's too early to say with all the details what will happen next year, '21, '22, '23. We just want to make that point that having heard, we'd say, the comments at the European level, having received additional comments from the SSM, it becomes very clear that not only we can control well on Basel 3 finalization, but there is room to maneuver. Then how we will manage that is to be understood, and it very much depends on the way those two bodies, the European level and the SSM, will ultimately decide to implement the Basel 3 package with all the details. That's also to be understood. But what is very clear is that what we have already now earned is strong enough to more than counterbalance this effect.

So is the ratio growing up? We don't know. Not necessarily, it very much depends on the way the regulator, supervisor, will manage the situation. But some free capital generation will be available, which is looking ahead quite a strong difference compared to the 2020 plan. In the 2020 plan, we were building what was considered relevant, and now there is a new period in which we are in a different situation. Looking at the return on tangible equity, partly it is due to the fact that we just accumulated equity during '19, so on average the basis on which we're computing the ratio next year is bigger, larger than the basis we have had in '19. The other part is obviously the impact of very low rates in the domestic market. So if you look at the comp in 2020, we're very much in line with what we said last year at the beginning of '19. The major difference is very much the impact of the low rate environment.

Thank you, Lauren. On the net interest margin, you should look at it at a country level, not at a group level. And if you look at the country level, the impact of low interest rates is clearly different in France versus Belgium. In France, you still have some room to manage the deposit rates given the fact that they are slightly above zero. In Belgium, it's different because you are already at or even below zero for most of the deposits. So the impact will be different in the two countries. And what you should bear in mind is that on the positive side, you have the development of the specialized businesses, which are growing at a very fast pace, and that will continue.

On the cost savings, we have achieved more than €1 billion already cumulatively. So we are well on track to deliver the remaining. On CIB market share, we have gained market share in EMEA, and we are now the number one European player. In the US, we have also gained market share in some specific products, like in prime brokerage with the Deutsche Bank transaction. So overall, we are confident that we will continue to gain market share in 2020, thanks to our integrated model and the cooperation between our businesses.

On French retail, you are right. We expect positive jaws in 2020. The revenues will decline, but the costs will decline at a faster pace, so we will continue to generate positive jaws. And that's the result of our transformation plan and the cost-saving measures we have implemented. On CIB costs, the Deutsche Bank prime brokerage transaction has a limited impact in 2019 because it was announced late in the year. So the full impact will be felt in 2020. But overall, we expect to continue to generate positive jaws in CIB in 2020, thanks to the business growth and the cost efficiency measures we have in place.

On the cost-to-income ratio, we don't provide a specific target for 2020. But what I can tell you is that we expect to continue to improve the cost-to-income ratio, thanks to the positive jaws effect. So the cost-to-income ratio should improve in 2020 compared to 2019. On capital distribution, we will provide more details on our next plan, which will be presented in the coming months. But what I can tell you is that we are committed to maintaining our dividend policy, which is a 50% payout ratio in cash, and we will continue to look at other forms of capital distribution, including share buybacks.

On the net income guidance, we don't provide a specific growth rate. But what I can tell you is that we expect to continue to grow net income in 2020, driven by the positive jaws effect and the business growth across all divisions. On CIB market share, we see potential for market share gains in several areas, including corporate banking, where we are gaining share in cross-border transactions, in global markets, where we are benefiting from the Deutsche Bank prime brokerage transaction, and in securities services, where we are expanding our client base.

On the dividend payout ratio, we are proposing a 50% payout ratio based on the 2019 net income. The slight difference to 53% is simply because of the rounding in the dividend per share. But our target remains at 50% payout ratio, and we will continue to maintain that going forward. On the insurance business, we expect continued growth in 2020. The market environment remains favorable, and we are benefiting from our strong distribution network and our product offerings. Regarding IFRS 17, we are well prepared for the transition, and we don't expect any significant impact on our results.

On the transformation plan, the cost savings have come from several areas, including the reduction of office space through the flex office program, the automation of processes using robotics and digital tools, and the streamlining of our operations across the group. For the remaining €1.5 billion, we have a clear roadmap in place, which includes further automation, the continuation of the flex office program, and additional synergies from the integration of businesses. On Belgium, we are managing the deposit rates carefully, taking into account the competitive environment and the need to retain our customers. The impact of low interest rates is more pronounced in Belgium than in France because the deposit rates are already at or below zero for most products. But we are confident that we can manage this through our cost-saving measures and the growth in our specialized businesses.

On the leverage ratio, we expect it to remain strong in 2020. We have a very solid capital position, and we are well positioned to face the Basel III finalization. The leverage ratio is above the regulatory requirements, and we have the flexibility to manage our balance sheet in line with our business strategy. We will continue to monitor the leverage ratio closely and take appropriate actions if needed to ensure that it remains at a comfortable level.

Thank you, ladies and gentlemen, for your questions. This concludes today's presentation. We look forward to seeing you at our next event. Have a good day.

So, looking at CIB, this is a purely organic growth as of today. We do not have any impact coming from the Deutsche Bank transaction, and we are not factoring in any impacts. So this is purely organic growth around BNL. If you want, yes, there is a series of smaller elements that flattered a bit the results. These are elements that we do not clarify; it's a series of smaller doses. And on the forex, basically when we look into the year 2020, we assume that it is stable for what we have now, so we don't take any positive or any negative forex evolution. That would be our answers.

Again, the last point we tried to answer; it was raised previously. So as you said, we need very much to wait for the last details, but in absolute terms, we are entering next year in a different sales cycle in which additional requirements would be more than, I would say, counterbalanced by capital generation. The initial position that gives us with some room to maneuver, and that's it. So we'll give you the next plan the full detail, but in absolute terms, yes, there is, I would say, a kind of capital generation that is free again to be understood for purchase. Looking at domestic market, the sensitivity is very simple. What we tend to say is, this is how, if you take a drop of 50 basis points, it's 100 million in fact the first year, 400 the second, 700 odd one. So if it's 100 basis points, it's 200, 800, and 1.4 billion. So the difference in between, if you assume the impact took place in 2019, the drop in 100 basis points, you would assume that in 2020 the impact is in excess of 500 million euros. The two most impacted geographies are France and Belgium, and a geography that is slightly less impacted is Italy, this is very much due to the deposit base of the bank is BNL, so you have to factor that. The impact comparing 2020 to 2019 is in the order of magnitude of 500 million, which basically is 3% of the total revenue base of domestic market, and this is slightly more looking at Belgium and France, slightly less looking at Italy.

Thank you. So on BNL, yes, we should be a bit lower. And looking at the French retail, the cost base went down by 0.2% each year. We will deliver a better result in that respect this year and in 2020. This is fully embedded, and this is why ultimately, looking at domestic market, if you consider that you have this large impact coming from low rate environment compensated by better action on cost and we said the growth of the commercial business, ultimately you end up with a negative evolution of the top line but limited. Looking at the mortgage volumes, the evolution in the French market was not typically the banking in France that is very, I would say, very linked to the evolution of the mortgage business, were more a kind of private bank, commercial bank, corporate bank, affluent type of platform. So this impact that can always take place will not impact that much the French retail. Those would be our answers.

The first question, everything is being considered. Those who are not disclosing a kind of buffer without the flooring, it's covered by the computation. Of course, it would not be very fair just to give the impact away from the flow. It means also everything is included. Climate change, we are already in that process. I mean, you have already changed the bank approach in a number of sectors or sub-sectors. We have closed down some businesses, so there will be an impact, but this is already covered by, I would say, the current strategic plan, and we believe it's going to be progressive. But you have also to factor the fact that there will be new sectors, new industries, new companies, new technologies, and most probably those banks that started first in that respect are going to have additional market share in those new areas. If you look at us, we are globally number three for green bonds, we're the leading bank for renewable in Europe, and so on. So the banks that started first will have larger market shares in those new, I would say, sectors, economies, approaches. So even if it's very difficult to compute, we don't believe that ultimately this will change the growth long term of the company because in a way or another, you will have to provide new energy, you will have to provide new sectors, you will have to provide new goods, new ways of, I would say, moving the economy. So it's more a question of rebalancing the business of the bank, and it can only be done in a progressive way, knowing that of course it's better to start in advance than to be the last one in the process. And again, if you look at those two positions, number three globally in green bonds and number one in renewable in Europe, are good measures of the situation we are already in, so good evidence that we're already benefiting from that transformation.

Alright, on your questions, yes, the CIB or the securitization in general, because it's indeed our CIB who performs it, the securitization is done on assets which are wider than that. At the beginning of 2019, there was basically blocking because there was clarity needed by the supervisors, so that was not done. Since the summer, we found back the normal rhythm of doing so. That's the rhythm at which we are. And then when it comes to your question on prime brokerage, so yes, if you look at the adaptation or restructuring concepts, we typically always have some of those related to the transactions that you do. It can be related to mergers, it can be related to software, it can be related to several things. So we do not give more guidance, but it is part of the overall costs of the integration that we had foreseen.

Thank you, Flora, for your questions. When it comes to the TRIM, as we said in the past, I mean, we have no idea of what the results would be. It is not an objective that is to be attained, but we said that it could be around like up to 20 basis points. In the meantime, several evaluations have been performed by the supervisor on market risk, credit risk, counterparty risk, and as we said, basically the impact has been very limited. Nevertheless, what is still ongoing is the low-risk portfolio, now that is less the district, all kinds of review. So I have to repeat that the guidance we have is the impact of 20 basis points. It could be less, it could be more. That is what there is to say about TRIM. When it comes to insurance, indeed, like every quarter, we review the provisions we are taking. In particular at year-end, we took a prudent stance, in particular to some of the activities we have, for example, in Latin America. So you know, we basically stepped that up. We see in some of those countries we observe some risks around social crisis, and that is basically what we provisioned for. So it's a one-time on the stock, right? It's not something you have to assume that it happens in quarter-over-quarter. We are prudent emphatically on the side, and as I said, it's not to be done times four. It's basically the stock which has been aligned. So for those, would be my two answers.

I'll invite you to come back when it's going to be published a bit later. But you do know that we are provisioning on solvency as well, so there is no concern, and all that.

So on that last point, we are just looking at the situation on a case-by-case basis, and only for counterparts that are, we say, depositing regularly, let's say, more than 100 million euros or so. This is very much the approach we have. We do not intend to charge retail customers or SMEs and so on. So this is very much the distance we are looking at, situations that are really large, important, basically above 100, sometimes slightly below, but this is really a case-by-case situation analysis. Looking outside the global portfolio of business we might derive from a certain counterpart on insurance, there are so many ways to compute the risk, and this is very much linked to whether the local regulator. This is not at EU level that this is being handled, so it's very difficult to answer to your question and to compare, because basically we don't know how it's being done in Italy. But last comment, it is the financial conglomerate is a complex regulation, and there are several triggers that can move you in one or the other, so it can evolve. For us at BNP Paribas, it has been stable, the way it's handled. And just to position it, I mean, even if the total Danish compromise would go away for us, that would be an impact of 10 basis points on the common equity tier one. So we leave it at that.

Direct, when it comes to transformation costs, basically we had the last one in 2019, so those 700 million are not there. So that's the synthesis. And when it comes to capital, there is no favored road, as I said. We're basically ending in 2020 our plan. During 2020, one would assume that there will be some clarity with respect to how these things will unfold, and at that time, in the next plan, we will be able to again make a crisp detail of what it basically means. And as you know, the deal on the acquisition is that what you're asking? The only thing we look at is if at some moment in time we can do bolt-on acquisitions like what we've done on prime brokerage, that's basically what we limit ourselves to.

Thank you for your questions. If I may allow me to clarify indeed on the costs, because intrinsically you should have all elements to compute them. So if you start from the basis of 2019, what do we know? That when rolling into 2020, first, we said the transformation costs which were 700 million in 2019, they will be no longer there. So you take them out. Then we also said that there would still be net cost savings of an additional 1.5 billion, which will also click in. So those are two improvements. But at the same time, there is this kind of what we call wage drift, which is the evolution of inflation but also the natural growth of the businesses that we have, which if you look historically, is gravitating around 3.5%. So if you take all that, that's basically where you stand. Because if we take those exceptional costs that you talked about, the restructuring and the likes, they are basically the same in 2020 as in 2019. And on top of that, we have some in 2020 some exceptional events that will be offsetting those, even though it's not in the interest cost. So with that, you should basically have all the elements to clarify those expenses. When it comes to those 400 that we basically mentioned, and listen, from the horizon we have today, in what we see, how we have to adapt which businesses because the fintechs are there, because the branches are different, because it is 400, that's basically the best view we have added today. And when it comes to Belgium, on the pricing, there is indeed the flux and there is a stock effect. So if you look at what we see in the behavior, there is indeed some pricing which kind of makes sense. However, there is still the history, the loans that were made four years ago are in a different shape than the ones that are done now. So those would be my three answers.

It's what you call it's the real change or the real pace of the cost, and it's the bulk of the countries in which you are. Sometimes it's the inflation which makes up for it, sometimes it's the more natural business growth that makes up for it, but in the end, that's a bit the statistical number we come at.

Oh, yeah, we basically addressed it. So it is every time different, and as I said, for us, if you look at the overall impact of the Danish compromise, if it would disappear, it would be 10 basis points.

So again, looking at the final buffer, our assumption is covering everything, without being fair just to say this is the impact on and keep out of scope something else. But as far as the flow, if FRTB, everything is included. This is the current reception of the group, very detailed due diligence analysis also. So this is it. There is nothing that is still in there on top. And away from TRIM, that is a regular process that started in 2018, we've been through 2019, 2020 is the last year. Away from TRIM, we do not expect anything on top. So is it right? Thank you very much.

Okay. When it comes to AT1, so what indeed we have updated the overall issuance plans for the year, and they are slightly up compared to what we had in the past. So that is a small change that shouldn't materially impact. And when it comes to corporate center, the overall guidance that we give both on the top line and on the costs are unchanged; they remain where they are. Can you repeat your second question there? It was the cost of risk, but if you can please repeat the corporate center guidance because it's been quite volatile over the quarter, so I just wanted to ensure that it doesn't correct numbers. Thank you. I know, if you look at the cost overall, we anticipate a yearly run rate of the cost of around 450 to 500 million. And when you look at the top line, we have like around 150 million that we have for the top line. And when you look at cost of risk, it is basically a small amount on the cost of risk because we have some legacy portfolios in there, for example, related to the activities that we have ended, and so we have some exceptional elements that weigh on the result this time. But overall, it should be negligible what we have there. Thank you. But the cost of risk was actually for the group level, so what do you think for 2020? Thank you. Yeah, for 2020, as we said, over the cycle is 50 basis points for us, and we said that it might be that we are a tad below that, so it could gravitate towards 45 basis points.

On leverage, and typically at year-end, there is a slowdown happening in the activities. I assume that all of you on the phone take holidays, and so those basically the majority of the business as well. So that is why there is a pickup in the leverage because there's a bit of a winding down on the balance sheet. And so that is just like last year. Last year we ended the year, I mean 2018, we ended the year on 4.5%, and now we ended it on 4.6% because we accumulated more capital. So if you want to look at the ratio which you see the first quarter, the second quarter, and the third quarter, which is gravitating around 4.4%, that is more of the metric that reflects the natural business, and that is well above the year-end we will have to be in two years. So from that point of view, we are relaxed on that one. When it comes to Basel IV, again, we looked at that. In fact, we've calculated it. I mean, there is no use of giving you more color on what it is. Those will depend on what the rules are and what activities we have to contemplate. So it is too early to say.

Well, very shortly to say, some domains if you want to stay as a state-of-the-art bank, you have just to grow that technology. But it's not going to change your position relatively to peers. So if you want to stay in a certain business, you have to be very good at that, and basically more or less all businesses are involved in that respect. In some businesses, you could potentially come across new ideas, new services, and this will give the company, I would say, additional growth potential. So we tend to say that looking at the cost base, I doubt very much this will have a clear impact because you need to fit the technology, you need to invest, it could require a lot of IT capacity and so on. But potentially, it can be a driver in certain businesses for the top line. So I would rather say that than a driver to lower the cost base.

So we're having interest in Germany and China for very simple reasons. Germany is by far the largest economy in Europe, and we are kind of reference banking in the eurozone. So sure, yes, of course, we have a strong interest in Germany, and just as secondly, we said around China, in Asia and worldwide. So these are the two obvious factors in our interest. We cannot expand the global platform in Europe without having a strong push in Germany, and being able to be relevant in Asia without a kind of global footprint, preferred China. We're very much in line with the planning as to geography, so nothing less, nothing more, while making good progress in the two regions. Looking at embedded insurance, we're very much in line with the project. So the way we are, I would say, cross-selling that product in the end, so far our retail customers in France is proceeding well. This is the beginning, but not yet up to the level of cross-sell you cannot see in short in, I would say, a cooperative or mutual banks in France, but progressively we're building the machine, and for sure ultimately we will reach the same level. It's a machine, and the Matmut offering is very relevant in that context. Looking at SMEs, we partnered one year ago with AXA, the worldwide leader in that domain, and we are still in the window, in the very beginning of the learning curve. This is brand new. We have to adapt, we have to be relevant, but it's coming. The potential is less important compared to the potential of embedded insurance with individuals, but still, this is relevant. It will take some years to be delivered fully. Looking at Hello Bank, Hello Bank does not have a negative impact on domestic markets. I said the cost base is covered by the revenue, and in the coming months, we will be clearly in the left wizard with a positive impact. Hello Bank is not positioned the same way in France, Belgium, and Italy because the way we are in those markets is very different according to the different geographies. And for France, for example, we're going to add a new strategy. This was announced a couple of weeks ago in terms of pricing offering. So the positioning we're having for that platform in the different countries is different, but what we can say is we are not any more in a kind of negative impact situation. We're having already something that is slightly positive that should grow in the years to come.

Sure. The intrinsic evolution that we have on the balance sheet, if you look at it quarter after quarter, yearly basis, it's basically the growth of credits. That's the one. We said that credits are growing around 5%, so that element is basically what is lifting that growth. However, that growth is accompanied by revenue growth, by bottom line growth, therefore by capital growth. So from that point of view, that's the evolution, and the overall trend is very fine.