Ladies and gentlemen, welcome to the Société Générale Conference Call. Frédéric Oudéa, Chief Executive Officer, and William Kadouch-Chassaing, Deputy General Manager, Head of Finance, will present the group's Second Quarter and First Half 2021 Results. Gentlemen, please go ahead. Hello, everyone. Thanks a lot for participating to this conference call on our Q2 and First Half Results. As usual, we will make a short presentation with William Kadouch-Chassaing, our CFO, and our whole management team. We'll answer your questions. Let's start. If you have the presentation with you as slide four, let me just recap the main highlights of this excellent performance for the second quarter. As you can see, a strong quarter when we look at the net result. You have to come back to 2016, the second quarter, actually, to see a similar number. In 2016, it was boosted by a strong equity capital gain. Fundamentally, it's probably the best quarter in the history of the group. Of course, a very strong first half. All the businesses contributed, as you can see on the revenue line, +20% on a like-for-like basis and at constant exchange rates, with a strong quarter in GBIS, in Global Markets and Financing & Advisory, very good performance in the Financial Services, and across the geographies, a rebound in retail activities. As you might have seen, we are maintaining a strong discipline on the costs, and the gross operating income is increasing by 55% with a strong improvement of our cost-income ratio. Something which is also not negligible is, of course, the very low cost of risk. We will elaborate on this. It is an illustration of a very low number of defaults, while we preserve a very prudent provisioning policy. All in all, we deliver a strong profitability on tangible equity, 10.4% for the quarter in underlying terms. The outlook for 2021 is improved. In our view, we now confirm a growth of our revenue for all our businesses. We confirm improved positive jaws and the downward revision of the cost of risk guidance. Based on this first half, we consider that the cost of risk for the full year should range between 20 and 25 basis points. Regarding our capital, you will see that we are maintaining a strong Tier 1, while confirming our share buyback program for the fourth quarter, equivalent to the amount of EUR 470 million. That means that we will have distributed the equivalent of EUR 1.1 per share all-in this year for 2020, while the provision for dividends for 2021 and for the first six months is already EUR 1.2. That means that we will, just in the next six months, distribute more than for the full 2021 year. Let's turn to page five. I'm happy to answer your question on the ESG. Let me just highlight that what we wanted to illustrate in this slide is that we are now working on ESG innovative solutions in every geography with all kinds of clients, whether it's developed or developing countries, whether it's large corporates, retail, or sovereign administrators in Africa. We are happy to see that our ESG research has been rewarded a strong industry recognition. As you know, we have now included systematically in our research since 2020, a strong ESG angle. I will turn now to William, who will elaborate more in the figures. William. Thanks, Frédéric. Morning, all. Thanks for joining this call. I do hope you're doing well. Let me turn to page seven, reiterating what Frédéric just said on the net income. Published net income stands at EUR 1,439,000,000. The underlying stands at EUR 1,349,000,000 after the adjustment pertaining to IFRIC and EUR 85 million of transformation charges. Of those is translated to a return on tangible equity of 10.4% and 11.2% respectively. The key element behind this strong earnings growth is on this page, is obviously the greater operating leverage of this company. We committed to strong positive jaws, and we have strong positive jaws, improving positive jaws, in fact, sequentially. This translates into a cost operating income of 55%, adjusted for foreign exchange, it's actually 60%. Of course, also a decrease in the cost-to-income ratio to 67%. To put things in perspective, remember that pre-crisis, our cost to income was about 70%. This is true for 2018. It was true for 2019, when we started the journey towards decreasing the cost base. That is to be compared with the 67% I just highlighted. Logically, this is due, and that's on the next page, to the way we manage our costs. We want to pursue a strong cost discipline. For the first half, you have an increase, which is a limited increase of 1.7%. In fact, when you look at what's behind that cost evolution, you find mostly variable cost components and a higher IFRIC 21 charges. We had already talked about that in the first quarter. Fundamentally, the intrinsic cost base is flat to decreasing. Strong positive jaws, I've already mentioned, and the cost to income for the first half at 57%. The second component in the performance is obviously linked to cost of risk. That's on page nine. We have a very low cost of risk. This is a historically low cost of risk for each and every division. As Frédéric said, we don't expect the cost of risk to be nearly where we expected it to be at the outset of the year. This is why we decreased the guidance from 30-35 basis points to 20-25 basis points. You remember it to all, that 10 basis points equates to approximately EUR 500 million on a cost of risk on an annualized basis. Let me point you to the non-performing loan ratio. It's decreasing to 3.1%. It's not just the ratio that is decreasing, this is also the absolute amount of NPLs. This is due, beyond the improvement in the environment, to an active, proactive management of NPLs. We sold some portfolio in the retail in Q2. Behind this performance on cost of risk, the only factor, in fact, is the limited defaults, as Frédéric said. We see very limited Stage 3 Provisions because we see very limited defaults. You see the EUR 164 million, which we deduct as a very small write-back of EUR 22. I say it's very small write-back because what you have on the right-hand of the page is obviously the picture of the representation of our prudent provisioning approach. We keep the EUR 3.6 billion approximately, amount of provisions that we had increased in 2020. Page 11, you see CET1 is strong at 13.4%, which is 440 basis points above MDA. It's pretty stable, - 10 basis points. What you have here, the story is pretty simple. Very strong capital generation on the back of the results we've just commented. You see 18 basis points, that's after provision for dividend. For the first half, organic capital generation was 44 basis point, to be compared with an historical, through the noise, through the cycle, organic capital generation of the company of about 20, 25 basis point. Only the first half, we had 44, and that helps compensating the cost of regulatory charges for the quarter. All were expected pre CRR2. We may want to comment if you have questions on that. As you see, pro forma, the share buyback, this would be the same level, 13.4%. All the other ratio are strong. Let me also mention that our funding program has been completed for the year in good terms. Actually, better than what we forecasted at the outset of the year, which is why we speeded up the program. Turning to business news, and starting with French Networks. As you know now, we comment first the Société Générale Crédit du Nord, and then Boursorama before we wrap up for the whole pillar. French Networks, you see the dynamics, commercial dynamics, on the page 14, improving. Loan production is improving sequentially versus first quarter, and also obviously in terms of production versus Q2 2020. It's still not where we were in terms of paths of growth in 2019, pre-crisis. This is a good sign to see that it's picking up a bit in some areas, particularly home loans and corporates. Deposit collection remains strong, which is good for the balance sheet, but not maybe as good for the P&L, of course, given the negative rates. On the right-hand side, we have very positive dynamics on the non-balance sheet savings. Life insurance outstanding are up, private banking net new money hits record level. On bank insurance, we continue to make progress with P&C and protection contracts. That is very important because this reflects the strategy we had announced to be very proactive in converting on-balance sheet deposits towards non-balance sheet, as well as P&C penetration. Boursorama had a very strong quarter. You see 168K clients acquired for the quarter, up to 24% from last year. When you look at the production, you see that it's picking up, + 40% if you compare to the client acquisition in Q2 2020. At the same time, Boursorama continues to monetize well its client base. You see strong growth in credit, in loans, strong growth in deposit and financial savings, and still good growth in brokerage orders. When you adjust for the acquisition costs, which are well in check as far as Boursorama is concerned, you get to a good 15% adjusted return for the first half. To wrap up, in French Retail Banking, you see a good growth for the quarter, 8%, as well as for the first half, which is 3%, with a NIM up 1.6%. Very good momentum in fees, operating leverage translating into a strong Q2 return on normative equity of 14.2%. 15%, if you exclude the acquisition cost of Boursorama. Turning to International Retail Banking. There again, you see an improvement relative to Q1 in International Retail, and strong growth year-on-year. You have the projections on the top of the page, which I won't comment. Maybe a word on the revenue dynamics, 3% in Europe, 4% in Russia, a hefty 17% for Africa. Should you adjust on some base effect we had in Tunisia last year, that would be still a good 8% growth after a very resilient year for Africa in 2020. You see this is across the board. Loan production is picking up, but also fees are very strong. To be noted, particularly for Europe and Russia, we are just at the beginning of central bank raising rates. This bodes well for the coming quarters in Europe. The profitability standard, a hefty 17%. Financial Services, very good quarter again across the board, starting with insurance. You see the outstanding up for life insurance as well as good growth in production premium across geographies. What is important is what we do in life insurance is a quality new money. We have an increase in the share of unit linked. That's very important, both for the results as well as the risk profile. You see overall insurance growing at 13% when adjusted for foreign return foreign exchange. Financial Services to corporate is very much driven by ALD, although we have good trend in leasing as well. You see close to 50% growth. ALD, it's important to note, you have seen the presentation, that it is, of course, explained by the increase in the car sales results, but it's also fundamentally linked to the increase in the contractual growth margin. Overall, for the IBFS pillar, same trend, strong revenues, + 17% across the board, positive yields, and a return on equity of 20%. Turning to CIB, we confirm what we had said, starting with markets, which is the recovery of our market operation, which has been observed for about four quarters in a row. We end up at EUR 1.2 billion for quarterly revenues for market activities. You see equities up above their average in 2019 and their long-term average. You see 21% above 2019, and that's across the board. We comment that with Slawomir, listed products, structured and flows. FIC is down. It is down a bit less than the average of the market, still down relatively to 2019, 6%. We benefit from a stronger exposure on rates than credit. Obviously, 2021 is less buoyant for FIC than 2020 was. Turning to financial advisory, strong quarter. To put things in perspective, you know that Slawomir had told you that we expect 3% gross premiums. With this quarter, we achieve a 13%. We have a strong growth across the board. I won't comment each and every topic. You see asset finance and natural resources, notably renewables and some areas such as shipping, very strong asset-backed product and transaction banking at 25%. Asset and wealth management, let me point you to the 8% adjusted growth for private banking, adjusted from an exceptional item we had the same quarter last year. This is on the back of very strong net positioning inflows. In fact, the pace at which we collect new money is well above the historical average. We have strong net inflows as well as on Lyxor. To wrap it up, for GBIS, which is page 22, same pattern as you have seen for other pillars. A bit more dramatic, even. 28% revenue growth. Operating expenses up I would say, explained by variable cost as you would expect. All the expenses are well in check in the program. The cost program is executing well, positive jaws, and a return for the quarter of close to 12%. For the first half, it's close to 15%. Corporate Center, not much to mention. Just to reiterate what we had said in the first quarter, the EUR 85 million transformation charges, the detail of which you can find in the footnotes and as well as in the appendix, are only now accounted in the Corporate Center. They pertain to various areas. That's to help the presentation of our results and the reading by you. Underlying gross operating income for the first half is EUR -96 million, better than the usual, and very consistent with the guidance. Thank you, William. Let me just conclude by a few words. As you can see on slide 25, we have reached a result and a profitability which is above the pre-crisis level, and actually is even the best in the last five years, equal to the highest half year that we have recorded, again, in our history. It is on one hand, of course, the definitive positive answer on the question on the specific issue of product structure. The franchise is well functioning. Beyond, I would say, the relentless efforts over the last year or so to reposition the business model, strengthen the franchises, lower the break even, and of course, maintain a strong risk discipline. As I said, we remain positive for the second half. We tend to think that the economies should do well. We consider that despite the Delta variant with the progress of vaccination, we would not experience a similar lockdown than the ones we had in 2020. We are, again, supported by good commercial activity in all our businesses. We are confident to maintain a strong discipline on costs. As you've seen, we have been very prudent in our provisioning policy, which is a guarantee for the customer risk going forward and even beyond 2021. We are really committed to pursue our different strategic projects, and of course, deliver a sustainable and profitable growth. I think there are opportunities in this market, and we are well-positioned to grow our businesses. That's what we wanted to say. Let me just highlight that at the end of the day, ESG is so core in our strategy, we decided to postpone to the first half our ESG presentation and to include it actually in our overall strategic presentation that we might make again in the first half of 2022 to finalize our trajectory for the year 2025. All right. That's it. Now, we are ready again to answer your questions. As always, I know you are very disciplined, let's stick to this good policy, two questions per person. Please go ahead. Thank you, sir. Ladies and gentlemen, if you wish to ask a question, you may press zero one on your telephone keypad. First question is from Madam Flora Bocahut from Jefferies. Madam, please go ahead. Yes, good morning. Thank you for taking my questions. I'd like to ask two, please. The first one is regarding provisions, and the second one is regarding ALD and M&A, more specifically. On provisions, the guidance that you provide today implies a higher run rate in the second half of the year than in H1. Just wanted to clarify why and if this is just out of caution. You mentioned it in your presentation, but you haven't touched much to the Stage 1 and 2 provisioning that you did last year. Do you expect that there will be, at some point, more reserve releases? If so, can we expect that this year, or it's more a story for next year? On ALD, just a quick question, because the IPO was partly with the objective to use the shares as a currency for M&A. Obviously, there's been press reports recently about some potential interest around this plan. Can I ask you as a broad question on ALD and M&A, what are the key criteria that you are considering when you think about M&A there? Is it more scale? Is it access to new markets, to new expertise? Would you be ready to spend a decent part of your excess capital on such M&A? Thank you. Flora, hello. Good morning. I will let Diony Lebot to answer first your question on the rate, and perhaps elaborate on the performance of ALD, which is actually spectacular for the first half. I'd like to take your strategy question, if I may. Of course, we don't comment on any market rumor. I would like to highlight, first of all, our conviction that we can grow organically, strongly, our businesses. Regarding more specifically ALD, what we do and what we have done in the past is to complement this organic growth with a small involvement acquisition, with a partnership mindset, which has functioned very well so far. Going forward, in terms of capital usage, we want to ensure that, first of all, we finance our organic growth. We can consider acquisition that will not have a significant impact on our capital trajectory. That's a discipline we want to keep. Of course, have this strong and attractive return policy to our shareholders, as I said, of 50% of net profit. This is a discipline we will keep looking at potential acquisition, if there were opportunities. The reason for acquisition, well, we look at startups to complement new business models, and we are doing that more and more. We can look at businesses which effectively gives scale, and so to have cost synergies. I don't think that currently with so much changes, we would consider, for example, entering into new geographies, et cetera. It's more really to further enhance the profitability. Again, we tend to look at startups. It's true, actually, for ALD too, to complement very disruptive business model, which I think has strong value creation. Now, Diony, on the provision and again, on ALD, because I think it's worthwhile. Yes. Thank you for the question, Flora. Just to complement on ALD, we did a very strong actually, record results for ALD, with close to 70% increase in revenues. Of course, part of it is driven by exceptional environment in terms of used car sales, with a shortage of used cars, and also the semiconductor issue, which delays deliveries. We had, as you saw, EUR 740 per car result. The outlook remains positive for the year, which allowed us to provide a more precise guidance on used car sales of EUR 600-EUR 900 per car. On top of the excellent results, as said by Frédéric, ALD is also moving towards the strategic objectives of the Move 2025 with, as you probably saw, some targeted acquisitions with Skipr, which is a startup specialized in mobility-as-a-service. We had also announced the partnership and the acquisition of Sabadell Leasing, which adds 20,000 cars. Partnerships such as an important one with Smart, which is 100% electric vehicle company. Also, with the trend of further electrification of our fleet, which is a significant trend in the market. Overall, good progress both in terms of revenues, profitability, and strategic roadmap. Maybe shifting totally to your first question on cost of risk. As you saw, we have a very low cost of risk, 11 basis points. It's 16 basis points for the first half, which gives us confidence on the revised guidance of 20-25 basis points. We have maintained almost stable our Stage 1 and 2 Provisions, which are of EUR 3.6 billion. The outlook is that we consider that there could be an increase of cost of risk in stage three. It's extremely low across the board, as said by William already. We could see some tick-up, and we want to remain prudent in our scenario, especially with the COVID situation maybe being prolonged. Having said that, our H2 outlook remains positive with the development of the situation, the strength of our portfolio, and the quality of our origination and our prudent provisioning policy. It's up to say, I think this guidance does not include significant write-backs on the provisions in the second half. Effectively, it will be done more in 2022. Thank you. Next question. Next question is from Mr. Jacques-Henri Gaulard from Kepler Cheuvreux. Sir, go ahead. Yes. Good morning, everyone. Two questions. First, I think this morning I read on Bloomberg, Frédéric, that you had given an outlook, which was probably a little bit less sanguine for 2022. I don't know if that was a mistake or if you want to clarify on the back of what you said. The second question is on the stress test by the ECB on Friday. When I look at your performance, it's really in line with the European average, except in one area, which is the cumulative pre-provision profitability, which is materially weaker. Could we have a little bit of a view, if you analyzed it, about what went wrong there versus the rest? Thank you. Hello, Jacques-Henri. What do you mean exactly in your second question? Yeah. If you look at the stress test of the bank, okay? Okay. Sorry. Yeah. Sorry, I missed that. Okay. Okay. I will answer your question. It's really on the economic outlook that I was commenting. Okay. Our economists have always been, to a certain extent, and since the beginning of this year, a little bit more positive on 2021 than most institutions, including in the European region. For example, they had forecasted a 6% pickup of the French economy in 2021. On the other hand, they have also always been more conservative for 2022 than, again, the European Commission, the ECB, the IMF, saying that at the end of the day, also, it's the sum of the two years, which was the most meaningful, if you wish to assess their overall forecast. It's fair to say, we tend to consider that there might be more issues with this, perhaps a question mark on the consumer spending, for example. Whether or not it will pick up structurally. Of course, questions on inflation and monetary policies. Some questions also in the supply chain, et cetera. That's what I was referring to. It's not related to Société Générale perspective, but it's the economic forecast. Perhaps, Diony, on the stress test, I think it's worth explaining a little bit on these impacts. Yes. Hello, thank you for your question. Indeed, as you saw, the stress test was quite severe and impacted all banks, but it has also shown the resilience to extreme shocks of European banks. As far as we are concerned, with an impact of 570 basis points, as you said, we are a little bit above European average, below average for French banks. We look at what really makes the difference, it's one related to scenario. Scenario in France is quite severe. It's business mix, it's methodology. The business mix is related to the relative power of our market activities, which under the EBA stress test, go through quite significant shocks. You have in mind the -45% to -55% on equities. With no possibility of hedging or management actions. There is also the methodology on market risks, which contains caps and floors. The caps have impacted the projected revenues, given that in 2020, we had suffered from the market losses and the COVID crisis. The floors impact the level of exposure as our risk occurred at the end of the year, and the methodology also should take an average. On top of that, some banks have benefited from one-offs, for some are quite significant, which was not the case for us. All in all, indeed more impact given our exposure to market activities and the specific situation of 2020, where our results were lower than our normal trend in terms of market activity. Super clear. Thank you very much. Yeah. Thank you. Thank you. Next question. Next question is from Madam Delphine Lee from JP Morgan. Madam, please go ahead. My first question would be on the French Retail, that now you're guiding to revenues improving. I was more interested in particular on net interest income, what that implied, if you don't mind elaborating a little bit what you're expecting on volumes, margins. Are you concerned that volumes could start normalizing, or is there any significant pressure still coming from the deposit margins in particular? My second question is on the capital return. Just wondering if in your 50% payout ratio for this year, you talk about the EUR 120 of cash dividends, and I'm just wondering if you would consider including some buybacks, which you have done for 2020. Again, for 2021, if there's any component of buybacks. Thank you. Hello, good morning, Delphine. I will leave the floor immediately to Sébastien to comment and answer your question about French Retail. Yes, let me just remind you that our policy on dividends is to say we will distribute only 50% of our underlying net profit. Within this 50%, we consider that up to 1/5 could be dedicated to a potential share buyback program. The rest being, of course, a pure cash dividend. Yes, we could, and we will look at this at year-end, consider some share buybacks within this envelope. Sébastien? Yes. Good morning, Delphine. Coming back on net interest margin. It's up versus Q2 2020, up versus Q1 2021. Answering your question, we are using different levers to support the NIM, the first one being to convert side deposits into financial products. Obviously, a second lever is to be very active to support credit production, which improved in Q2, and especially for mid and long-term credit to corporates, and home loans production to individual customers. As you said, there is still pressure on the deposit margin coming from the increase of deposits, and also the context of low rate environment. For sure, this context in terms of rate will last in the coming months, even years. We are confident that using the different levers I have mentioned, we are well-positioned to support the NIM and mitigate the impact of the low-rate environment and the increase of deposits. Especially regarding deposits, we can imagine that the increase of side deposits in the future will be lower than the one we have had over the last quarters. If I may. Great. Delphine, yes, Jerome, one important point I would like to mention. Obviously, I haven't mentioned the fact that we haven't booked any second bonification for TLTRO in the Q2. We have a positive growth of the net interest margin compared to last year, compared to Q1, without any second bonification impact. How much would that be in coming quarters? We don't disclose that number. As you know, we refer here to TLTRO III, for which we haven't accounted anything, as Sébastien said. You know that we tend to be a little more conservative than the average market practice, because we accounted over the life of the instrument, i.e., three years. If you do your calculation, you know that we have EUR 72 billion of amounts. You can multiply the bonification and spread it across three years, that's it. You see, Delphine, I'm sure that you are good enough in math to make the calculation. It's relatively significant, and it will be just, keep in mind, spread according to the full duration of the TLTRO, or the so-called TLTRO. That would help on top of everything that Sébastien mentioned. Okay. Very clear. Thank you. Next question. Next question is from Mr. Jean-Francois Neuez from Goldman Sachs. Sir, go ahead. Hi. Good morning. I just wanted to pick up on the questions that have been asked before. Very quickly, on the net interest income in France then, would you say that the second quarter, in short, is a level which we can consider as a trough in absolute terms? That would be a significant change compared to the trend of the past many years for this particular item. Secondly, I read this morning, an article, a headline from Slawomir, who was saying that the environment for equity seemed to be remaining good, supportive, as he said. I felt in the first quarter that his comments, after the very strong quarter that took place, were more towards leading us towards a guidance of more conservatism, maybe that headline would suggest. I just wanted to understand if anything has changed or what were the fundamental drivers, because obviously, this is great development. You don't have to answer, but if I may sneak another one on the stress test, do you think that your restructuring of the equities business of last year, which obviously took place after the cutoff date, I guess, of the stress test, maybe for the full effect, would have changed your outcome? Improved it? Hello, Jean-Francois. I would leave Sébastien answer again your question on the NIM, leave Slawomir's comment on his comments on the equity position. Just as Diony said, if you had done the same stress test today, so six months later, it would have been better. In particular, because in the way it's done, you capped the revenues at the 2000. You had to cap the revenues at the 2020 levels, obviously, in terms of capital generation, given the kind of revenues we do today, it would have been effectively better. Probably, we are losing a few dozens of basis points because of that and the different effects. That's life. Structurally, I think we are improving the potential future results of the stress test for Société Générale with what we have been doing. Sébastien. Yes. Good morning, Jean-Francois. We have given a guidance on the French retail revenues as a whole, saying that we expect positive growth of revenues compared to 2020, which is a slight change compared to what we said last quarter. We're clearly more optimistic. I would not give a sub-guidance on the different components of the revenues. What I can say on net interest margin is that we will keep using the same levers than the ones I have mentioned. I.e., converting side deposits into financial products and boosting credit production, which are the two main levers to support net interest margin in the future. Slawomir? Hello. Thank you for the question. I believe that my comment was referring to the environment, mostly. Clearly, let me walk you through my reasoning. If you compare the current situation versus our conversation a few months ago, you have a market where you have sustained trends, stable volatility at reasonably high levels, but without any exceptional spikes or exceptional volatility of the volatility. You have a continuation of this good combination of factors driving investment banking activity in equities towards, let's say, a good environment. That's what I was trying to say. Looking forward, at least to 2021, and I'm talking about the market here, you have trends that will remain because you have unanswered questions about the long-term macroeconomic outlook, and about monetary policy in the context of the inflation theme. These, I believe, are going to be reasonably positive drivers for the market, right? If I turn to our own performance, and again, commenting on your comment about my comments from last time, we are down 10%, because Q1 was exceptional, and I was really expressing the caution versus truly exceptional market conditions. In Q2, good news, they remained conducive starting in May, after an April, which was very slow on the back of very low volatility, but picked up again with all the reflation theme reappearing, so to speak, in the conversations on the buy side. Still, it was lower than Q1, right? I don't know. I hope I'm being clear, in the sense that I believe that the equities market conditions will remain reasonably good, not comparable to Q1, but reasonably good. Our own ability to be relevant in these markets should be unchanged. Thank you. Next question. Next question is from Madam Giulia Aurora Miotto from Morgan Stanley. Ma'am, please go ahead. Yes, thank you. Hi, good morning. My first question, actually, more than on the quarter, is really more forward-looking. It's about the integration between Société and Crédit du Nord. How is that project progressing? Can you give us an update of milestones achieved so far? I don't know if maybe you're going faster or much slower than you had originally anticipated. In terms of loan growth quarter to date, so the most recent things that you're seeing on the ground, which areas are showing the best trends and which ones are still quite subdued? That would be my question around French retail. Secondly, international retailing spend. You mentioned that, of course, the Czech Republic and Russian rate cycle are positive. Could you quantify that? If we take the current market forward, what would that mean for Société Générale's revenues? Thank you. Hello, Giulia. I will give the floor to Sébastien for the French Retail and Philippe Aymerich for the International Retail Banking. Sébastien first. Yes, good morning, Giulia. For your first question regarding the merger between Société Générale and Crédit du Nord, everything goes as planned, with a merger which will take place H1 2023. IT merger H1, legal merger January 2023, where there's this difference between legal merger, which would be in advance of the IT merger. We will come back before your end of October with a detailed presentation of the project, including the different impacts, and including the social impact of the merger. We will give more details in the coming months in the project. Again, everything goes as planned, and we are working hard to stick to the timing I have mentioned. Regarding loans and credit production, Q2, how did we bounce? In credit for corporate, medium long-term credit for corporate, excluding state-guaranteed loans, and also reborn in home loan for customers. Reborn also in last June in consumer credit, which is good. The prediction of short-term facilities and short-term credit for corporate remains more under pressure in the context of excess liquidity. Corporate needs in terms of short-term credits and facilities is obviously less important. Thank you. Philippe, on the International Retail. Yes. Thank you for the question. I start with KB. That's true that the net interest margin of KB has been under pressure due to rates reduction, but at a slower pace during the second quarter. It has been partially offset by a good level of production, notably on mortgages. It has also been offset by a strong momentum regarding financial fees and non-financial fees. We project three hikes of each 25 basis point. One of them has already taken place. As you will see, KB is projecting flat revenues, more or less, for the year. Simultaneously, there is a very tight control regarding cost base. Regarding the other entities of International Retail Banking, BRD has also been impacted on this rate reduction, but clearly offset very significantly by a very strong momentum on production and on deposit, also on fees. The other entities of International Retail, notably in Africa, has not been impacted by these interest rates moves. As it was mentioned by William, the revenues momentum, it's very robust in these entities. Thank you. Next question. Next question is for Mr. Matthew Clark from Mediobanca. Sir, go ahead. Good morning. A couple more questions on French Retail Banking revenues, please. Firstly, on the TLTRO, are you still confident that you will meet the second lending hurdle to get a second, I guess, bonification is how you describe it, even if you haven't met the, I guess, threshold from an accounting perspective to book it already, as you describe in the footnotes of your financial report? Second question, was there any material benefit from the resetting of the state-guaranteed loans this quarter after the 12 months time period lapsed? Was that part of the reason we saw an improvement in NII and margin second quarter versus first quarter? Thanks. Hello, Matthew. I will give the floor to Sébastien. Let me just perhaps give one precision, that the TLTRO effect is not just for French Retail. It concerns other activities, and effectively, the objective includes other loan production than just French Retail. Understood is contributing to that. Perhaps, further explanation, Sébastien, on Matthew's questions. Yeah, no, I mean, regarding the TLTRO, things are going in the right direction. As I said, we have an increase of net interest margin between Q2 and 2021, and then Q2 2020, without any impact or effect of the second bonification. Things, again, are going in the right direction at group level. Coming back to your second question. The benefit of guaranteed loans, there's not really any benefit in the second quarter. No, there is not such an impact of the state-guaranteed loans. Keep in mind that the pricing of the state-guaranteed loans, it's at cost. That's not the kind of product where there is a high margin. How do you define the cost? How do you measure that? We were able to include if you wish all the cost of distribution as a part of the price of liquidity. It's a liquidity cost of risk, and a cost of distribution. Thank you. That's very helpful. If you wish, it will be better to have these midterm loans than the very short-term at zero. It's relatively marginal. Again, the people have just made the transition towards the decision of amortization. It's something, again, relatively limited. Again, the overall banking system committed to, as you know, do that without excess margins, but we have been able to price the cost of putting in place these loans reasonably. Thank you. Next question. Next question is from Madam Azzurra Guelfi from Citi. Madam, please go ahead. Hi. Good morning. From my side, I have two questions. One is on the CIB, and one is on capital return. You have undergone a revision of your CIB business, and we have seen the revenue performing well also on the back of a constructive market backdrop. My question is more around the customer reaction to your restructuring. Has it been more constructive than what were you expecting? How have the customer reacted to the changes that you have done, and have you seen any cross assets impact in your CIB business? The second one is on the capital return, and it's on the medium term, it's not just now. Shall we expect that higher capital return from Société Générale will come just because the profitability improve? Given the strengthen of your capital position and the de-risking of your business, there could be something more down the line. Thank you. Hello, Azzurra. I will leave Slawomir answer your question on CIB. I think we really consider that, given the fact that we have to fuel the development of our businesses, and we have growth potential in our businesses, factoring also the different regulatory impacts, and to start with Basel IV that we consider should be implemented, probably now more 2024, let's be realistic, than 2023 in our previous computation. Again, 50% of net underlying profit is the right distribution level. It provides an attractive yield to our investors. It can be again split between, as I've said, cash dividend, and of course, share buyback. We really believe it's a balanced policy, and of course, and just reflected by this first half versus last year, it means effectively, thanks to the profitability improvements, more for our shareholders. I think it's really the right balance given our business model. If we were just a retail bank in eurozone, I might have a different answer. We have, in our view, opportunities to grow different business models, which request, of course, some part of our net profit. Slawomir? Sorry, can I follow up just quickly on the regulatory headwinds. Have they been confirmed versus what they were last quarter? Have there been any changes apart from the one that you booked? For 2021, we had said as far as TRIM is concerned, 30 basis points, we remain at that level. Pretty much, we think it's accounted for now. We had also pre-announced CRR2 at the end of quick fix, I would say for 2021, we are done. Slawomir? Hello. I would say customer reaction, I would say first of all, overall, and then maybe we'll focus on equities and structured products and equities. Overall, I think what we have been doing, and for a number of years now, specifically in the latest exercise, is to make sure that we focus on the clients, on helping them, and on areas where we are strong in terms of this intersection of client geography and product or service that we provide. I think by being very consistent in executing on these principles, we have been able to not only retain the entire confidence of our clients, but also increase it and to accompany them, across this year, H1, Q2, in many non-market transactions, supporting them both with our advisory capacities and our underwriting capacities, and on the markets with our ability to be their intermediary of choice. I think you see this in the results, and you see this in a consistent way if you compare to the levels pre-crisis, if you compare, obviously, to last year, and you see this across all our businesses. Specifically on the structured products and equities, where the intensity of the repositioning was higher, in the recent quarters, I think it's fair to say that here again, we wanted to be very strategic about the way we thought about this in terms of the client impact, in terms of the allocation of the underlying scarce resource, if you will, ability to offer these structured solutions. We were very strategic, and I think from that perspective, our clients are always grateful for us for being rational in allocating our capacities to them, one. Two, we have been creating new products, innovating in the space, with a balance between the risk/reward for us and the value for clients, which I think is much better. We see this in terms of the fundraising, so to speak, in some of our new products like the product evolution that I think we spoke to you about. Overall, it's a very good picture from a customer response perspective. Thank you. Next question. Next question is from Mr. Amit Goel from Barclays. Please go ahead. Hi. Hello, thanks for taking my questions. Firstly, just in International Retail and Financial Services, coming back to the impact of rates, do you have the sensitivity to rates for Czech Republic and Russia, please, and even BRD would be great. I may have missed it, but I can see it in the KB or BRD disclosure. I wonder for the division as a whole, if maybe you have a nice situation where BRD drives the revenue growth this year, and then next year you have the pickup from a kind of full year of the rate rise benefits in CEE. Secondly, on French Retail, I just wanted to touch on the outlook for commissions. It used to be that financial commissions, when you used to split the disclosure, had a bit of third quarter negative seasonality. I think you used to do like EUR 200 million in financial commissions and EUR 650 for service fees. Do you think that seasonality is exaggerated in the third quarter because of some of the market sensitive stuff? Do you think that with the economy reopening, the better environment, that EUR 856 million of commissions is actually more of a trough? Thanks. Hello, Amit. I will check with William whether we disclose such granular information. It's clear as, of course, with the interest rates happening this year, we will have the full effect next year. William, what do we disclose? Unfortunately, we do not. We do disclose at group level. For 10 basis points, we update you regularly on that. For 10 basis points upwards, parallel shift upwards, it's about EUR 60 million you could have in revenues for the group in the first year and a bit more than EUR 100 million in the second year. Let's just keep in mind, to give you a perspective, that the majority of that contains French Retail. Sébastien, on the sustainable level of fees. Yes. The retail fees. Very strong growth compared to 2020. Strong momentum in financial fees, in particular in savings, life insurance fees, usage fees, and private banking fees. Service fees, which have benefited from the weak recovery trajectory after the lockdown period in 2020, especially in Q2 2020. That's an occasion for me to say that we are gaining market share in savings life insurance in the French market. When you look at both inflows and you compare to public information, it clearly shows that we are gaining market share and gross inflows were particularly important, high in H1 2021 compared to H1 2020. It's +67%, which is obviously a big number, and net inflows are significant. The gross is significant. Having said that, we think that even if we don't give sub-guidance for the revenues, I think that in H2, should sanitary context not worsen, we might expect a continuous recovery of service fees and, depending on the situation in the market, financial commission, financial fees will be supported by our effort to increase the equipment weight of our clients in terms of savings product, unit linked product also. Thank you. That's very clear. Just as a very quick follow-up, could you just elaborate on why you think you're gaining share, particularly on the unit linked and on the life side? That would be helpful. The level of gross inflows is higher than the market. That's based on public information. Okay. Thank you. Thank you. Next question. Next question is from Madam Lorraine Quoirez from UBS. Madam, please go ahead. Yeah, hello. Thank you for taking my question. I just have one actually, because a lot of them have been answered already. It's a question on the restructuring of the French network. I was wondering whether you already taken a decision with regards to the different brands that are within the Crédit du Nord network, whether you are looking towards a common branding, if this brand will continue to exist. Any color on that would be greatly appreciated. Thank you. Hello, Lorraine. I will leave the floor to Sébastien. Good morning, Lorraine. We will give a very detailed presentation in the coming month. It will include an explanation on our branding strategy, which will be consistent with the objective, which is to have a bank very well-rooted locally. As we said, there won't be a unique brand for all the French market as a whole. The detail will come in the coming months. Thank you, Sébastien. Thank you, Lorraine. Next question, please. Next question is for Mr. Stefan Stalmann from Autonomous Research. Sir, please go ahead. Yes. Good morning, everyone, congratulations on the results. I wanted to first follow up on the stress test results, please. The drawdowns were clearly quite steep, your trough ratio is also not great. I was wondering if you think that could trigger a debate with regulators about your Pillar 2G buffer. Related to that, do you think it's actually still adequate to run with a 200-basis-point buffer over MDA as your management target? The second question relates to your deferred day one margins. You actually had a very strong addition of new business in that part of your activities, very strong net new business that created deferred margins. I was wondering if that reflects the economic complexity of that new business. Is that rising, or are there other reasons for this very strong increase in your deferred margins, please, in the first half? Thank you. Stefan, hello. What kind of figures are you, sorry, referring to exactly? Which business? I did not understand, catch your second question. Yes, that refers to the deferred margins. The one- that you create for. Yeah, exactly. Yeah, the one. No. Okay. Listen, Stefan, we don't want to. Fundamentally, we come back to the issue is the nature of the new product. There's nothing on the contrary. We have simplified the complexity of the product [crosstalk], are we starting to answer your question? Can I just come to the first question first? The stress test is one element. There are many, which is considered by the supervisor in the stress process. We have absolutely no information on this. Can I say, [Didier], on your question on the margin, at the end of the day, let me just highlight, we are fundamentally, in the coming two, three years, we are going to increase the density of risk-weighted assets, everything being equal, for between the TRIM, between the CRR, between the Basel, et cetera. First, a 200 basis point margin multiplied by the end game means more billions of EUR. Second, I think at the end of the day, the key question is, and this will be the question for the European supervisor, how do you think about the right level of capital for a bank like Société Générale versus U.S. banks? I would put it as direct like this. When I see the level of Tier 1s of U.S. banks, and I think I factor, as I said, the completion of all the regulatory projects, which means, again, full comfort on the models. When the modeling is complex with Basel, we take even the standard levels of LGD, for example. Do you think that 200 basis point multiplied by more, as I said, is enough or not? That's the question. At the end of the day, this is the margin we keep, in particular, factoring, of course, the capacity every year to generate more capital, new capital, and good profitability. We will see, and the supervisor will have to refine its own position. At this stage, at least, we think it's the right level. Slawomir, on the reserves. Specifically, right, very specific to your question, actually, our day one reserves were very stable. I think, it's just maybe you can follow up with our team just to make sure that we're talking about the same thing. Day one reserves, our capital markets activities were nearly flat. Yes. Could I just follow up on that? Yeah. The additions to the margin were actually very high. You created almost EUR 600 million of new reserves during the period from new transactions. Then you also had amortizations against that. The new business additions were actually 50% higher than they have been in the past on average. I was wondering what creates this increase in new business additions? Listen, I suggest we follow up specifically on this. Sure Strategically, I can tell you that size-wise, we have less structured the products of the highest complexity, and in nature, even more so, right? We have even less o f the most complex structures because of the shift that we accomplished. Let's figure this out, because this is a little counterintuitive to me. I can tell you in terms of the business strategy and the business execution, it's absolutely not the case. If anything, the complexity has drastically been reduced. Thank you. Thank you very much. Next call. Thank you, Stefan. Next question. Next question is for Mr. Kazim Andac from Deutsche Bank. Sir, please go ahead. Yes, thanks for taking my question. A very quick one, again, on French Retail, related to restructuring costs. Does the previous guidance on restructuring costs still hold? I mean, EUR 700 million for French Retail, of which 70% will be included in 2021. That's the guidance. Up until now, only EUR 60 million have been booked related to French Retail. Just wonder if the guidance still hold in French Retail. Thank you. Hello, Kazim. Yes, I think so. Sébastien? Yes. CTA would be between, as we said, EUR 700 million and EUR 800 million, and it will be booked in H2 2021. 70%. I'm sorry, 70% will be booked. But with the backed booked- The backed, yes. in H2. H2, yes. This year. This year. Next question. Next question. Next question. Next question is from Madam Anke Reingen from RBC. Madam, please go ahead. Thank you very much for taking my question. The first is on provisions. I just wonder, given your comments about potential write-backs in 2022, where we are currently stand, could we be looking at a similar level of 20-25 basis points in 2022 as well before going to the 30, 35 you previously indicated as more like a normalized level? Secondly, on costs, it's probably a bit premature to sort of call this a victory, but obviously your targets are based on absolute cost base, but the revenues seem to be growing faster than probably could have been expected. Do you still think that the absolute cost target is the right target, or should we be more thinking about cost-income ratio? Are you really looking if you have more higher costs because of higher revenue, you would be looking for cost savings elsewhere, just to stick to the absolute cost target? Thank you very much. Hello, Anke. We don't give any guidance for 2022. We comment for 2021. We are, I think, giving quite a lot of precision to our guidance on the cost of risk. As we've said, on 2025, it's without writing back a significant portion of our results. It means we don't take Diony commented on the potential increase of default, at the end of the day, starting from a very low level, it's not it will be something significant. The idea is of course, to ensure also a cost of risk for 2022, which will be also relatively low, by keeping the buffers. Second, on the cost, we are, as we said, this target in absolute terms for 2023 is like the renewal. The level of revenues are increasing on the market. As you know, this target of those EUR 4.5 billion. If we were to do much more, we will factor some valuable compensation in line. Like any bank at this stage, I think it's consistent in line with this revenue assumption to stick to this figure for the cost. I think you will admit that this year, we started the year seeing slight increase. We are exactly in line, knowing that we have a good performance on the income, which means that we are really putting a lot of attention on our costs. This is a core discipline we have had now for many quarters. Okay. Thank you very much. Next question. Next question is from Mr. Pierre Chédeville from CIC. Sir, please go ahead. Yes. Good morning or afternoon, everyone. One question, a follow-up regarding cost of risk, because in your previous plan, you had a target between 35 and 40 basis points. Now we are much less, twice less. I was wondering if we are entering a new era in certain sense. Is it a new normal that could be caused by, I would say, two reasons? First, a shift towards an American model where economic needs are financed by the markets more than by the banks, which was a characteristic of European banking model, but which is evolving regarding the regulation. Also, maybe the fact that European banks, and maybe French banks in particular, are too cautious now, and do not, I would say, properly do their job, because a bank that is not taking any risk or too few risk, in my view, is not doing its job as a mutualization actor of economic risk. What is your view on that? My second question will be very quick. Could you update us regarding the penetration rate of P&C and protection in your French network? Thank you. Hello, Pierre. I will leave Sébastien answering your second question on P&C. Your first one is a complex one to answer in just two seconds. Can I say, I'm not sure actually that there's really such a change, first on the market, because in Europe, actually the financing has remained a bank finance largely. We see the development of non-banking finance, of course, but still, compared with at least the initial plan of the Capital Markets Union, it is still a fundamentally a banking market. If I may, not taking a risk when I look at what we did last year. Actually, the low cost of risk is the direct result of a very efficient cooperation between the public sector, the central banks, and the banks to provide effective support, subsidies when certain sectors were closed for administrative purposes to save the lives of citizens, and the liquidity. I think we can be proud as bankers to have done the job. I must say, it's a contrary which I think would have been a problem to find many defaults, because it would have meant, in my view, that we would have failed in at least protecting as many capacity productions possible. Of course, going forward, the best companies will make the difference with the ones which might have been weakened for different reasons, and that's normal. Second, I think that the banks are already on it. I don't buy the idea that we should take more risk, at least as a supervisor, is there also to ensure we don't take too much risk. We are on the mortgage side, for example. In France, we have a supervisor, Haut Conseil de Stabilité Financière, which stays very careful. We align with the rules. We don't do silly things, but we are there to support the clients, whether it's corporates and households. It's across the board. It's true also in Africa. It's true in Russia. I don't think so. I think we are in an extraordinary situation where there were very strong supports to the economies. Markets play their role. Private equity firms play their role also as shareholders. They put the money when needed. It happened that with very conservative provisioning in 2020, not just on S 1, S2, but also on S3 ahead of the crisis, we are in a situation of an extraordinary low cost of risk. I think we are doing our job, and I don't hear any stakeholder, I must say, which are criticizing the banking sector, at least in France, for not have been there with their clients and finding solutions. Different. We think that we give progress in normalization, and going back to higher levels and close to zero. I think it's at least a part of our model to originate credit soundly. We will pursue this discussion, if you wish, one day, because we've held time. Thank you. Sébastien. Yes. Pierre, good morning. Your question is about equipment weight and protection. For personal protection, it's 22.5%, and for property and casualty, it's 10% with a slight improvement compared to 2019. As you know, and as I already said, we are not where we want to be. That's potentially more work in use, and something which can fuel the growth of the French networks if we manage, and that's the objective, to improve more significantly the equipment weight. One positive signal, again, in Q2, the number of contracts is up + 6.4% compared to Q2 2020. Clearly, insurance is one of the key focuses for our French retail businesses. Thank you. Next question. Thank you very much. Next question. Next question is from Mr. Kiri Vijayarajah from HSBC. Sir, go ahead. Yes, good morning. Good afternoon, everyone. A couple of questions on the cost side from me. I think previously you'd guided that 2020 was supposed to be the peak year for remediation costs. Has that been falling away as expected? Just some quantification on how much that's been helping your cost numbers this year. You don't really mention it on your cost waterfall on slide eight, so maybe it's not material. Just some quantification there. Still on costs, but really on the French Retail merge, just wondering to what extent the pandemic has altered your view on what the optimum size of the combined network should be. I know you're going to give us an update later in the year, so I just wondered, are you hinting that there's been some rethinking going on that you need to update us about? Just some sort of clarification on your thinking on the optimum size of the retail network in France post-pandemic. Thank you. Hello, Kiri. I will leave William commenting on your first question and Sébastien on your question on the retail network. Morning, Kiri. Thanks for the question, because it allows me to clarify what seems to be a misunderstanding. I don't think we said that we had a peak in 2020, rather that we had a peak for 2020 and 2021. We keep a high level between EUR 150 million and EUR 200 million booked in the corporate center because there are obviously also remediation costs continuing to key projects elsewhere. The first year where we do expect some decrease is 2022, then gradually, depending upon what we're talking about in terms of remediation, 2023, 2024. Certainly no help from that. I would love to say that. To the contrary, that's not the case. Sébastien? Yes. No, we haven't changed what we want to do thanks to the merger. In terms of cost for the retail networks and our objective hasn't changed. If I take an example, the number of branches will be reduced by 30% to [30]. With the objective to have 1,500 branches at the end of the plan, 2025. When we decided the merger, we had in mind all the changes from a customer perspective, all the changes which will take place in the coming years, impacting the number of branches. The pandemic, the health crisis, has made these changes even more relevant. I confirm the objective in terms of cost and in terms of number of branches at the end of the plan. Thank you. Next question. We have no other questions. Back to you for the conclusion. Okay. Listen, well, thank you so much for your time and your attention. For those of you who might take some holidays, happy summer break. Of course, see you soon, and 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.