Executives: Lars Machenil – Chief Executive

Officer
Analysts: Lorraine Quoirez – UBS Tarik El Mejjad – Bank of America Merrill Lynch Jon Peace – Credit Suisse Jean-Pierre Lambert – KBW Delphine Lee – JPMorgan Bruce Hamilton – Morgan Stanley Jacques-Henri Gaulard – Kepler Cheuvreux Anke Reingen – RBC Stefan Stalmann – Autonomous Research Kiri Vijayarajah – Barclays Maxence Le Gouvello – Jefferies Jean-François Neuez – Goldman Sachs Alex Koagne –

Natixis
Operator: Good afternoon ladies and gentlemen and welcome to the presentation of BNP Paribas First Quarter 2017 Results. For your information this conference is being recorded. Supporting slides are available on BNP Paribas’ IR website, investor.bnpparibas.com. [Operator Instructions] I'd like now to hand this call over Mr. Lars Machenil, Group Chief Executive Officer.

Please go ahead, sir.

Lars Machenil: Thank you, operator. Good afternoon fine ladies and gentlemen and welcome to our first quarter 2017 results presentation. In our usual way, I'll take you through the first two chapters of our Q1 results presentation, and then of course, I hand it over to you for Q&A. So starting with our key messages on slide three.

In the first quarter, BNP Paribas delivered a good operating performance, revenues in particularly of our operating divisions performed well marking a 7 % increase on Q1 last year. Costs progressed at a lesser pace than revenues, leading to a sharp rise of the operating division’s growth operating income, which was up 12.5% in the first quarter. After all this because of risk, also an important point, we marked a significant reduction this quarter to stand at 32 basis points in terms of loan outstandings. So overall the group generated €1.9 billion of net income in Q1, up 4.4 % given limited positive one- offs items compared to Q1 of last year, net of one-offs, net income progressed by 13.2%. Then when it comes to ratios, let's start with our common equity Tier 1 ratio which stood at 11.6 % at the end of March versus 11.5% at year end 2016.

So as you can see the group delivered solid results with good business growth and further strengthens its common equity Tier 1 ratio. So if you can now go to Slide 5, where we can look at the exceptional items, you can see that it stood €31 million pretax. On the other hand, in Q1 last year had seen quite positive exceptional item and elements mostly on the back of the DVA revaluation. You also see on this slide first wave of transformational costs, I remind you that this is a start up or 2020 transformation plan leading to a more effective and digital bank. So on the following slide number 6, you can see the impact of IFRIC 21, on the Q1 accounts of course.

In fact, as you probably know because of the application of this IFRIC 21, Q1 accounts for the large majority of banking taxes and contributions for the year, including amongst others the full year contribution to the Single Resolution Fund. In the first quarter 2017, we booked the increase in banking contribution and taxes that we accounted for last year in the second and the third quarter and this for a total of 84 million. So Q2 and Q3 had an additional 84 million booked in 2016 which now has been booked into the first quarter of 2017. And so therefore for the whole 2017, we estimate as of today that the contribution IFRIC and the systemic banking taxes should be roughly stable compared to the full year 2016. So having done that, if you know turn to slide, 7 you can see the good performance of the operating divisions I've mentioned and a 13.2% increase in net income excluding one-offs.

This in turn means that we delivered 10.4 annualized returns on equity, excluding the positive one-offs. The annualized return on tangible equity stood at 12.3%. Now focusing on the revenues of the operating divisions, a few flicks to Slide 8, you can see the contribution of the three divisions 2% to 7 % revenue growth of the operating divisions. Domestic markets revenues marked a slight decrease due to the low rate environment. IFSs revenues rose by 5.8 % and there was a sharp rebound of 20 % at CIB which had experienced a very challenging market environment in Q1 of last year.

Continuing and advancing to the following slide at number nine, you will see the cost of our breathing divisions reflected the effects of business growth in IFS and in CIB, which for CIB of course, a low base in Q1, 2016, as well as the impact of the application of IFRIC 21which entailed booking this quarter, the entire increase in banking contribution and taxes that has been accounted for in Q2 and Q3 of last year, as discussed a few moments ago. So if we now shift to the cost of risk, I would kindly ask you to flick through the three dedicated slides on this team and they start on slide 10. You can see the cost of risk declined to stand at the low level this quarter. On the whole, this level of cost of risk resulted from the continued decrease at BNL combined with write-backs and low provisioning in other businesses. So looking at the different businesses one at a time, in corporate banking provisions were more than offset by write-back this quarter.

Looking at our domestic markets on slide 11, cost of risk was low in terms of retail, low Belgian retail as provisions were offset by write-backs and we continued the tapering off and therefore the decrease at BNL. In other retail businesses, on slide 12. Personal Finance, saw a low cost of risk this quarter benefiting from the low rate environment and a gradual shift towards products with a better profile like we've given the example of car loans. Europe-Mediterranean cost of risk was positively impacted by 40 million provision write-back, while BancWest remained at the low level. So having looked at this, if we now turn to our financial structure, which is on slide 13, you can see the further improvement of our common equity Tier-1 ratio to a 11.6 % that I mentioned at the start.

The actual improvement was 15 Bps, mostly driven by the sale of 20.6% of first Hawaiian Bank. In February we generated 10 Bps of ratio. I remind you that consistently with our 2020 plan we have of course set aside 50 % of our Q1 net results for dividend payment and next to that our Basel 3leverage ratio was at 4.1 % and our liquidity coverage ratio stood at 125%. So this is the slide on our ratios, which you see are basically in good shape. And if you know kindly swipe to slide 14, you can see how our net book value per share continues to grow as it has done year after year.

At the end of March, our full book value per share stood at €75.1 and our tangible book value per share stood close to €65. So fine ladies and gentlemen, if you could now advance to the divisional results and they start with retail banking and services and more precisely we can start with domestic markets, which you can find on slide 18. On this domestic markets, you remember that on April 4th we announced the acquisition of what is called the in French retail and it is in France that will complete our offer related to new banking usages, currently with our digital approach that I mentioned at the start. Thanks to the addition of Compte-Nickel, whose distribution agreement with the Confederation des Buralistes they were basically an alternative distribution channel has been recently extended. Our set up in France now includes a comprehensive offer of solutions adapted to our client needs.

So alongside Hello bank!, which is I remind you the digital offer of a French retail banking and then of course there is the branch network. Compte-Nickel has proved highly successful since its launch in France as I mentioned just two years ago. Over this period it has attracted over 540,000 clients, leveraging is real time execution capability and a full digitalization of its processes. I just want to remind you that they are basically on the vanguard of this digitization of processes and I also remind you that the target is to accelerate client acquisition and reach 2 million accounts by 2020. In terms of the activity in the first quarter, domestic markets showed good business drives with 5.2 % loan growth and 9.1 increase in deposits.

And so this is of course covering all the networks. Private banking is good, development was confirmed by the 8% growth to assets under management compared to March of last year. And Hello bank!, successfully on boarded 100,000 new clients to reach a total of 2.6 million clients. If you now at the P&L, we see that revenues reached close to €4 billion. They are down slightly versus last year, as we had anticipated low rates continue to weigh on net interest income, but we successfully offset most of the impact through business growth and higher commission income in all the networks.

Costs were 0.8 % higher on a comparable basis. That is netting out the IFRIC 21 impact that I mentioned at the start. Given a significant reduction in cost of risk, especially on the back of continued improvement at BNL in Italy, pretax income stood at €7.7 million marking a 2.5 % improvement on last year. So overall good performance in terms of pretax income for our domestic markets, where in particular and the syntheses good growth in business activity in all three networks. French retail in particular is showing good growth of loans and of private banking assets under management, BNL showing an increase in loans and a good performance in terms of our balance sheet savings and a continued reduction on its cost of risk.

Belgium also growing credit outstanding and our balance sheet savings and the remaining part which is specialized business is delivering good sales and marketing drive and of course related income growth. So in conclusion, our domestic markets have fared quite well in the first quarter, showing good business drives and higher income, but of course still reflecting the low interest rate environment. So having looked at domestic markets, if we stay in retail banking and services, if you could swipe to slide 23 on your device, and you will see the synthesis of international financial services and you'll see that they show a good business drive, in particular, personal finance continues its good drive and announced in March the joint acquisition with PSA of General Motors Europe's financing activities. Also international retail banking showed good business growth and insurance and wealth and asset management showed strong net asset inflows in the quarter. From this we now tilt into the P&L, we can see that the revenues were at 5.8% higher, thanks to good growth of personal finance, Europe-Med and wealth and asset management.

There was also a strong rebound of insurance revenues versus I remind you a low base in Q1 last year. And thanks to a positive effect and lower cost of risk, pretax income improved to €1.2 billion, up 16 % on the first quarter of last year. Now going into a bit more detail for each of the business lines in IFS, you can advance first to Slide 24 where we look at personal finance. And as I said PSA announced the acquisition with PSA Group of General Motors Europe’s financing activities which is basically in 11 European countries. The deal which will bring an additional €9.6 billion of loans outstanding to our personal finance is expected to be finalized later this year and especially by Q4 and once completed it will be fully consolidated in our accounts.

Looking next to that in the first quarter they have continued a very good business drive with outstanding loans up 11.2 %, thanks to higher demand in the Euro zone and a positive effect of new partnerships. Consistently with past 2020 development plan, we signed during the quarter new partnerships agreements in new sectors of activities such as for example tourism and also new countries such as for example Austria. Now having looked at the activity, if we look at the P&L, revenues were up 4.5 % on the back of the abovementioned volume growth, combined with of course the shift towards products with a better risk profile. So revenue growth was driven in particular by the Italian, Spanish and German markets. Then after looking at the topline, we look at the cost line, that's where they basically progressed on the back of the increased level of activity, and we're up 3.3 % excluding the impact of IFRIC 21.

As I said, cost or risk was at a low level and pretax income progressed to €353 million making a 6.1 % increase on last year. So in conclusion, personal finance delivered another strong quarter with dynamic business drive and increased contribution to the group's results. So if we continue with our review of the parts of international financial services, we could now move to our non-euro zone retail activities, which is basically Europe-Med first on slide 25. So here business activity showed good growth in all regions both in terms of loans and deposits. Our digital banks in this area confirmed their successful development with Cepteteb in Turkey exceeding 380,000 clients and BGZ Optima in Poland, reaching 205,00o.

Still in Poland we are continuing to develop our cross-selling as for example in consumer lending where credit outstandings were up 12 %. Now after having looked at the businesses, let's now look at the P&L, we're taking into account variations at so-called constant scope and exchange rate, revenues progressed by 6.2% thanks to the good volume growth that I mentioned. Cost increased at the latter pace on the back of the good business development. Overall, given also the lower cost of risk due to write-back this quarter, Europe-Meds results increased by 28.2% in the first quarter of the year. As published, the increase stands at 13.5% due to an unfavourable Forex effect because of what I said, the dilution I gave were at constant scope and exchange rate.

So now if we now cross the Atlantic and also a slide and we go on to slide 26, where we look at BancWest and where we can see that the future of this quarter was the successful placement in the market of 20.6 % of First Hawaiian bank, which is now 62 % owned. I remind you that we'll continue to fully consolidate the entity for as long as we maintain effective control. In the first quarter BancWest confirmed a strong business drive with loans up 7.7 % driven by both individuals and corporate lending and also deposits increasing by 11.4% always compared to last year. Again, if we look at evolutions expressed in constant scope and exchange rates, we see that revenues were basically lower due to the impact of significant capital gains on the sale of security and loans in Q1 of last year. Net of this effect, revenues were up 5.3 % on the back of the good volume growth we mentioned.

Now if you look at the other line namely, costs they were kept under control and on the whole banks with pretax income came out lower than last year, but only due to the base effect rates to securities and loan sales that I mentioned just before. Net of this effect, pretax income increased by 16 % confirming a good operating performance of BancWest. If you could now kindly flick to slide 27, where we look at our savings and insurance business, which saw assets under management progressed by €32 billion over the quarter to reach €1 trillion 42 billion at the end of March. Assets under management were also positively impacted by strong asset inflows in all our businesses and by a positive performance effect. If we look in particular at the insurance business and its on page 28, it continued to show good inflows into a unit linked policies in the first quarter, revenues rebounded strongly, bearing in mind the low comparison base of last year.

Generally protection activity progressed well and savings activity in Asia picked up versus last year costs. Costs on the other hand were up due to the continued development of the business and overall insurance pretax income marked a sizable 63.8 improvement in Q1 to stand at €326 million. Now if we move to the order part of this activity. So moving into wealth and asset management, we observe that revenues increase in all business lines. Overall they increased by 7 %, bearing in mind that Q1 of last year has seen unfavourable market conditions.

Costs were well under control leading to positive draws and in a synthesis pretax marked a significant improvement of 29.7% to clock in at €270 million. So globally, strong income growth in our insurance business, compared to a low base in Q1, 2016 and a good performance in all businesses in our wealth and asset management. So with this, we basically conclude our retail and services and I would like to ask you to kindly catch eyes now on slide 29, where we see corporate and institutional banking or CIB. So this CIB displayed good growth in business activity and a strong rebound in income generation compared to a low base last year when market conditions had been unfavourable. Revenues topped €3.2 billion, making a strong 20 % increase on last year with a good performance in all three business lines.

When we look at the cost operating expenses progressed on the back of the increased level of activity, but showed largely positive tolls, thanks to effective cost control deriving from the implementation of cost saving measures which I remind you that we started in 2016. As a result, gross operating income led by 67.3% and given the write-backs in the cost of this quarter pretax income surged 93 % to stand at €780,000. So if we now turn to the next two slides, that is 30 and 31. Let's take a closer look at the three businesses that make up our corporate and institutional banking. So if we start with global markets, you'll see the ad revenues led by 33.1%, thanks to a significant pickup in activity compared to the very challenging beginning of 2016.

Fixed income mark to 31.9% improvement with a particularly strong performance in rates, good growth on bond issues and credit and a good contribution from Forex and commodities. We confirmed our top ranking on all bond issues in euros and number nine positions for international bond issues. The business also continued to optimize its resource allocation by disposing all the profitable portfolio, presenting €2.5 billion of risk weighted assets. So this is fixed income. If we switch to equities, revenues were also significantly higher marking a 35.5% improvement on last year on the back of a strong rise in client services and a rebound in derivative activities.

If we now turn to the second part of that CIB, so we turn to security services. So revenues progressed by 8.5 % on the back of growing outstandings and higher transaction levels. In Q1, we also gained some new significant mandates such as Mapfre, and Spain were €60 billion of assets under custody. Last but not least, the third one in that row is corporate banking, whose revenues progressed by 6.7 % with growth in all regions and a 19 % improvement in commission income compared to a low base last year. We saw a good start to the year in advisory and solid performances across Europe in areas such as aircraft financing, exports and media telecom.

Transaction bank loan also evolved well with robust growth both in cash management and trade finance. So in a nutshell, a strong quarter for our corporate and institutional banking with good business drive and strong revenue growth in all of the three businesses. So with slide 32, which basically concludes my introductory remarks for our first quarter results and as a takeaway, I would like to retain that BNP Paribas showed good business growth this quarter. Also that income of the operating divisions was sharply higher. That our common equity tier 1 ratio increased to 11.5% and the 2020 plan starts in good conditions.

So, thank you very much for your attention. Ladies and gentlemen and I'll be glad to take your questions.

Operator: Thank you. [Operator Instructions] Our first question is from the line of Lorraine Quoirez at UBS. Please go ahead.

Your line is now open.

Lars Machenil: Operator, I cannot hear any question.

Operator: Yes, I believe her line is still on mute. So Lorraine, if you can un-mute your line please.

Lorraine Quoirez: Hello? We can now hear you, Lorraine.

Please go ahead with your question.

Lorraine Quoirez: Hi. Hello, Lars. Thank you for this presentation. Just if I remember well, I think you guided for 3% revenue decline in French retailing this year.

Are you still comfortable with this guidance or do you think you could revise it upwards, looking at the performance in Q1? Also could you may be precise what level of fees are related to refinancing are booked in Q1 NII? My second question will be on CIB, the performance of global markets revenue was pretty strong. And I wonder whether you could provide us with a bit of an indication of what part of the revenue growth was like, I would say corporate driven and what part was much more like a slow reason?. Thank you.

Lars Machenil: Lorraine, thank you for your question. So first of all if I look in France.

So when we said that it was minus 3% top-line guidance it was that, indeed we expected the impact of the low interest rates to continue. However, we also said that we would fight it between quarters by working with our customers, helping them finance their plans, so therefore growing our volumes and also providing them additional services, leading to additional fee and commissions. If you look at the first quarter and to the year, it basically is relatively positive. So you can see that the loans are up 7 %, deposits are up 12% and fees are up3 %. So of course, this intrinsically will help to compensate somewhat this low interest rate environment.

Now if this is to continue for several quarters and it's just at that we're ready to say it will. But if it is, it will definitely help contributing to lowering the impact of the low interest rate environment. And when it comes to your second question on the split, we basically do not provide this information. And on CHB when it comes to global markets on your question, and you do know interests to make sure that I do understand, our main activity is basically client driven. Let's be very fair, today in the Basel environment things like prop trading is a no go.

So for us it's really client driven. We - as you can see we saw very good volumes, you can see into global markets, but you also see that into our security services, you see it in corporate banking. So that's basically what's driving our pickup. That would answer my - that will be my answer Lorraine.

Lorraine Quoirez: Thank you so much.

Operator: We are now on the line of Tarik El Mejjad, Bank of America Merrill Lynch. Please go ahead Tarik. Your line is now. Tarik

El Mejjad: Hi. Good afternoon, Lars.

Good afternoon, everyone and thanks for the call. Many questions, so I limit myself to two. From the cost of risk provision this quarter were exceptionally low at 32 basis points of loans, probably the lowest in many years. So this performance was driven by the law provisions in Europe-Med, Belgium, and CIB. These are all divisions that did not specifically - specifically notified as potential source of assets growth improvement during the Investor Day.

So that's the context, so would you consider this quarter low provisions as a one-off and you stick with your targets or you would review down your guidance for the group? My second question is on operating costs, Lars, mentioned a few times in presentation today that the high cost were driven by - the growth in the costs are driven by a low base in Q1 last year, so we take then Q1 ‘17. Obviously just as IFRIC as a new base for costs or you still believe this is an NIT there. And just you know, on costs, usually for the simple efficient plan previous to used usually have this nice slide where you show the savings and the transformation costs you've done every quarter. Could we have something similar for the new digital transformation plan you've presented in 20th of March this year? That's my question. Thank you.

Lars Machenil: Thanks, Tarik. Thank you for your two questions, but I probably count them wrong, because I get to three. So if I take the first on the cost of risk. So indeed we mentioned that the main thing is that we expect with all the restructuring that we've done in Italy, that of course, so risk in Italy would tapper off, that would tapper off over time. Now it is true that in several areas the cost of risk is low this quarter.

And then what we have mentioned that for example in Belgium the write-backs and in IFS the write-backs, they are more of a kind of an exceptional kind of nature. On the other hand on corporate banking, it is true that there are also some write-backs, but intrinsically the provisions are also somewhat low. But it is - at this stage, it's the first quarter. It is early, so we don't give any date to our overall guidance at this stage. When it comes to your question on cost.

Yes, there is basically two drivers. So the first driver if you look at it at IFRIC 21where we have crystallized in the first quarter of 2017 costs also that occurred last year or last year two years ago in 2016,in the second and the third quarter. The other thing is that if you look at the businesses there is one business where the costs are also related to the volumes in the business and that is in particularly CIB. So you can see that with a pickup of the business in CIB there is also a pickup in the variable cost. So that is basically the two drivers underlying the costs, whereas for the rest of the business it has been basically - business as usual.

When it comes to business as usual, your question on indeed or simply an efficiency slide and I take note of your question. We are in the first quarter of launching our plan. So as you can see we have invested for a start, but it's starting to this will rollout. But - so at the moment we will be closer to the full swing. We'll of course introduce there one slide that gives the synthesis of where we are.

So it's well noted, it will be our pleasure. That will be my answers Tarik. Tarik

El Mejjad: Thank you, Lars.

Operator: Okay. We are now at the line of Jon Peace, Credit Suisse.

Please go ahead. Your line is now open.

Jon Peace: Thank you. So my first question was on the trading revenues in global markets, where the growth rate was noticeably stronger than European peers. So I just wondered what you would put that down to, do you think it’s the mix, so things like derivative products, so do you think you gain some market share from your peer group.

And the second question was on the corporate center, and again it has a habit of surprising positively in revenues. Could you just sort of give us a little bit of an update on the guidance there and particularly as it relates to the sort of private equity gains going forward, what sort of run rate might we expect? Thank you.

Lars Machenil: And Jon, yes. A couple of things, so on and trading, so indeed we already gave part of that in the previous question. So indeed as you know we're focusing – or we are in shape of being able to serve our clients.

So we are both on capital and on order elements we are fine. We further improve so that we really can serve to our client with the global markets, but also the other parts of CIB. So that's what we're doing. And if you look and for what that is little bit, if you look at some of the statistics of market share like Dealogic you see that indeed there has been a rise somewhat in the market share. So that is basically what we do and we will continue to do so.

And yes, on the corporate center, on the corporate center there are somewhat some elements that can be believed to resolve which is a bit better than our guidance that we've given in our guidance. Well, you know it can be one quarter or another, it can be better, but it doesn't mean that we change it. We give you the thing that we think is the realistic level we can get and we wouldn't want to fall below that. So sometimes from time to time there will be a positive effect. Okay.

And of course, let's not forget there is one thing which we published there has been a part of a sale of Shinhan which basically leads to a gain that we see in the corporate center.

Jon Peace: Okay, thanks.

Operator: Our next question is from the line of Jean-Pierre Lambert at KBW. Please go ahead. Your line is now open.

Jean-

Pierre Lambert: Yes, thank you for taking the call. Two questions on my side, the first one, you seem to be outperforming the market in the growth of French loans, so book is up 4.7 % for the market in February and you are above 7 %. So any color for this out performance, or any pattern would be of interest. The second question relates to asset management inflows, you have an impressive 10.9 billion inflows, that's 10.5% annualized. That's a reversal from an outflow of 2.7 billion in the fourth quarter.

So what's the source of this inflow? You say it's a cross-product, but is it France or international or is it institutional or is it retail, any better would be of interest? Thank you.

Lars Machenil: Sure, Jean-Pierre. So first of all on your question on French retail loans. So yes, it is true that the 7 % is somewhat flattered by the fact that if you look back at last year to a year ago we were at that low. So you know, we had a little bit of redemption a year ago which makes it that the base is a bit lower.

So the increase is somewhat flattered by that. So that's on the loans. And when you look at asset under management, asset under management, as you know and we've done as part of our evolution, that's part of the elements which we put focus, both in the assets under management and to the private banking which is in our retail, as in the non-retail market. And basically all of them have been doing well. They have been both in the products that we had to offer, they have been no well received and that’s basically the growth that you see in most of the activities.

Jean-

Pierre Lambert: Thank you very much.

Operator: We're now over the line of Delphine Lee at JPMorgan. Please go ahead.

Delphine Lee: Yes, good afternoon. Thank you, Lars for the presentation.

So two questions on my side. First of all, just let me come back to global markets, just to understand that the cost increase here because if it does not explain everything. I mean, should we think in terms of decline in cost income ratio for the full year and or is that related to the variables that you just mentioned I think in previous question. And then secondly, just noticed on your liquidity reserves that it has continued to increase. I was just wondering if the objective is to continue to improve the LCR ratio or you're kind of happy with where you are.

Thanks a lot.

Lars Machenil: Delphine, yes. So on our global markets and on the cost. So let's not forget as I said there's two basically - two main drivers for our cost. So there is IFRIC 21, we basically had the impact that we said.

And the second part is that on global markets this quarter compared to a year ago is a totally different environment. I don't know where you were a year ago, but it was a different environment. I mean, that meant that there was a lot of less activity going on, which also meant that there were a lot less variable cost - variable cost called that bonuses and alike that you have in the variable cost. And so what we've seen is that there has been a strong pickup. So there is also a pickup in those costs.

So that is for us basically in line with that. And so that is nothing abnormal in it. When it comes to liquidity. Let me tell you that, as I said when it comes to ratios like the leverage and the LCR, it's kind of a backdrop, so we have to above. We want to be above 4 % our leverage ratio, we want to be above a 100% on LCR and that’s basically.

So we are not in the business of accumulating liquidity or other stuff. And that's what it is. So this time from time to time you will of course see peaks. You will see peaks for example in the LCR when there are things like the TLT Arrau [ph] which happened in the first quarter and then they we take a pickup that basically leads to a boost which then tapers off when it gets redeployed. So that's basically it.

So there is nothing as particular of it. And we basically not in the business of considering these elements different than a backdrop.

Delphine Lee: Thank you.

Operator: Moving on to the line of Bruce Hamilton at Morgan Stanley. Please go ahead.

Your line is open.

Bruce Hamilton: Thanks. Good afternoon. A couple questions on CIB. Just to make sure I’ve understood on the cost you’re saying is mainly you know, this amount of is variable.

So if revenues were to weaken we should expect you can manage the cost base, so it’s not a function of more investment going into that division? And then secondly, in terms of the market share gains you appear to be making, you mentioned the Dealogic data, but where as you look forward you’re most confident on further opportunities in market share given your footprint and capabilities and product, services you will see them quite well. I mean if you could add any other areas where you have more confidence on market share looking forward, that would be helpful? And then finally, just on the Basel sort of negotiations, and obviously it’s going to make quote [ph] with the - without a US member on the committee, but what's your sort of current thinking in terms of timeframe for finalization, is it by year end or beyond. And do you still think about what flows is likely in the final version or is it just so unclear, it's hard to say?

Lars Machenil: Bruce, thank you for your questions. On CIB, I think you synthesize that as well. So as I said its variable.

So indeed if revenues would go down going forward, so will the costs. So I hope that it is clear. And when it came to your question on market share. So indeed it’s true that some services like prime services, we've seen that. But I think for us what is our capability, our capability is of course on one hand that the bank is ready to serve its customers, but it is great to serve its customers also in cross-selling.

What you see is that there is also a tendency of these kind of activities within our counter-parties to be centralized. So I imagine that the treasurer says I'm going to centralize my treasury and he also wants to really centralize the banking with which he works. And so he prefers the banks with whom he can - have a wide range of products and that's basically what we do. That's the core of the cross-selling and the diversification of what we do. So that is what we will continue to do.

Now on the pop quiz of Basel, I don't know, can I you use the Fifth Amendment and no, the thing is on Basel you're absolutely right. So for the moment the US is not around the table. So the US has to decide who's around the table, so that I don't know that might happen by the summer. And then we have to be sure that that person has aligned the US so that it basically represents the US. So that also might take some time and then depending on if this is a view which is different from Europe then it will take time to get this kind of an agreement which represents a level playing field.

So it could take quite some time. That is why Basel IV in our plan leading up to 2020, we have not taken it into account. As I said because on Basel it will already take some time afterwards Basel then has to be translated into law which will take time as well. So we haven't taken that and we don't expect it to be applicable during our plan of 2020.

Bruce Hamilton: That’s helpful.

Thank you.

Operator: Okay. We are now over to the line of Jacques-Henri Gaulard at Kepler Cheuvreux. Please go ahead. Your line is open.

Jacques-

Henri Gaulard: IFRIC 21 contribution for 2017 which is a billion roughly, same as last year, is it fair to assume for 2018 that will be the same, first question. And the second one on Compte-Nickel, very well done on this acquisition, so really good brand. Question is, is the bank that claims to be the bank for the people with no bank and the opposite of that culturally in a way. Do you plan to integrate it or is it something that is going to continue to develop independently from the rest of the brand? Thank you.

Lars Machenil: And maybe the first words, I didn't get it, but I think you asked about the 1 billion of the IFRIC 21and what it would mean in 2018 and listen, so yes, for the moment our hypothesis is that indeed 2017 will be roughly the same amount as 2016.

For the moment I have no indication to see that there will be new rules or coming in that would dramatically change that. So it would be - I would assume today they would be in the same order. I mean, it can be somewhat differentiating, but it can also be that over time there are new rules coming in, let's say last year, last year when we bought it in Q1 we didn't know that in the third quarter in Belgium there would be different waves coming on. So yes, for the moment today with the current information that will be the best guess. So on the Compte-Nickel.

No the thing is you’re absolutely right. It's a bit of a different channel and we basically consider it as a complementary one. So as I said, we can reach customers through Compte-Nickel. We can read them through a full-fledged digital bank and we can read them to a full-fledged branch bank. And so that's what it is.

So it basically makes a complimentary kind of addition to our overall set up of the changing back. Jacques-

Henri Gaulard: Thank you, Lars.

Operator: Okay. Our next question is from the line of Anke Reingen at RBC. Please go ahead.

Anke, your line is now open.

Anke Reingen: Yeah, thank you very much. My first question is on your target, you announced in March, and the Q1 is already a very strong performance. Would you then describe your targets as being conservative or would you just be - being cautious on extrapolating given seasonality and other factors. And then secondly, could you just remind us on the tax rate guidance and what your assumption there is for foreign? Thank you.

Lars Machenil: Anke, thank you for your question. When it came to the targets, we indeed clarified that what we published and clarified further in March that it was based on basically - I took a picture of what the macroeconomic parameters were in September and we basically run the numbers on that. And so, if indeed we said at that time that if the macro economics would be more what was in the forward curves at that moment that there indeed there would be a little bit more positive kind of evolutions. And that is a bit to some extent what you might read into the first quarter. But it is too early after one quarter to basically get that evolved.

So we basically stay to this guidance and the comments that we made when we published the targets and to be monitored closely. The second thing is, in the tax rates it is true that honestly a tax rate on a quarterly basis doesn't necessarily mean much. There can be shifts, there can be shifts also depending on the kind of elements and the contributions of the top-line. And so basically we stay on a guidance of a yearly basis tax rate of 31 %.

Anke Reingen: And what does that assume from.

In case there's a change in the tax rate?

Lars Machenil: Yes, but that would end, as you know, with that clarification - or that clarification that would happen by 2020, so that would not be a change for the guidance of this year. That would be a guidance by 2020 that we would evolve.

Anke Reingen: And the 2020 target included 31 tax rate, is that correct or?

Lars Machenil: That would gravitate towards something like that, yes.

Anke Reingen: Okay. Thank you.

Operator: Okay. We are now over to Stefan Stalmann at Autonomous Research. Please go ahead. Your line is open.

Stefan Stalmann: Yes.

Good afternoon and Lars, thanks for the presentation. Two questions please. The first one going back to Compte-Nickel. Could you give or maybe a rough indication of what the financial impact of this might be in particular in terms of CET1 investment upfront? And the second question goes back to the liquidity build-up. I hear you on the TRO [ph] but I would have thought that that should have actually boosted the LCR ratio much more than it did.

But the LCR ratio was only up by 2 percentage points despite the fact that you build 40 billion of additional liquidity. So the question here is I guess and has anything changed in the way that you model your cash outflows that go into the LCR ratio and maybe related, is this liquidity built up possibly a function of the - at that time expected French election which could be unwound once the French election is done. Or is this not the context at all? Thank you very much.

Lars Machenil: Stefan, thank you for your questions. So on Compte-Nickel, we basically disclosed that the impact on common equity tier 1 would be very low.

So single digit and low single digit. So when it comes to liquidity build-up, there's typically what is as you know, the last quarter and the first quarter of the year are a bit different. So meaning, the last quarter is basically two and half months of activity given holidays and the likes. And the first quarter is more like three and a half months of activity. So you typically see a pickup in activity which then also consumes part of what the LCR is about.

So that is basically what it is. And on the French election, honestly the only thing I can say is that in the day to day business as usual, so the activity goes on and there is no particular thing to be mentioned. That will be my answer, Stefan.

Stefan Stalmann: Thank you, Lars.

Operator: The next question is over to the line of Kiri Vijayarajah at Barclays.

Please go ahead. Your line is now open.

Kiri Vijayarajah: Yes. Good afternoon, Lars. Just a couple of questions on capital actually, the leverage ratio looks like it jumped a fair bit this quarter, I guess is partly seasonal, you've got a lot more activity in CIB, but from here do you expect it to be pretty steady or are there leave as to maybe take that down again? And then secondly on that 2.5 billion portfolio you sold in global markets.

Is there more of that to come. I remember in your March Investor Day, I think you had 12 billion earmarked to come out to of CIB. So is there more to come through that? Thanks.

Lars Machenil: Kiri, thank you for your question. So as I said, the leverage for me is a backstop.

And so that means we pulled it out as we want to gravitate at 4 % and that's basically it. So indeed the reason why there is some swings is a typical swings, also in balance sheet between the last quarter and the first quarter. So that's basically it. If you look back that’s basically what we had. So it's basically - it gets a little bit off pressured in the first quarter and then it basically picks up towards the year end and then it starts all over again.

So for us as I said, we want to stay at 4 % and that's pretty good. So there is no specific thing to be done at it for the moment. That's fine. When it comes to the 2.5, yes, you're right. So we mentioned earlier as you mentioned that there was 12 billion to be done and of course we optimized that, how it works if the pricing is right.

So there is 2.5 billion on this quarter. I remind you that there is 8ish [ph] that was done last year, so you can see that we start to gravitate towards the target that we set forth. So it will be my answers.

Kiri Vijayarajah: Great. Thank you.

Operator: Okay. We are now over to the line of Maxence Le Gouvello at Jefferies. Please go ahead. Your line is now open. Maxence

Le Gouvello: Good morning, Good afternoon, Lars.

My first question would be regarding fees in retail in France, Italy and Belgium. Can you give us an idea of the split between the service fees and the financial fees in terms of performance and also detail of which product people are buying on the financial fees that would be the first one? The second question is regarding BancWest, doing all the [indiscernible] dollar to avoid the FX impact, I am quite puzzled to see such a drop of the revenue margins on loans on this quarter versus the rest of last year. I just think from the exceptional of Q1 last year. Can you give us some color please? Last point is can we go through again the solvency calculation because I'm not able to get everything together as you have roughly coming from the net profit to be of solvency of which I'm taking hold for the dividend which means 15 plus the first way and stake is in the 25 and you're only increasing by 10 Bps your solvency over the quarter? Thank you.

Lars Machenil: Maxence Le, thank you for your questions.

So yes, if we'll take it one by one, on the defeat in retail, there of course there is indeed a pick up in services and financial. There has been a bit more dominant growth on the financial domain, in it, what is it. Well it's a typical product there's not one product which is therefore necessarily much better than another. Its things like life insurance and the generic funds and the kind of business. So it's a little bit more financial services.

That's one thing. Maxence

Le Gouvello: In terms of when we're looking to year end that has, its seems CNL [ph] has gained a lot of market share going on the present the market. Have you done some special event on that size or is just a natural consequences of the new plan that you have acquired that are gradually getting more equipped?

Lars Machenil: It's a bit a blend of the two. So as you do know, we do also apply for example our private banking which is not separate from the retail, so it’s part of the retail and that's basically the focus that we do. So when you have a branch, you are the retail, you can get the services of the private bank in a very integrated way, which works typically very well.

And that's one of the reasons why we've seen generically pick up and why we've also seen a pickup in Italy. And we'd now take the plane and we go to the other side on BancWest. So indeed BancWest if you look at the evolution of the topline excluding of the one-off elements of last year, you see that the evolution is a tad slower than what you had on the volumes and that is because the seasoned commissions are a tad slower than what you had. So it's not related to the net income margin, it's related to the fees which are that's slower than what we had a year ago. When we come to you your, yes, go ahead?
Maxence

Le Gouvello: Are you not concerned that many people will say that to the retail in the U.S.

starting to be top of the cycle, to continue to focus in terms of growth on commercial real estate? So the second element then combined with margin pressure, this look like is we are the top of the cycle over there?

Lars Machenil: One of the things we aim to do in BancWest, we aim to make it just like our domestic market. So we focus it on cross-selling, we don't focus on one single product. We focus on the products of the bank, so closer cooperation with also the East Coast. So that's why we feel comfortable of that growth. And when it comes to your third question on the common equity tier 1 ratio.

You're right, so there are indeed -there is of course the contribution of what we did with First Hawaiian and when it comes to the bottom line of course, as you say the bottom line that we take into account that reserve 50 % of that bottom line into dividend, that's one thing. The second thing is that as we follow our clients and we pick up our lending activities there is also a pickup in risk weighted assets. So you have to somewhat mitigate that. The second thing which is very important is, this is a technical term, excuse me for it. It’s called recycling.

What does that mean? If we sell for example at participation that we have that participation is already – the value is already taken into account into capital. If we sell it or sell part of it basically gets recycled. So we basically get it into the P&L but we basically lose it in our available for sale. And so that's why in total although it looks like a strong earnings there is only a part of that which goes into the capital. So that is - these are the three reasons why overall our evolution is 15 basis points between the two periods.

Maxence

Le Gouvello: And there's been - that’s going forward, your usual run rate is around 20 Bps per quarter. You feel comfortable with it?

Lars Machenil: No, no I don't, I think its 20 Bps per quarter. In a normal run of the mill as we said of the 100% earnings there is 50 % which goes into dividend. There is - if this is a normal run of the mill there will be 35 that we need to cover our growing balance sheet or growing RWA on which we will also need 12 % of common equity tier 1. So more have 16 % that is basically every year going into capital.

So on an average per quarter it is lower than that. Maxence

Le Gouvello: Okay. Thank you, Lars. Have a good day.

Lars Machenil: Welcome.

Operator: We now go to the line of Matthew Clark at Maine, Maine First [ph] Please go ahead. Matthew, your line is open.

Unidentified Analyst: Good afternoon. Two questions from me please. First one is on the finance division, where you've got volumes growing much faster than revenues.

Could you just give us a bit more color on products and your performance and we're driving that by virgin and maybe within confiscation to help us get a grip on it. And then secondly, the comment of a very good contribution of principal investment from the corporate center. Could you just give us some context with which you say that that was a very good contribution. Are you talking about the last year level or specific quarters or what you know it seem in the first quarter 2016 that was a much stronger contribution from principal and investment. So just some help gauging how you view that would be helpful? Thank you.

Lars Machenil: All right, Matthew. You referred two questions. So first of all on the tax, we've guided that indeed we have good volume growth, but we also guided that we focus on products which typically have a better risk profile than before. I'll give you my typical example, is instead of financing the person buying its large flat screen which basically the moment you walk out of the store, the values at zero, we basically focus on a car where if you drive out of course it also loses some value, but it doesn't fall to zero. So that basically means that the risk profile of these products is different.

And so what we basically see is that in the bottom line this is improving but it basically shifts a bit between the contribution and the top-line and of contribution in the cost of risk. That overall that shift that we do towards better products or better is basically positive as you can see in the first quarter. Your second question on the guidance of principal investments, the way we do it is relatively simple. If you take the top-line in the corporate center and you strip out exceptional elements like for example, the Shinhan that I talked about or other the stuff, we basically guided that on average that would generate 60 million or zero, so without the exceptional elements. So if this is basically the result would be substantially better.

And basically this would be driven by principle investment. So that would be the guidance that we give. So I said [indiscernible] zero is without exceptional, basically what we give has a run rate, and if it is substantially better as it is now then that's basically on the back of principal investments. So that will be my two answers Matthew.

Unidentified Analyst: When you say on the back of principal investments, above usual both investment contribution or is this excluding for investments contribution?

Lars Machenil: No, no.

The CBD, there is the kind of run of the mill of principal investment, there is some cost related to it. There is some minimal earnings related to it and that's basically what it is. That would be it, Matthew.

Operator: Do we still have remaining questions? I guess that’s...

Operator: Yes.

Yes we do actually. We do have one final one and that's Jean-François Neuez at Goldman Sachs. Please go ahead with your question. Your line is now open. Jean-

François Neuez: Yes.

Good afternoon. And I would just like to have two remaining questions please. The first one is on tax rate sensitivity, point of headline tax rate change in the three countries of France, Belgium in the US if you wouldn't mind sharing that with us, if you have it handy. And my second question is when I look at the shape of the balance sheet, I think year-on-year you've grown your deposits by around about 90 billion, loans by around about 20 or so. And as far as I can see of your funding plan is continuing as usual.

I know that you have the capital notes to issue and so on. But was the deposit growth that you've experience plan and your funding plan based on that. Are you finding yourself with maybe more on deposit funding than you would have thought? And is your funding plan potentially, I would say at risk, but I think the right one – so with an opportunity to reduce the funding plan going forward and potentially have some sort of room for manoeuvring in the liquidity cost or the revenues and corporate center and so on? Thanks.

Lars Machenil: Jean-François, thank you for your questions. On the tax rate sensitivity, well, the thing is - I do not know what is a realistic scenario.

So you know the size of what is France, Belgium and the US. So I think you can do your estimate on what it is and so the only one where we have some guidance going forward is France 2020, Belgium said that they would review it but then they decided that they wouldn't - you have a phone call it seems and then Belgium decided that it would change. So honestly I let you run the numbers because whatever I say it's probably not the right thing to do. And when it comes to your other question on the loans and the financing, so it is true that the funding has to take into account elements like LCR, but it's not only the LCR, it also has to take into account TLAC, so you do know that we need insurance for the TLAC and so forth. So that basically means we have to see and we have to optimize between those elements.

And so we have to see how our funding and other businesses works and how we optimize between those different needs. But that is something that we constantly do and as I said we are trying as I said with the LCR it's a backstop, the same thing with the CET TLAC and we try to optimize the overall funding. That will be my two answers.

Operator: Okay. We have a final question and that is over to Alex Koagne at Natixis.

Please go ahead Alex. Your line is now open.

Alex Koagne: Yes. Just two remaining question for my slide. On the Compte-Nickel, just trying to understand is it like an investment or is it –or are you expecting some potential questioning with BNP, I guess the question has to relate with what you said on BancWest.

I think that on First Hawaiian you this - you're setting this asset because there was no questioning with the remaining BNP. So I'm just trying to understand what is the logic behind the Compte-Nickel. The second question is relate Misi-2 [ph] I think that’s one of your competitors said that it will have a negative impact on the derivative on margin in the relative or is it something that you share? Thank you.

Lars Machenil: Alex, could you just repeat your last question, I'm not sure...

Alex Koagne: Yes.

It relate to Misi-2, one of your competitor say that the implementation of Misi-2 will have negative impact on the margins, when you come to the rest of your business. So I would just wondering if this is something that you share? Thank you.

Lars Machenil: Alex I'll start with your first question. So basically let's not forget, so Compte-Nickel basically gives us access to clients and to growth and as I said as it is on the vanguard or digitalize in banking processes, that makes a lot of sense for us as a complimentary kind of way of serving clients and capture into the growth that comes with it. So that is basically on that.

Listen on the fact of Misi-2 there is no particular point that I have on the agenda. So there is not much I can add to that.

Alex Koagne: Okay. Thank you.

Operator: Okay...

Lars Machenil: So I just wanted to thank everyone – let me just finalize. So I wanted to thank everyone for their contribution. You've seen a good business growth, you've seen a sharp rise in income in the operating divisions, you've seen that Basel to treat common equity tier 1 stands at 11.6 and you saw that we had a good start of the plan 2020 in good conditions. And I wanted to thank you for that. Thanks.

Operator: Okay. This concludes our call. Thank you very much for attending. And you may now disconnect your lines.+