BNPQY - BNP Paribas S.A.

Operator: Good afternoon, ladies and gentlemen, and welcome to the presentation of the BNP Paribas Fourth Quarter and Full Year 2025 results with Jean-Laurent Bonnafe, Group Chief Executive Officer; and Lars Machenil, Group Chief Financial Officer. For your information, this conference call is being recorded. Supporting slides are available on BNP Paribas IR website, invest.bnpparibas.com. [Operator Instructions] I would like now to hand the call over to Jean-Laurent Bonnafe, Group Chief Executive Officer. Please go ahead, sir.
Jean-Laurent Bonnafe: Good afternoon, ladies and gentlemen. We are pleased to present today our strong fourth quarter results, and we'll provide some elements on our '28 trajectory, which we are revising upwards given the strong revenue momentum at the launch of a transformation plan of our support functions. I will start with our results on Slide 4. So our fourth quarter results confirmed the sharp acceleration we had expected. Revenues posted a strong 8% growth. Jaws effect was higher at 2.9 points and even reached 3.9 points when excluding AXA IM. Cost of fees stayed low at 34 bps well within our trajectory of below 40 bps. And this led to a very strong 28% increase in net profit, approaching EUR 3 billion, which is a record for our fourth quarter. Our CET1 reached 12.6%, up 10 bps this quarter, and we remain committed to delivering on our target of 13%. For '25, we will have paid a total dividend per share of EUR 5.16 including the final dividend of EUR 2.57 to be paid in May. If we focus on our revenues, they are up 8% with well-balanced growth between the businesses. CIB revenues posted a strong performance up 1% from a high base or up 4.8% at constant exchange rate. CPBS revenues accelerated sharply as expected and were up 5.5%. Q4 is a pilot quarter, largely helped by the rate trajectory and acceleration at Arval, thanks to the end of the base effect related to used car prices. Finally, IPS generated double-digit organic growth, but also benefited from the AXA IM integration, which led to a transformational 40% increase in revenues. Now moving to Slide 5. The fourth quarter showed sharp acceleration of revenues at CPBS, up 5.5%. Within CPBS, we show here the revenue trajectory of the business, not sensitive to the interest rate scenarios namely our Eurozone Commercial Banks and Personal Finance. The trajectory is expected to remain favorable throughout much of our next strategic plan. For Personal Finance, margin improvement is driven by the natural runoff of loans originated in '22-'23, which were impacted by higher funding costs. In contrast, new business generates a margin in excess of 5%. This supports an outlook of more than 5% revenue growth per annum over '24-'28. For our Eurozone Commercial Banks, the deposit mix that has been stabilizing since '24 has enabled to continue the reinvesting of low cost deposits at the longer end of the yield curve, aligning with the maturity of the assets. This will continue well into the next plan, providing a supportive environment for revenue growth. CPBS will also be supported by strategic plans that are already underway or to be launched, aiming at increasing profitability on 80% of its risk weight. Moving on to Slide 6. Let me focus now on our '26 targets. Of our strong end to '25, we reconfirm our '24-'26 trajectory. We expect above 7% earnings and 8% EPS CAGR over '24-'26. This will lead to a return on tangible equity of 12% in '26, a first step towards our target of more than 13% in '28. Our strong Q4 reinforces our positive revenue outlook and we will deliver our jaws effect of 1.5 points. Cost of risk is expected to remain below 40 bps. We are making good progress towards our CET1 target of 13%. Let me now summarize the '28 trajectory on Slide 7. We have increased our '28 return on tangible equity target from 13% to above 13%. One of the key levers is an improved cost-income ratio outlook from around 58% to below 56%. This will be achieved, thanks to the launch of our new structural transformation plan for support functions. This will be a complete overall. I'll come back to this later. This initiative will lead to more than 10% net income, an EPS CAGR of '25-'28, a new target with a sharp acceleration when compared with our previous plan. It goes without saying, we obviously reconfirm our CET1 target of 13% and the distribution in excess of that level will be decided finally. Moving to Slide 8. Let me elaborate on the key bricks behind this increased return on tangible equity target. As you can see on the left side, we have many strategic plans ongoing, notably within CPBS, to achieve levels of profitability in line with the group targets. As you can see on the right chart, these plans alone will help us bridge the profitability gap to 13%, which means that the growth from the other businesses, including CIB, will enable the group to exceed 13%. 13% is only a first step in our profitability improvement. By '28, we will be well on track for 2030 targets which will be discussed at our Capital Market Day in early '27. We have presented plans to improve the pretax return of CPBF and Personal Finance to above 17% in '28. We have also presented the BNP Paribas Bank Polska plan, which is already a very profitable entity. With this plan, we are looking to raise the profitability to the highest standards amongst Polish banks at 20% return on tangible equity in 2030. In the next few months, we'll present the strategic vision for Asset Management with the AXA IM integration plan. We intend to generate 20% return on equity in '29, which is the equivalent of over EUR 600 million of additional net earnings. CPBB, will present its strategy plan targeting 20% pretax return in '28. Subject to successful acquisition of Athlon, we will also present the integration plan with a target return on equity of 18% in '28, adding about EUR 200 million to group earnings. Finally, we will present the strategic vision for the next chapter at BNL, which has significantly improved its profitability already, thanks to well management costs and a low cost of risk. I'd like now to discuss our cost income trajectory on Slide 9. We have now set out to lower our cost-to-income ratio from 58% to less than 56% in '28. Obviously, part of this journey will come from the strong revenue trajectory described earlier but we will also be even more disciplined on costs. At the end of '26, we will have completed our EUR 3.5 billion cost savings program, contributing to the sharp reduction of 6 points in cost-to-income ratio we have seen since '21. These savings have allowed us to develop our platforms at marginal costs and are well balanced between divisions. We will continue to generate incremental savings going forward but we want to go one step further. Today, we are announcing a new structural transformation plan for support functions, which I will discuss on the next slide. Why a new plan now? We are nearing the end of our GTS plan, and we are positioned to build on its momentum. Recent acquisitions have expanded our scale and created opportunities for optimization. Reregulation, which brought in layers of complexity and costs is now coming to an end freeing up resources. And finally, many of our businesses are or will present transformation plans and are ready for the next step. What is the guiding principle of our plan? The plan will rely on mutualizing and standardization as well as on new industrialization opportunities enabled by the widespread strategic development of AI in the group. The plan will cover all entities and all geographies. Efficiency gains would be greater in activities most affected by the regulatory wave of recent years, such as compliance and risk, as well as in IT that constitutes the largest proportion of the identified cost base. It will also include a transversal approach across the group through operational functions, HR, finance, procurement, communication and facilities. You will probably ask what this new plan to overall our support functions means for the P&L. We will provide details at our CMD in early '27, but I can make the following comments: The initiative will optimize spendings on about half of our cost base or EUR 15 billion. First benefits will start in '27 and will be amplified as the plan progresses. In contrast, the benefits are anticipated to be negligible in '26. We look to invest regularly throughout the plan as the initiatives are medium term, ensuring that the investments are covered by the savings from inceptions. Ultimately, the plan will also help revenues and it will improve customer experience and refocus our employees on value-added tasks. Some, but obviously, not all the savings will be reinvested to support our future growth. This initiative will transform BNP Paribas into a more agile, efficient and value-driven organization, better equipped to deliver long-term success and sustainable growth. Moving now to Slide 11. Our transformation plan will be assisted by AI, but will also facilitate its use, including generative AI. Indeed, having more standardized and mutualized platforms will facilitate its implementation with speed and scale. The value created by AI was focused so far on revenues for the most part, but now it will increasingly benefit costs and risks, including operational risk. We've already quantified benefits at approximately EUR 600 million to date, and we anticipate reaching EUR 750 million by '26. According to the Evident AI Index, BNP Paribas has emerged as the leading Eurozone bank in AI. I will now explain what this all means for our shareholders on Slide 12. We enter '26 in good shape with ambitious targets. We expect to generate more than 10% earnings growth CAGR over '25-'28, an acceleration from the previous plan largely helped by much stronger revenue growth than cost growth, as explained earlier. EPS will obviously grow faster than earnings given the buybacks. Our current distribution policies confirm at 60% for '26. And for the planned '27-'30, we will announce a new policy at our CMD, but it will not be less than 60%. Let's now focus on our capital path on Slide 13. We are progressing fast towards our new CET1 target of 13%. We've already announced disposal for 13 bps net of the proposed Athlon acquisition. We'll continue to reassess our portfolio with a view to release at a total of 30, 50 bps. Organic capital generation will benefit from accelerated earnings and control risk weight growth at 2%, including securitization and credit insurance. Finally, we expect the reregulation cycle to end with the FRTB implementation. We're hopeful that the European regulators will ensure a level playing field with banks in other jurisdictions, and we believe there are encouraging signs of possible watering down or delayed implementation which would neutralize some of the impact. For now, we still factor 30 bps impact in the trajectory, but it then to reach 13% by the end of '27 after FRTB and the distribution of the excess above 13% will be decided only starting in '27. Let me now hand over to Lars, who will present our Q4 results from Slide 17. Lars?
Lars Machenil: Thanks, Jean-Laurent. Before presenting our pivotal fourth quarter results and 2028 trajectory, I just wanted to make a very short statement regarding our Sudan litigation. As a reminder, in its decision made public on January 8, 2026, the court granted BNP Paribas' request to proceed with its appeal. We welcome the court's decision and announced yesterday that appeal will be filed by February 9. The proceedings are therefore, progressing as expected and we are thoroughly prepared and confident in the strength of our arguments. Let's now move to Slide 17 on the solid and pivotal results. So on Slide 17, you can see our revenue growth during the quarter. As you know, our business model is based on solid platforms, that have a strong focus on cross-selling between these platforms and that accounting to -- those cross-sells are accounting for about 1/3 of group revenues. So if you look at CIB revenues, they were up 1% or almost 5% at constant scope, given the USD evolution. And so this is a very good performance, given a high base a year ago in the fourth quarter '24 that included a capital gain in FICC for almost EUR 80 million, which we mentioned at that time. It's nothing new. I just reminded. So of course, Global Banking was impacted by lower margins in Transaction Banking due to lower rates, but we had strong capital markets activities, particularly in the Americas. We also had very strong performance of global markets, both FICC and Equity & Prime Services as well as Securities Services. We remained the #1 European investment bank in EMEA in 2025 in a very competitive market. So that's CIB. If you now look at the second division, CPBS, posted a sharp 5.5% revenue growth helped on one hand by the strong performance of the Eurozone Commercial Banks and the margin improvements at Personal Finance. And all this consistent with the acceleration we had guided for last year in our deep dives. Next to those, there is also Arval, which is growing, thanks to the now negligible headwinds from car sales results, which means that in 2026, the strong organic growth will become fully visible than it was compared to 2025. Moreover, as Jean-Laurent mentioned, it will be amplified if we successfully acquire Arval. So that's the second. So if I end up thirdly with IPS, we generated a very high 11% revenue growth, and this is excluding AXA IM. And so if I include it -- well, it is included, it reached almost 40% of growth. Now we will present the asset management trajectory in more detail at our March deep dive, but the integration, I can already give you the heads-up, is fully on track with the anticipated timeline. In IPS, all businesses posted top line growth around the 10% mark to give high fee level, they saw good inflow, and they saw very good market activity and levels. We also consolidated HSBC Wealth Management in Germany. So having looked at these strong revenues, let me now look on Slide 18 on the costs. You see basically that all divisions have positive jaws. That's what you see at the top left. If you look at the bottom left, you can see that our growth grew with 5.2% in the last quarter, which you might consider high. But if you look through it and you basically look at the cost evolution, excluding AXA IM, you see, it is 0.9%. So the difference restructuring costs, which should phase out over time. Now this will be further accelerated through the review of our support functions, as outlined by Jean-Laurent earlier. These functions represent approximately half of our total cost base, and therefore, provide a significant opportunity for optimization and efficiency gains. Let's remind, I mean, coming out of a period of a lot of integrations, it is time to do this end of review. We've done that in 2012 as well, and so this is a similar exercise. Now if I look since 2021, we have generated EUR 2.9 billion of cost savings, equivalent to about 10% of our cost base and helping our cost-to-income ratio for 6 points over the period. Our three operating divisions posted positive jaws effects during the quarter, as I mentioned before. And for the second half of 2025, we generated 2.7 points of jaws, exceeding the 2.5 points target we had shared with you. So we enter 2026 with confidence about our ability to grow revenues and improve the cost-to-income ratio despite the integration efforts and costs at AXA IM. Well we had that, let's look at Slide 19 and look at the asset quality. So we saw that during the quarter, cost of risk remained low at 34 basis points over outstanding, well within the guidance of being below 40 basis points. And this, despite lower releases of Stage 1 and Stage 2 provisions compared to the fourth quarter of '24. So we recorded lower Stage 3 provisions than the fourth quarter of '24, which had been burdened by a one-off specific file, but we remain confident that our cost of risk will stay amply below the 40 basis points threshold this year. You can see the breakdown by division on Slide 20, but that's all basically variations on the theme of low or normalized levels. So in a synthesis, our portfolio is well positioned in the current environment. So having looked at the elements of the P&L, let's now look at capital on Slide 21. So, we reached 12.6% compared to what we announced at the beginning of '25 to 12.3%. And so this 12.6% is up 10 basis points during the quarter -- last quarter of '25. And this, after the fact that during that quarter, we set aside 20 basis points for distribution to shareholders. So Q4 confirms the trajectory we had indicated that regulatory impacts are receding and organic RWA growth net of SRT is very well contained. Note that our CET is not sensitive to the U.S. dollar weakness as it impacts both the numerator and the denominator of this ratio. As you can see at the bottom, we continue to make good use of SRTs with a cumulative CET1 ratio benefit of 80 basis points built over the years. Moreover, in 2025, we set up 42 transactions for EUR 27 billion of gross savings and most of our businesses were active, which highlights a significant expertise and discipline. So a payout of at least 60% is confirmed. So in synthesis, you see that we generate free capital and are on track of stepping up our Common Equity Tier 1 ratio. Finally, let me take you through the Corporate Center on Slide 22. And in particular, given that the Corporate Center performance was below expectations in the second half of '25, in particularly in the third quarter, as we mentioned. We wanted to provide a more nuanced understanding of the factors at play and offer guidance for 2026, just to ensure to have a clear view of our prospects. As a quick reminder, the Corporate Center is basically made up of two parts. The first part, which you see on the top of the page, pertains to restatements related to insurance activities with basically revenues and costs broadly offsetting each other, and therefore, the gross operating income should be close to 0 annually. That's the first thing. The second part, which you see at the bottom, it basically pertains to restructuring costs, what we call central shareholders costs that cannot be allocated and that involves then also liquidity costs and other volatile elements like the DVA. So we expect revenues to be around 0 every year. In 2025, the outcome was a little worse, but we have taken measures to return towards the 0 mark in 2026. So that's the top line. If you then look at the cost line, the first part is the restructuring charges, that should amount to EUR 800 million in 2026 after EUR 600 million in 2025. I remind you that, on average, we have been having EUR 400 million restructuring and they are impacted both in '25 to get to EUR 600 million in '26 to get to EUR 800 million through the AXA IM integration costs. And then there is the last part of the so-called central cost that -- well, shareholder costs that cannot, for tax reasons, be allocated, are expected to be around EUR 600 million in 2026. So in a nutshell, we forecast a gross operating loss of approximately EUR 1.4 billion in 2026. And this is already factored in into our overall expectation, and we remain comfortable with your current consensus forecast for gross operating income at group level. Now this is the gross operating income line. If we look below that, we tend to book in that line in the Corporate Center, the revaluation of stakes, which are intended to offset to a significant effect, the restructuring charges. For 2026, we anticipate recognizing an EUR 800 million gain from the AGI transaction and in 2027, not in 2026, the EUR 400 million gain from Allfunds. So if I can sum up my intervention with what you see on Slide 27, where you see that BNP Paribas is driven by three powerful engines that are integrated as well. And so on one hand, you see a high return CID, which we will continue to grow; on the other hand, you see at the bottom, a capital-light and scalable IPS, which will be transformed, thanks to AXA IM; and thirdly, an accelerating CPBS which where you saw the pivot and the step-up in the fourth quarter. Together, these businesses give the group visibility, resilience and upside to deliver our targets. So having said that, I'll now hand it back to Jean-Laurent who will offer some final remarks and conclude our presentation.
Jean-Laurent Bonnafe: Thank you, Lars. To conclude, our fourth quarter '25 was a pivotal moment for the group. And we are now entering our most attractive value creation cycle in more than a decade. Having built platforms that drove particle costs, we will accelerate our progress through a comprehensive review of our support functions. This will enable us to implement AI on a larger scale, driving benefits for our clients, employees and shareholders alike, while laying the groundwork for our '27-2030 plan, with the aim of building an even more efficient and value-creating group. By doing so, we will be well positioned to capitalize on emerging opportunities and drive long-term success. This concludes our presentation, and we are now happy to take your questions.
Operator: [Operator Instructions] First question is from Tarik El Mejjad, Bank of America.
Tarik El Mejjad: A couple of questions from my side, please. First, on your revenue guidance for the CPBS. I would like to understand a bit more the dynamics, because you focus a lot on the better rate environment with steep curve and higher rates, which is the more fits better your business model. No mention on the volume growth actually in these geographies. I mean you've seen in Q4, your loans have been still stable or even down a bit in France, where there is some dynamic of recovery. Can you just maybe explain a bit this guidance? If there is an upside from higher lending growth or this is not something that you aim to push and you rather focus on a good margin more contained balance sheet expansion? Second question was on capital build. In December, you started very strong with some management actions to generate capital quickly. And I think there is still more room to do more. I mean, from -- you already mentioned that Europe made some assets there, some JVs and private equity stakes and so on. Should we still expect you actively looking to get capital faster? I mean, you reiterate 2017 for 13%, but clearly, I think you have more ambitions to do it faster. And this is -- last one is just a very technical one on the DPS. Given the capital gains you'll have in '26 and '27, how should we think about the DPS you use? Should we -- are you distributing the capital gains as well? Or are you assuming the investments will offset the capital gains and then we just assume DPS on reported? Just want to hear you on that.
Jean-Laurent Bonnafe: So on the DPS, it's very simple. I mean anything that is contributing to the net profit result is going to pay 60% return to shareholders. There is nothing that can be, I would say, hand away from the bottom line. So if you look at the AGI, Ageas for example, capital gain, as said by Lars, half of it to some extent is basically contributed to the guidance because year-after-year, we have a kind of EUR 400 million capital gain. The other EUR 400 million are on top. And including those one, we are paying 60%. And it goes the same way for, I would say, the Allfunds capital gain, for example. So nothing can escape, let's say, the return to shareholders. So this is the DPS capital build. This is a very high priority at BNP Paribas. We are moving as fast as we can. Any time we can find an opportunity, we move the right way. You can see that in '25, as you said, we prefer margins to volumes, but all the business are not just the same. So if it's a French mortgage, we don't need that many volumes. If it's Personal Finance, it's a very different story. So it's difficult to give a kind of aggregate number. Lars will give more color on that. But we, in any case, favor profitability against volumes. And when it comes to disposal, disposal can take some time. So we have a number of situations. You have to negotiate, you have to sign, you have to close and so we can take some. So disposal cannot be accelerated that much if you want to get the right price. So we move as fast as we can for the CET1 and all, I would say, revenues, profits are paying a dividend. So this is the simple approach.
Lars Machenil: Tarik, and I'll give some further color. So indeed, we are not growing volumes at any cost, yes? We are growing it at a profitable way. And so indeed, if you take France, we are growing our loans by 1%. So it is not that 1% loan growth that generates 5% growth in the top line. What generates the 5% on the top line is basically the redeployment of our deposits. So we have those non-remunerated deposits which we redeploy on average 5 to 7 years, which basically means each year of the next 5 years, there will be EUR 20 billion to EUR 30 billion of non-remunerated deposits that we will reinvest on the longer end of the term. And that is basically the one that is generating the 5% and why we feel comfortable to say that it's going to be that lift over the longer duration.
Operator: Next question is from Delphine Lee, JPMorgan.
Delphine Lee: Just two questions for me. So the first one is just a follow-up on Tarik's question on volumes, please. So on deposit trends, I get you questions on loans. On deposit trends, we are seeing some very encouraging signs on -- in Belgium, but are you seeing anything, sort of, more positive in France and Italy, which could sort of accelerate the top line trends on top of, sort of, the dynamics on the swaps and new investments that you just mentioned? My second question is just on your plan on support functions. It is very encouraging to see you focus on optimizing your cost base further from here. I'm just wondering a little bit, sort of, what are you doing a little bit differently compared to the past? And where is that acceleration coming from? You've had EUR 3.5 billion already over '22 and '26. It doesn't look like AI, looking at the chart that you have, is contributing necessarily that much. So just wondering what are you doing differently this time to really generate those additional cost savings?
Lars Machenil: Delphine, thank you for your question. So now when you're talking about the volumes on the other side of the balance sheet. I mean, as you know, if you look at our liquidity ratios and whatever, you see we have a very solid liquidity ratio. So again, here also on the deposit, margin is key, not the volumes. And in particular, therefore, if there is a focus, it's on the non-remunerated ones. And so in the base that we took, we assumed that there would be stable non-remunerated. What we see at the moment that actually it's in the core countries where we are, it's even picking up. So we are getting more non-remunerated. So we don't go for the price, as the liquidity we don't need it, but we are attracting an even higher-than-anticipated volumes, which we then can redeploy, as I mentioned just before. On the cost, Jean-Laurent?
Jean-Laurent Bonnafe: So if we go back to Page 9 -- this is Page 9. So, as you mentioned, we are having currently a trend that is basically in terms of efficiency, EUR 700 million per year. You have the split between the different businesses. If we were to go for a more detailed split, you would see that central functions, group level amounts to more than 20%. And within the remaining part directly within the businesses you would have something roughly around 13% to 15% that belongs to the local business-by-business support functions. So in total, out of the EUR 700 million per year, you have roughly 1/3, slightly more, meaning EUR 250 million, EUR 300 million of efficiency coming already from support functions either at group level or within the businesses. The rest is very much, I would say, delivered by the businesses itself, especially in the layer that is directly servicing the counterpart, the clients. So if you look at group functions, if you look at the support functions, group level or within the businesses, as of today, we are very much looking at all that on a stand-alone basis. So one after one. All that, I will say, improvement comes from, I would say, a long list of improvements coming from any function, any platform. And we will continue that game. But on top of that, we are going to move to a second level, meaning we can consider to have, I would say, either joint ventures in between those support functions or a different approach in between those support functions and the businesses or we could have even potentially the possibility to merge some of those support functions. So, we are moving from an approach that is being efficient function-by-function to an approach that is redesigning the whole setup. So this is a very different approach. Doing so, we can double what's coming from the support functions. We did that in a number of occasions, the moment of merging BNP and Paribas. We did that when we integrated BNL, the Fortis and a number of other, I would say, situations. We are doing that basically merging BNP Paribas Asset Management and AXA Investment Managers. So this will represent another layer that is going to be roughly of the same magnitude we're extracting year-after-year from the current situation around support functions. So the support functions will provide not only the EUR 250 million, but an additional typically EUR 250 million. So this is EUR 500 million. EUR 250 million is basically 0.5 percentage point -- 0.5 point of cost-to-income to be very simple. So we are moving from a trajectory where the cost-to-income was going down 1.5 points every year to 2 points. This is the story. Said it in another word, instead of delivering EUR 3.5 billion in 5 years, we are going to deliver something close to EUR 4 billion in 4 years, and you can see that on the Page 10. Page 10, you can see that cumulatively, we delivered EUR 3.5 billion in 5 years, and the next phase is going to be the same momentum plus the add-on, and this is roughly EUR 700 million plus EUR 250 million, then EUR 950 million, close to EUR 1 billion. So this is roughly EUR 4 billion over a 4-year period. So this is the situation. And we have already enough programs, enough initiatives to deliver the '28 program, the below 56 cost-to-income ratio. We have already this in our pocket to some extent. And this will continue beyond. And probably, we are not going to extract the 100% potential in 4 years. There will be something on top of that the plan after 2030 because you cannot change everything at the same moment. So the difference again is that not only we are going to improve the efficiency of any individual piece that we are going to combine those different pieces so we can extract additional efficiency with the target probably change to some extent, the design and the perimeters of those different support functions. And to do that, yes, AI is one of the technology we will leverage, but this is not the only one. A bunch of that is just regular synergies and regular cost cutting because doing that, you are having -- you are identifying overlaps and king those overlaps, you are extracting additional efficiency. So it's something we did already, it's something we already delivered in certain occasions. And this is the right moment to move. Why? Because of the regulations, reportings, the digitalization, we pursued looking at the past 7, 8 years, we were very much focused on looking and servicing customers and answering anything that was reporting to the supervisors. We did a lot towards customers. We did a lot towards supervisors. And now we have some, I would say, ability to refocus on the, I would say, the measure, the key basis of the company, and this is going to be the focus. So it's an opportunity. It's a new phase. This will accelerate the efficiency program. And as you can understand, the cost-to-income will decrease slightly faster because of that. The goal of that program is not only to gain additional efficiency, meaning having a better, I would say, return, but it's also a way to have better data within the group. Doing so, you're having more, I would say, integrated processes. So the internal service, the internal value chain, the way you serve customers is being improved. The way you can, I would say, manage, leverage that as to originate new services is also, I would say, improved. So to some extent, you improve the quality of service towards clients and also innovation. And also you can refocus the teams, colleagues to what can be considered value-added tasks. And this is also very important to attract, I would say, the new colleagues and the younger generation. So this is what is being said in a very simple way on the right part of the slide. It's not only about efficiency, it's also about servicing better clients, giving a better prospect to colleagues and ultimately giving additional, I would say, return to shareholders. So this is the spirit, and this is the way it goes.
Operator: Next question is from Giulia Miotto, Morgan Stanley.
Giulia Miotto: I have two. I'll start with one on the payout mix on Slide 12. I think you say that you will communicate the new distribution policy basically at the next CMD, and I was wondering if perhaps rebalancing away from cash into buybacks is one of the options you're looking at. In the past, you weren't really open to this. Just wondering if that could change? And then secondly, in the quarter, asset quality was basically non-eventful. But other -- we're seeing other banks in France perhaps having slightly higher cost of risk and mentioning some industries that are impacted or uncertainty is not helpful. What are you seeing on the ground? And do you expect a pickup in cost of risk, most notably with the French corporates?
Jean-Laurent Bonnafe: So on the first question, we have different options. We can change the mix in between the cash dividend and the buyback; we can increase the 60% to, I don't know, 70%; we can opt for a different approach, keeping 60% and giving back everything above 13% Core Tier 1 ratio. So this is part of the next plan. It's too early to say. But clearly, the group becoming more profitable, something will be changed the best interest of the shareholders, obviously. So this is the first point. Looking at the asset quality, I mean, we are basically a European bank, the French part is a piece of the total. This is not typically BNP Paribas anymore. So France is contribute to the total, but this is not on average BNP Paribas. BNP Paribas is much more a European platform. I've always said that we are focusing the company and the businesses on the best part of the market, meaning the best, I would say, counterparty in terms of risk profile, we are very focused on that. Doesn't mean that from time-to-time, we cannot bump into a certain situation. But on average, we are very focused on that. And if you take away Personal Finance, that is a slightly different type of business because in consumer lending, you always structurally a higher cost of risk. Away from that, the cost of risk at BNP Paribas is below 20 bps in terms of provisioning compared to outstanding. So it's a low level and it will stay that way just because we focus and this is correct from time-to-time, I should say, every day. We are giving up some revenues just to protect that approach when we believe a certain situation is not relevant or it's not, I would say, aligned with our strategy. So looking at us, looking at our business model, we're not seeing currently any deterioration. And looking at the portfolio we are having, we do not forecast any deterioration. So in that respect, yes, it's a confirmation of the quality of the balance sheet, but there is nothing new in that respect.
Operator: Next question is from Chris Hallam, Goldman Sachs.
Chris Hallam: Just two for me. So first on cost. For 2026, specifically, you used to have a 61% cost-to-income ratio target which I guess has now, sort of, been replaced by that 3-year walk towards 56% in '28. We have the 5% revenue CAGR and the 1.5 points of jaws per year. But I guess, just specifically, how should we think about the outlook for costs year-over-year in 2026? And then secondly, how should we think about the EUR 635 million and the EUR 750 million of AI value creation on Slide 11? Is that telling us that if AI like wasn't the thing, the pretax profit for BNP Paribas would have been EUR 635 million lower in '25? And I don't know if that's a net or a gross figure, i.e., whether the CapEx and OpEx spend on AI products and services is embedded in those numbers.
Jean-Laurent Bonnafe: For '26, we didn't put that in writing, but the cost-to-income for '26 is 60%, 6-0. We said 61% in November. But obviously, improving the curve. We're also improving '26. So '26 is going to be 60%. On your second question, I will ask Lars to answer.
Lars Machenil: Yes. If you look at the chart that you see, so we basically say with all the elements that we put in motion, let's say, in the run-of-the-mill activities. And if we identify the ones that we have on AI. If we look at what we have been doing in the last couple of years, the main effect that we have been doing, which was like to say more the machine learning AI effect, the main impact was in the light green, light blue, whatever you want to call it, was on the revenue. So it was stimulating the revenues, it was identifying the products for our customer and the likes. What we see now in the work that we have been doing, the testing that we have been doing and the end-to-end process that we identified is that we see that the next wave of these kind of using AI in our day-to-day improvements will also have a very material impact and a stepped-up impact when it comes to cost and cost of risk, yes? So we will be able to be reducing the cost to serve. But also, whenever it comes to risk activities, be it KYC, so that you will see that in the cost. But it can also be in the workout with elements of cost of risk, where by the use of AI, we have more data available, and therefore, the impact of the total will be positive on the cost of risk. So that's the kind of thing. So we do the investments in our run-of-the-mill. This is kind of the synergies that, that aspect generates and how we intend to evolve it going forward.
Operator: Next question is from Jacques-Henri Gaulard, Kepler Cheuvreux.
Jacques-Henri Gaulard: So two questions. The first one, coming back to the cost-to-income ratio. The one thing which is really spectacular is that we started from target objective of 60%, 61%. Then in November, we get to 58%, and now 2 months later, we get to 56%. So it's been really quite brutal in terms of effectively, I would say, evolution of mindset. What was there? And what changed really? Was it really the transformation plan for support function that got you okay. We're going to do that 2% more and more the revenue evolution where you feel it's a bit better? And linked to that, how much is it going to cost you? Will it be part of the -- this transformation plan? Will it be part of the minus EUR 1.4 billion that is in the Corporate Center? That's the first question. And the second one, which is natural. If we get from that target of 61%, 58%, 56% and then why is the RoTE only moving from 13% to more than 13%? I guess, the more than 13% is, is it 13.1%, is it 14%, is it 15%?
Jean-Laurent Bonnafe: So to be very simple. We started -- so the program, the transformational program, we are, I would say, presenting today is something that will be up and running beginning of '27. We decided to start, I would say, the early, I would say, work in September '25. So we started the first, I would say, working group in September. So in November, we were not, I would say, confident enough. I mean, there was something on top of the targets we were kind of corresponding to the natural, I would say, evolution. So we were not having already in your hands, I would say, a representation of what could that represent in '28. So now we are much, much more advanced. We know better the program. And ultimately, we will give you the target for 2030, because this is a program that is for '27, 2030 and '28 level is just a kind of interim, I would say, projections. So 2030 is going to be much better, obviously. So this is the reason why in November, we were not prudent but communicating around, I would say, the regular trajectory, meaning kind of '21-'26 program continuing the same way. And now we are much more confident on the impact of the new program. So this is basically the situation. The program is going to be funded by the company in one way or the other, and probably because this is the way we booked the transformational costs when we are having transformational cost is group level. So this is part of the EUR 1.4 billion, and we have no intention to grow that amount. It's probably something we'll try to diminish rather to increase. So -- but in any case, everything is factored in the projection.
Lars Machenil: And it's what a part of the EUR 600 million because the other part is the restructuring cost. So that's what it is. So we will run it within that. And then when it comes to the RoTE, yes, we stepped it up over 13%, and that's basically it. So you know we are always a bit prudent in what we share. So it is above 13%.
Operator: Next question is from Andrew Coombs, Citi.
Andrew Coombs: If I could just have one follow-up on the cost-to-income and then I ask a separate one as well. On the cost-to-income, just going through the math that you outlined earlier, you talked about how you're currently doing about EUR 700 million of sales a year, and that's contributing to the 1.5 points jaws each year and that by effectively now realizing an additional EUR 250 million on top in each of '27 and '28 that would get you to 2 points per year, which takes you from the 60% to the 56%. Just backing into that, implicitly, you're assuming similar revenue growth, therefore, in '27 and '28 as you have had over '24, '25 and '26 in that case. Is that a fair assumption? And then second question, and I appreciate you are going to give a deep dive on this later in the year. But perhaps you could just touch on the rationale for Athlon, the EUR 200 million net benefit to earnings, do you expect what to assume within that in terms of synergies and the underlying business trends?
Jean-Laurent Bonnafe: So you're correct, basically because the cost-to-income is based upon the evolution of the cost base and as well the evolution of the top line to go through that competition, basically, yes, we're assuming, I would say, the revenues are going the same way, knowing that in the previous plan, we were, to some extent, handicapped by the rate effect. So, on a stand-alone basis, the next plan should be stronger. But in the last plan, also, we had some external growth. So it's fair to say that for that computation, we're taking basically the same kind of, I would say, top line evolution. And in fact, the difference is very much the one you underline. I mean, EUR 250-plus million cost reduction a year is 0.5 point of cost-to-income. So this is as simple as that. So you are going down by 1.5 per year, and then it becomes 2 points per year. So this is exactly the math. And if we can do a better job, we will do a better job. But again, the '28 target we are giving is just kind of interim target. This is not the representation of the strength and the power of the new initiative. 2030 will have to be better, clearly. On Athlon, we're having a very strong leader with Arval in car fleet leasing throughout Europe. In terms of market share, it's the second player behind events. Roughly, if you concentrate on the real car fleet leasing, which is the piece that is profitable, because managed fleet -- management of fleet is a very different story. I mean the revenues are absolutely not of the same kind. So if you concentrate on the core business, that is the real car fleet leasing. Arval is growing by net 100,000 vehicles per year and progressively the gap in between the leader and Arval is diminishing. And the platform is strong enough to deliver a bolt-on, that is not that huge. This is not a merger of equals. This is something that is proportionate, quite easy to deliver and a very good complement in terms of geographies. Doing so and considering that Arval is the fast-growing platform within Europe, probably in the years to come, the new platform, I would say, based upon the aggregation of Arval and Athlon will be at par with the leader. And in that business, volumes and size are relevant. Because it gives you a certain, I would say, traction in your conversations with car manufacturers. So it's important, and it makes a difference to be at 2 million or to be at 2.5 million per year. So this is the goal of that move to become a core leader, to complement geographies, to deliver additional efficiency. And very -- in a very simple way, I mean, we are going to integrate Athlon platform within the one of Arval. So we will extract a lot of cost synergies. And these cost synergies will, I would say, produce this additional efficiency and return. So it's in terms of size, a very reasonable move, quite easy to integrate, no disruption, fast-growing project. Ultimately, you are building the co-leader at par. And again, size is of essence in that business. So this is the strategy that is behind this move.
Lars Machenil: So basically leading to a 27% pretax return.
Operator: Next question is from Flora Bocahut, Barclays.
Flora Benhakoun Bocahut: The first question, I'd like to go back to the cost, but to discuss a little more the potential for restructuring costs. Because you have the deep dive, you're going to do in H1 on Belgium. You have the one you're going to do in H2 on the P&L. Obviously, the Athlon acquisition you just mentioned, the situation at HSBC Wealth business you acquired in Germany. So you've guided on the restructuring cost for '26, especially from the AXA IM situation. But should we expect potentially more restructuring costs coming in, in '26-'27 from what I just mentioned or is that already embedded in the cost-to-income ratio that you present? And the second question is on the capital. Basically on capital, the question would be the CET1 target of 13% is for by the end of '27. I just wanted to understand what are the odds? How high are the chances that you can achieve that already in '26? And actually, regarding that, what would be your expectation from today's standpoint on FRTB specifically?
Jean-Laurent Bonnafe: So in terms of costs, everything is covered. Nothing is being hidden somewhere. Everything is covered in our trajectory, including, I would say, restructuring costs that could come from, I would say, aggregation, external growth or internal programs. Again, everything is being covered, nothing on top or on the side. On equity, you never know. We do the -- I would say, we go as fast as we can to some extent. We were supposed to deliver 12.3% this year, we are delivering 12.6%. So we saw some kind of acceleration. But I don't believe that 13% by year-end '26 is reasonable. If it's a necessity, we can deliver that, but I don't believe this is reasonable. For the FRTB, not what we believe, but what we hear and what we understand that there are a couple of initiatives that could end up ultimately with a kind either of postponement of the FRTB for a certain number of years or a process that would implement FRTB while neutralizing the impact. This is basically the two voices we are hearing. Why? Because, obviously, the U.S. universe is not moving, implementing the FRTB so fast. So it's a question of global competition for the banking system in Europe, in the Eurozone. So there's a certain probability that ultimately the impact is not going to be 30 bps, but you don't know. And in any case, we are prepared to deliver the implementation of the FRTB because there is an operational dimension, so we are, I would say, full speed on that dimension. So we will deliver, in any case, the implementation, and we are preparing the trajectory in terms of CET1 to be able to absorb that potential 30 bps headwinds. So, I don't know how to say that. So yes, there are scenarios. It's very difficult to give a probability, let's say, 50% chance that ultimately this could be watered down. But in any case, we are prepared, I would say, to deliver those 30 bps, and we're prepared to operationally implement the FRTB.
Lars Machenil: Yes. And maybe, Flora, to put a number on it. So as we said, for the restructuring, we basically have foreseen that's what we announced, EUR 800 million for '26, and that will basically go down to EUR 550 million the year thereafter. And that is the cost base within which we will deliver the things that we mentioned.
Flora Benhakoun Bocahut: Okay. Can I just follow up with a very quick one on the timing on FRTB? Do you think we will know in H1 this year?
Lars Machenil: What we hear is that -- so the European Commission is having the hand on this. So whatever Jean-Laurent said, that they are looking at options, it's basically the commission. And so therefore, if the commission once or cannot postpone it, but needs to implement something with an effect which is neutral, then it has to be ready by '27. And so that is why they are working on it now. And so yes, it's not impossible that we will have a view by the summer.
Operator: Next question is from Sharath Kumar, Deutsche Bank.
Sharath Ramanathan: I have two questions, one on capital and one on Arval. Looking at your capital buildup, I hear you when you say disposals cannot be accelerated that much in the near term if you want to get the right price. But given what you've seen happened to your share price with the faster buildup of CET1, would you be open to exploring a minority stake sale perhaps through an IPO for more scaled assets like your asset management business or Arval to achieve a faster route to 13% CET1? That's the first one. Second, on Arval, again, would it be a fair conclusion to say that consensus underestimates your strength by factoring in only 5% revenue growth for 2026, given your organic revenues grew by 11% in the fourth quarter? Your fleet is growing very well and you would face extremely negligible impacts from used car revenues for 2027, in that context, can you also confirm that you'll continue to grow fleet around 5% in 2026?
Lars Machenil: Listen, on capital, as you know, we are intrinsically generating capital. As I mentioned earlier, you'll see that with the 10 basis points that we generated in the fourth quarter, on average, on a year, we generate 30 basis points. We assume that there could be some supervisory regulatory overhang, so we generate 20 basis points. So we're already at 12.6%. So that's the speed at which we go and then some sales will further step it up. So we're really on track. And so having a setup with joint ventures with those key activities like Arval and Asset Management that we consider key in the cross-sell and in the integration that we do, that is an option we do not consider. So we consider -- we have very fast organic growth and then we will dispose things, which are the fast track on which we go. And so, with respect to the rest on Arval, yes, we have guided the growth that we have on the fleet. And whatever we see at this stage is that growth we are having. If you look at -- so the overall growth we see that and we also confirm the non-effect of the resale value of the cars. If you see the prices of both the EVs and the ICE, they basically don't deteriorate. So also that assumption is clocking in. And so that's why we feel comfortable with the outlook.
Operator: Next question is from Pierre Chedeville, CIC Market Solutions.
Pierre Chedeville: One remark question, I would say, on Slide 8 regarding BNL because I noticed that for every business above, you mentioned RoNE and precise deadline, I would say. But not for BNL, we have nothing, and I was wondering why this uncertainty in BNL, that you don't feel for Belgium or Arval, for instance? And more globally, I think we all have seen clearly your new trajectory for 2030. But at the end of the day, if we take one of your best peer in Italy, and I know that you know very well is banking market. You remain, I would say, 20 points above in cost-to-income and more than 10 points below in terms of profitability. And I was wondering, in the past, we could say it was because of the high interest rates, variable rates, et cetera. But this is normalizing. And I don't understand this gap remains so high with this type of peers. And I was wondering if, I would say, will we miss something in France in terms of IT, I don't know something which is not very clear for me? And my second question, in your trajectory, we also see that many players are pushing very hard in their retail businesses, on the digitalization, not only AI, but also digitalization with online banks, things like that. And I was wondering in your cost-to-income improvement, what do you see -- which could be the part of the digitalization, for instance, Hello bank! development, et cetera, but not only in France, but more generally in your CPBS business?
Jean-Laurent Bonnafe: On that second question, I mean, if you look at the efficiency program, we talked about support functions, but you have all the rest that is much more, I would say, the part that is servicing directly customers. So it could be commercial banks, it could be CIB, it could be insurance, all the good progress we are delivering are coming from, to some extent, digitalization. So this will continue. And if you look closely at the plan we already communicated that Personal Finance or CPBF France, and you will see just the same with Belgium and again with BNL, digitalization is of essence in that part when it comes to improving the efficiency of a business platform, and the layer that is directly servicing customers is moving that way. So it's something that started in the previous plan that expanded in the current plan, and that will continue to expand in the next plan. Because remember that you have the new program, but anything that is optimizing the efficiency of the businesses will stay. This is very important. And again, part of it is the digitalization, which ultimately has good strong impact in terms of FTEs efficiency, quality of service and so on and so on. For your first question, on BNL. BNL, they're going to deliver the plan. We have a good vision of the plan as of today. Obviously, this will be communicated in the second part of '26. And remember that those plans, they are for the '27-2030 plan, so nobody is late. On the contrary, you have a bunch of businesses that are moving ahead of the plan and BLN will communicate in due time and there is no specific, I would say, complexity with BNL. It's a different market, it's a different positioning and you will see the result. And then comparing our group to, I would say, more domestic players, let's say, that are operating in one market where margins on loans are much higher than in Belgium or France because this is a reality and that are having the floating rate, I would say, type of balance sheet. It creates a large gap in terms of return on asset. Because the situation we are in today we are back to a normal growth, let's say, more than 5% in those commercial banks we are having at BNP Paribas. But this is the beginning. When you have a floating rate balance sheet, I would say, the -- what took place in '22-'23 with the rates was all of the sudden violent, very rapid increase of the intrinsic margin of the whole book. As this will be much more progressive. And in any case, in some countries, you are having for certain asset, a better margin. This is linked to a number of local factors. This is not linked to the business model of the bank in the country. So again, we are progressing well. Return on tangible equity used to be at 10% in '21, will be at 12% in '26. We're going to be at more than 13% in '28. And clearly, we will be at a much higher level in 2030. This is the situation. And again, that business model is very diversified. And in terms of risk profile over the cycle, not short-term period, but the cycle the long way, is an excellent, I would say, dimension of the company, and it gives, I would say, additional security to something that is much more concentrated on a certain market that could be at a certain moment in the cycle in a different position because of a different level of diversification. So this is our business model. And again, can be compared just that way towards the domestic bank that, to some extent, a much more mass market compared to the type of, I would say, franchise we're having in our different commercial banks.
Operator: Next question is from Anke Reingen, RBC.
Anke Reingen: The first is just on the below 56% cost-to-income ratio. And listening to the call, you obviously see much more -- I mean, not confident, but it seems more visibility on getting to the 56% and below. I just want to confirm, is that because you think you basically have more visibility on the cost levers and the revenues is more underpinned on -- because of the trends in the retail operations on the NII benefit? And when you think about the below 56%, do you think where you stand now, are you potentially even doing better on costs than you're currently envisaging? Or is it, basically, a revenue function? And then secondly, on the corporate and investment bank on your Slide 8, where you show us the different moving parts, see above 13% RoTE. And I guess if FRTB wouldn't be coming in, then you could free up the capital and we have 30 basis points more. But also in terms of like operational trends, 2025 was quite a good year, how do you think about the different revenue drivers to keep that profitability outside of FRTB at around the same level or potentially even higher?
Jean-Laurent Bonnafe: So the cost-to-income evolution is very much -- if you compare the target we are giving to them the one we gave in November, the difference is basically just the level of cost. It has nothing to do with the revenue trajectory. So this is one. If you imagine that for the entirety of the '27-2030 program, if you go down by 2 points of cost-to-income again in '29 and '30, you are down to 52%. And then you are still left with some marginal cost growth model. And so you are becoming quite close to the 50% level. So let us see what will be the result of the '27-2030 plan, but we are probably in 2030, quite close to 50% in terms of cost-to-income. '28 is just the beginning of the program. For CIB, CIB will continue to grow at marginal cost. It has an excellent trajectory. This year, CIB was, to some extent, a bit handicapped by, let's say, the corporate bank. I mean we saw because of geopolitical issues, lack of momentum in Europe, globally, not because of BNP Paribas, we saw a number of, I would say, programs, investments, aggregation, M&A have been postponed. So well, the corporate bank was just stable, resilient, but didn't grow. So that was the situation in '25. We have good reasons to believe that this will be rebalanced rapidly looking ahead. In any case, again, the CIB platform will continue to grow at a marginal cost. So this will contribute to the increase of the return on tangible equity. Looking at the FRTB or not the FRTB, it's too early to discuss this. We'll see probably in the coming months, maybe before summer or autumn end of that year, we'll probably have a, I would say, position at the European level. And based on this, we will consider which direction is the right one for the company. I mean, we have to be very careful. We have to be very sure that the new, I would say, the new regulation, if it's a new regulation is stable or not stable. You never know. You have to be very cautious in that type of situation. We are prepared to deliver those 30 bps on top. We prefer, obviously, not to have to deliver those 30 bps on top because simple, but we have to be very cautious about that. So the day we know we can comment in a more precise way.
Lars Machenil: But to give some color, right, the way what we hear is that Europe wants to align with what other authorities are doing. So imagine that those other authorities are taking a decision in a couple of years. It might be that there is a relief from FRTB for a couple of years, but then it will come. So that's why, I mean, we prepare to be ready for it.
Operator: Next question is from Matthew Clark, Mediobanca.
Jonathan Matthew Clark: A couple of questions. Firstly, you used to have, I think, a 20 basis point placeholder regulatory headwind penciled in for 2026. I just wanted to check whether that's still the case? It looks, I think, on a chart may be a bit smaller, but that could just be I'm reading it wrong. And then second question or 2.5 question is on Belgian NII and Arval revenues in the fourth quarter versus the third quarter. There was quite a strong increase for both those line items. Just wondering whether the fourth quarter was clean or there were any lumpy items? We've seen disposals or dividends or revaluation of stakes, et cetera. Muddy the waters there in the past. So just to check of our revenues and Belgian NII, were they clean in the fourth quarter?
Lars Machenil: Matthew, just to clarify on the capital. So what we assumed, as I said, take the 10 basis points that you saw of capital increase in the fourth quarter is like around 7%, which basically means that on a yearly basis, we generate 30 basis points. And then we've guided that we assumed that there would be 10 basis points next year of the regulatory supervisory overhang. And so that leads to the 20 basis points that you had, and that's why the 12.6% should become 12.8% at year-end. Then on the pickups that you said. So both, if we start with Belgium. Belgium, the pickup that you saw in the fourth quarter is the one we announced also for France a quarter earlier. So it is the mechanical effect, as I mentioned, of having all the windfalls being bizarre product in the Belgium environment, which is basically gone. And therefore, the fact that we redeploy those non-remunerated deposits at the longer end. So that is the pickup that you saw, and it's the pivot that we announced. And when you look at Arval compared to the third quarter that in the third quarter, we still had some revaluation effects that were present that you basically do not have in this quarter comparison. So the comparison quarter -- on the fourth quarter did -- was not impacted by the residual car value, which the third quarter still was. So that is the intrinsic read of what you see is indeed the intrinsic growth.
Jonathan Matthew Clark: Just to check there on that, what was the negative revaluation used car sales results or how have you described it in the third quarter? Because I thought it was 0-ish for both third quarter and fourth quarter?
Lars Machenil: No, no, no. It's 0 in the -- yes, so the effect was 0 in the fourth quarter of '25, right? And it was 9 in the third quarter in that. But let's not forget that indeed, Arval intrinsically, independent of that, has a kind of seasonal effect in the fourth quarter.
Jean-Laurent Bonnafe: No more questions?
Operator: No more questions registered at this time, sir.
Jean-Laurent Bonnafe: Okay. So you can very much count on us, we'll deliver. Thank you so much. Take care.
Lars Machenil: Thank you so much. Have a good day.
Operator: Ladies and gentlemen, this concludes the call of BNP Paribas Fourth Quarter and Full Year 2025 Results. Thank you for participating. You may now disconnect.