Operator: Good afternoon ladies and gentlemen and welcome to the presentation of BNP Paribas Third Quarter 2021 Results. For you information, this conference call is being recorded. Supporting slides are available on BNP Paribas IR website invest.bnpparibas.com. [Operator Instructions] I will now hand over to Mr. Lars Machenil, Group Chief Financial Officer.

Sir, please go ahead.

Lars Machenil: Thank you. Good afternoon, fine ladies, gentlemen. Trust you’re doing well. And hello from Paris and welcome to BNP Paribas third quarter 2021 results presentation.

And usual way, I'll take you through the first two chapters of the results presentation in a kind of synthetic way, and this before handing it over to you for Q&A. So if we look at this third quarter, BNP Paribas demonstrated yet again, the strength of its distinctive model. BNP Paribas performed well above 2019 levels, and business activity continued to evolve very positively. The Group's performance in the first 9 months of this year confirmed not only the rebound, which has now already occurred in the majority of the businesses, but also our potential for growth beyond a mere rebound to this level of 2019. And this evolution is structural, on the back of the bank distinctive diversified and integrated approach, and demonstrated BNP Paribas is very well-positioned to capture an increasing part of the growth ahead.

On the strength of this confirmed performance and growth, as well as its solid balance sheet, expressed via well pick two, but let's take the ratios ROTE at 10.4% and CET1 ratio at 13 -- 13%. So if you look at those ratios, you can understand that BNP Paribas has enhanced its distribution policy for 2021, and announced this morning the launch of a share buyback program for €900 million. Moving to the presentation now, let's go to Slide 3. And you see that BNP Paribas delivered a very solid performance in this third quarter 2021 with a sharp rise in net income and a positive jaws effect. Looking at the financial summary line by line, you can see that revenues were up 4.7% year-on-year with a similar evolution when compared to the third quarter 2019.

Clearly, revenues benefited from the Group's diversified business model. With on one hand, particularly good contributions from domestic markets and wealth management. And on the other hand, a high level of revenues at CIB, which experienced growth across all of the three business lines within CIB. And these domains perform very well as they build on each other in a unique BNP Paribas way. For example, when we take domestic markets where wealth and domestic markets interact very strongly.

And also if you look at CIB, where for example global banking and global markets interact very well in a kind of joint venture that is called capital markets. So that's the revenues. Cost, company does evolution with 3.8% when compared to the third quarter in 2020, while they decreased by 0.1% when compared to 2019. Of course, the bank is reporting the growth of our businesses, which has been stronger than anticipated at the start of the year. In addition, as there is now a strong reduction in economic uncertainty and a better visibility on the growth potential in front of us, we're also investing to support future growth in a very disciplined and consistent manner.

Furthermore, as you know, costs embedded this quarter some scope effects related to business development initiatives, I think in particularly in equities with on one hand Exane, who's now fully consolidated and prime brokerage, who is being transferred from Deutsche Bank. So in addition to our strict discipline, our improved efficiency continues to sustain structurally the containment of operating expenses. Thus the Group operated with positive jaws close to one point in the third quarter. 4.7 points when looking at the third quarter of 2019 as the basis of comparison. If we further go down to P&L, and we come to the cost of risk, it stood at a low level of 32 basis points over loans outstanding.

And this were a moderate release of Stage 1 and Stage 2 provisions and a limited number of new defaults. Hence, a very steep increase in operating income of 31% versus the third quarter and just shy of up 25% on 2019. Finally, if we take it to the bottom line, net income came in at the high €2.5 billion, sharply up from the third quarter last year and the year before last. Now, this is the P&L. And as I mentioned earlier, if we look at the balance sheet and its regulatory metrics, let's look at the CET1 ratio.

It clocked in at 13% in the third quarter 2021. It would have stayed at 12.9% when taking into account the impact of the share buyback program announced today. If we now switch to Slide 4, which provides a summary of the evolution of several levers of the P&L, but this time on 9 month basis, and also comparing to 2019. And as you can see, the Group delivered a strong performance on a quarterly basis as well as on 9 months. Also, you'll see that it outperformed 2019 results on all fronts with a 5.2% increase in revenues, an overwhelmingly positive jaws effect, an 18.7 increase in gross operating income and net income at €7.2 billion in the first 9 months.

As such, the Group has clearly demonstrated the potential and preparedness to capture growth going forward. Finally, it has demonstrated that is able to capture growth, while keeping its costs under control, as evidenced by its positive jaws effects based on a comparison with the first 9 months 2020 and even more so 2019. So with this, let's move to the update of the Group's distribution policy. So if I can ask you to swipe to Slide 5. So first of all, it is important to note that the Group has confirmed its strength, growth potential and financial solidity.

Again, if you look at the metrics and realized ROTE at 10.4%, CET1 ratio at 13% with no specific uncertainties in front of us. So given these ratios, given the absence of these uncertainties, the bank is more than ready to accompany growth and this at an above average rate. As such, we step up our distribution policy in 2021, fronting the recurring increase to be announced with the 2025 plan on February 8 of next year. As a consequence, our distribution policy for 2021 has been enhanced. And in this respect, I trust you saw the announcement this morning with regard to the launch by the Group of a share buyback program to the amount of €900 million.

This program has already been approved by the ECB and will be carried out between November 1, so next Monday and February 2022 at the latest. In addition, the Group continues to set aside 50% of its 2021 net income with a view of paying in cash as usual. As said, the new distribution policy for the years to come, [indiscernible] 2022 to 2025 will be announced together with the 2021 full year results in early February 2022. Actually, for those who wouldn't know it's February 8. So with this, if we turn to Slide 7, you can see that the total exceptional items of the third quarter entailed an overall moderately negative amount to the bottom line.

And this with the capital gains arising from the sale of shares in Allfunds this quarter, more than offset by goodwill impairment, and a very limited impact of restructuring and adaptation costs. So basically, the bottom line results of €2.5 billion is really stemming from the improvement and the evolution in operating results, and is not driven by exceptional elements. So with this, I can swipe -- I can ask you to swipe to Slide 8, and you can see the solid performance of the Group in the third quarter. And as you can see from this slide, the financial performance has improved over year -- year-on-year on all fronts, from the revenue line all the way down to net income. In line with what we saw in the second quarter, this has also been the case when comparing to the third quarter 2019.

Hence, this goes to confirm that the Group has entered a new phase of growth that goes beyond the rebound to pre-crisis levels. Furthermore, to date, as we mentioned, the Group has delivered an annualized return on tangible equity of 10.4%. If we now move to the elements of the P&L and let's start with the revenues on Slide 9, that increase by 4.7% at Group level. If you look at the three domains, domestic markets first, they were up 6.3% on the back of very good performances across retail networks, driven by a focus on the development of fee generating business, and a continued solid growth in specialized businesses. So again, this is quite distinct to BNP Paribas, because we do have all of the services to offer on our client centric model and that is what delivers this solid revenue line.

If we look at International Financial Services, they proved resilient at minus 1% on a like-for-like basis, with a strong increase on wealth and asset management, more than offset by a lower contribution of insurance and a less favorable context of the international retail networks. The latter being compensated by the very strong focus on cost of risk. Lastly, if we go to CIB, they saw higher revenues across all three of its businesses, resulting in a very good level of quarterly revenues, up 6.4% year-on-year against the level which was already elevated a year-ago, and sharply up 25% when compared to the third quarter of 2019. If you can now swipe to Slide 10, you can see that while supporting the business development in a disciplined manner, costs increased by 3.8% at Group level, yet at a much slower pace than revenues and with half of it stemming from business development, and particularly related to equities, as I mentioned before, having the cost of Exane and the prime brokerage being added. If we zoom in on the divisions, cost and domestic markets were up 2% year-on-year, mainly in connection with growth in its specialized businesses, while cost remained well contained with a modest increase in its retail networks.

Overall, domestic markets operated this quarter with very positive jaws. International Financial Services costs were up 3.5% year-on-year in connection with the growth in assets gathering businesses and targeted initiatives in other parts. Finally, CIB operated with positive jaws with a cost evolution of 5.9% or 1.5% on a like-for-like basis in connection with the growth in activity and development initiatives that I mentioned before. If we now go to the third element in the P&L, and that's the cost of risk, Slide 11 and beyond. You can see that the cost of risk stood at the low level of 32 basis points of loans outstanding at the level on €539 million lower than in the same quarter a year-ago.

This is mainly due to a limited number of new defaults and moderate releases of provisions of performing loans, Stages One and 2, and particularly taken in 2020. Finally, 37 basis points of loans outstanding year-to-date, the Group's cost of risk comfortably stands below the 45 to 55 basis point range indicated earlier this year. If we now go to the financial structure, which is Slide 14, which we modestly called solid, you can see that common equity Tier 1 was up 10 basis points compared to the second quarter clocking in at 13%. Actually, it is 20 basis points stemming from the third quarter results after taking into account a 50% payout ratio, partially offset by 10 basis points impact resulting from the rise in risk weighted assets this quarter and this rise is stemming from the growth that we accompany. So all very logical.

The share buyback that we have launched, but of course that we are launching Monday, so post end of September will have a limited impact on the Group's CET1 ratio. As a matter of fact, after taking into account the maximum amount of share buyback announced earlier today, the pro forma CET1 ratio, end of September would stand at 12.9%. Our leverage ratios stood at 3.9%. And just to remind you, we have not opted for the temporary exclusion related to deposits with Eurosystem bank -- central banks authorized by the ECB decision of June 2021. Finally, the Group's immediately available liquidity reserves totaled a whopping €478 billion at the end of the third quarter.

So the evolution of these ratios goes to confirm the very solid financial structure of the Group. If we now turn to Slide 15, you can see that the net book value per share stood at €85.8. At €76.8 when we look at the tangible book value per share, up 6.4% compared to a year-ago. And as you can see, since 2008, it has grown at a compounded annual growth rate CAGR of 7.1%, which goes to show our continued value creation through the cycle. I cannot repeat it enough, BNP Paribas as you've seen once again, being very solid, providing a wide set of integrated services, through good and bad times, is extremely well-positioned to continue this trend.

So with this, we turn to our ambitious policy of commitment to a sustainable economy. I have a couple of slides starting on 17. You're well aware of the Group's long lasting commitments towards the fight against global warming. As such, BNP Paribas was one of the first signatories of the Net-Zero Banking Alliance earlier this year. And recently joined, the Net-Zero Asset Owner Alliance, not only the banks, but also the assets they own.

Through these initiatives, the Group is committed to aligning its financing and investment portfolios with the trajectory required for achieving carbon neutrality by 2050. You will find on this slide a summary of the very concrete targets that the Group has set itself, particularly in the space of non-conventional oil and gas, thermal coal and upstream oil and gas. You will also find the Group's goals with respect to the financing of renewable energies and new technology supporting the energy transition as well as with respect to investing in alternative energies and energy efficiencies. If we take the next one, Slide 18, that describes the recently announced Group's new initiative aimed at accompanying its clients in accelerating their transition towards a sustainable and low carbon economy. The Group has indeed decided to mobilize global resources by creating a dedicated, powerful and agile organization within the bank to support it clients around the world.

This new team that we named Low Carbon Transition Group, will bring together over 250 professionals from advisory, capital markets and industry backgrounds and will engage in close and long-term dialogue with clients with a view to helping them accelerate their transition. The Group is particularly well equipped to undertake this new initiative in the light of its strong global ranking and market recognition, as illustrated on this slide. If we now take the third slide in this series, Slide 19, because when we talk about CSR or ESG, we also want to talk about, yes, the social impact. I will let you run through the list, but I would like to stress in particular that the Group has financed micro finance institutions, providing support to over 2 million beneficiaries, 81% of which were women. Also, it supported social enterprises to the tune of €2.2 billion, out of which €1.6 billion of loans and actively participates in the G7 working group on impact investing.

So with this, I would now kindly ask you to advance to the results by division and I'll synthesize rapidly, all three. And so let's start with domestic markets, which you have on Slide 21 to 25. As you can see, our domestic markets are continuing positive business drive this quarter, with a year-over-year evolution in loans of 3%, deposits of 6.4% and even more markedly in off balance sheet savings at 14.4%. Besides, domestic markets saw an acceleration of digital users with over 151 million monthly connection to digital apps on average, up 27%. And the fast growing space of payment services, it announced the acquisition of FLOA, a French leading player in split payment solutions, with a view of rolling out its solutions across Europe in the next few years.

When we look at P&L, revenues were up 6.3% compared to the third quarter. They were driven by a strong performance of its retail networks, which saw a hike of over 5% in revenues on the back of a continued sharp rise in fees. We are particularly focused on providing services that lead to an increase in fees, in particular, financial fees in all the networks, right, so in France and Belgium and Italy. And the strong -- also the strong performance of the specialized subsidiaries, especially Belgium and France, despite the ongoing impact of low interest rate environment. They were also driven by the sharp increase across the specialized businesses of domestic markets.

I think of Arval, which is in particularly up 17%, but also Nickel, which is profitable in France, and leasing solutions. If you look at costs, they were up 2%. They are nearly stable in the networks, while the specialized businesses saw an increase of 7.7% in connection with their business growth. Listen, if Arval goes up because they have more cars that they provide to their customers, basically the cost related to that also go up. So that's my -- the costs that go and accompany the revenues.

And as already mentioned, domestic markets operated with very positive jaws, more than 4 points. As a result, gross operating income up 14.6%. Finally, cost of risk clocked in at the low level of 30 basis points of loans outstanding. Hence, pre-tax income came in at just shy of US$1.2 billion this quarter, marking a steep 27% rise. This provides further evidence, if need be, that the growth in domestic markets goes beyond the mere rebound to pre-crisis activity levels.

So to wrap up, domestic markets saw an increased level of activity this quarter, very positive jaws and a steep rise in pre-tax income. If we now go to International Financial Services, the second of three, Pages 26 to 32, and you see that the division saw an overall continued strong business drive, in particular with rising loan production and personal finance as well as across its international retail networks with the easing of public health measures. In the asset gathering businesses, net asset inflows were well oriented this quarter, and so were the assets under management up close to 10% year-on-year. If we focus on the P&L, IFS revenues were down 1% year-on-year on a like-for-like basis. On one hand asset gathering businesses saw an overall growth in revenues.

On the other hand, the contribution for insurance was driven lower by a decrease in financial results, while international retail networks and personal finance operated in a less favorable context. But let's not forget for those two, that context was more than compensated by the low costs of risk stemming from the efficient management of delinquencies. If we look at cost, up 3.5% driven by the rebound in activity as well as targeted initiatives. So pre-tax income was up 12.6% or 13.3% on a like-for-like basis and this on the back of the sharp decrease in cost of risk that I alluded to. To wrap up, IFS saw a very impressive performance in wealth and asset management businesses and with other businesses not yet firing on all cylinders.

However, IFS saw an improved level of activity especially with respect to new loan origination this quarter, so greasing the cylinders. Furthermore, it saw an improved net income level on the back of the drop in cost of risk. If we now take the third domain, Corporate & Institutional Banking, Slides 33 to 36, which saw another strong quarter across all three of its businesses. Let's see them one at a time. If we start with the financing space, it saw a better level of activity across equity bond and syndicated loan businesses compared to a year-ago.

In particular, CIB's ECM franchise saw a 20% rise in volumes this quarter as well as market share gains. In terms of league table rankings by volume well as market share gains. In terms of league table rankings by volume, CIB was the highest ranked European bank in this space in the third quarter. If we then go to the second department, global markets, saw a strong activity in equity derivatives and prime services. While the environment was less supportive in ForEx, credit and in particularly, rates.

The business continued to roll out the strategic expansion of its platforms with the integration of Exane with effect from July of this year and the ongoing transfer of clients in prime brokerage, in connection with the agreement with Deutsche Bank that is expected to be finalized by year-end. Let me add that we are particularly proud of the number one ranking of Exane BNP Paribas in developed Europe research, and it's for the fifth year in a row. Lastly, if we turn to the third entity, security services, which continued to see an increase in assets under custody and funds under administration, and a good level of transactions. Looking at the P&L, CIB's revenues were up 6.4% year-on-year and just shy of 25% when compared to 2019 and this on the back of strengthened platforms, and very effective diversification and client centricity. They were driven by a strong 15% in corporate banking when compared to a year-ago, and 23% compared to 2018.

They were also driven by the very good overall performance of global markets that saw its third quarter revenues increased by 1.2% from an already high-level a year-ago, and 33% from the year before last. In a lackluster environment this quarter, particularly on rates, FICC revenues decreased by 28% when compared with the high base of the third quarter a year-ago, while equity and prime services revenues rose very solidly by an overwhelming 79%. Lastly, security services achieved again a very good quarter with the rise in revenues of 5.8%. CIB costs were up 5.9% year-on-year or 1.5% on a like-for-like basis in connection with the positive momentum in business activity and investments for future growth. As such, CIB operated with positive jaws.

With a further decrease in the cost of risk in the third quarter, CIB generated €1.33 billion of pre-tax income, up 39% versus last year, and almost 60% compared to 2019. So to wrap up, a strong performance in revenues compared to 2020 and 2019, and a sharp rise in income for CIB this quarter. This basically sums up the divisions and if we switch to the Slide at the end, Slide 38, where you can see the confirmation of the Group's growth potential with revenue and net income beyond the levels seen in 2019. Accordingly, the trends for 2021 are very well oriented with the confirmation of a strong revenue growth and a high-level of revenues for 2021. The firm objective to deliver positive jaws effect as a cost discipline and operating efficiency, sustain our ability to support business growth and investments in a disciplined and targeted manner, the cost of risk at the low level below the 45 to 55 basis points range.

And if I can ask you to go to Slide 39, that concludes our presentation today. And as a key takeaway, I would like you to keep in mind the high-level of results supported by the strength of the Group diversified and integrated model, quite a distinct model with a third quarter net income at a high level of €2.5 billion, up over 30% The Group's solid results beyond the level seen in 2019, so beyond that and the enhancement of our distribution policy for 2021 with the launch of a share buyback program starting on Monday. We are pleased to confirm that we will as always provide a high-level presentation of the Group's strategic plan together with the annual results on February 8, which will be followed by an Investor Day for which we have now set a date that is March 14. So with this, fine ladies, gentlemen, I thank you for your kind attention. And I will be pleased to take your questions now, if there are any.

Operator: [Operator Instructions] So first question is from Madam Lorraine Quoirez from UBS. Madam, please go ahead.

Lorraine Quoirez: Hi, hello. Hi, Lars. Thank you for taking my question.

Just a quick one for me. Obviously, you quote underlying Group parity of 10.4%. But looking at market valuation, it seems to me that investors believe that the profitability in CIB may not be sustainable. So I'd like to understand how you can change this market perceptions, and if you have some arguments against perception at present. And also one would be regarding your membership to the Net-Zero Banking Alliance earlier, I'd like to understand how this will impact your lending practices in the coming years and whether you see competition stepping up in sustainable finance at present.

Thank you.

Lars Machenil: Lorraine, thank you for your questions. If I start indeed, if you look at the numbers, if you look at the capitalization of 13% and the ROTE above 10%. And so there is the concern that you mentioned that some have about the sustainability of CIB. And what for us, and there is a reason we call CIB, we don't call it investment bank.

What I mean, so we call it corporate and institutional bank. So it's focused on serving corporate and institutional clients in the flow of business that they have. So they have a recurring flow. And so it's not that there can be a specific demand one quarter or another, there is a recurring flow. Maybe in one quarter, it can be more lending, another quarter, it can be more equities and other quarter it can be done.

And that it depends, but if you look on average over a given year, you'll see this recurring demand. And off that recurring demand and particularly to the flow business, we are organizing ourselves to ensure that we have the platforms and that we have all the services. So that basically we can provide that service to our customers and therefore, we step up our market share. So there is a recurring flow of our businesses. We are having all of those services available, and we are stepping up our market share into it.

And then if you look at it, there are several ways you can see that. There is a chart that we have on Page 33, where you basically see the yearly average CIB revenues, and you clearly see that year-after-year they are up. And of course, there is some volatility within a quarter, but if you look at the overall demand in a given year, and given the fact that we step up our market share, the yearly average goes up year-after-year and that is what we've done now 3 years in a row and that is something that we will continue to do. So that is basically what we do. So we capture into that and that is why we are so pleased to be able to have now the equity products as part of one entity.

So we have being or we are able -- we have consolidated Exane. So it's part of that and we are finalizing the onboarding of the prime brokerage. So that basically makes also their one entire service offering. So that's basically what we do. We go for the flow, which is a recurring basis on a year.

We step up our market share, and so we have proven year-after-year that it is recurring, and that we step up the revenues. So that, Lorraine, would be the rational why for us CIB is not we don't label it an investment bank. It's really corporate and institutional and we have the recurring flow. And then on your other question of the Net-Zero Banking, it is what you see and it will be even be further strengthened in all the climate stress [ph] that are ongoing. So there is, we at BNP Paribas, we really have embarked already since years the fact that one has to evolve.

And of course, you have to be sure that you yourself as a bank are carbon neutral, but you have to accompany the clients for this to happen. And this is something that you really have to work out. And that's one of the reasons why we believe we can make also a difference is in that low carbon platform that we just launched where we basically take 250 dedicated people. So bankers who have that knowledge, but also specialists, who are very well aware how and what options exist when it comes to transportation, when it comes to energy, when it comes to building and the likes. And that's basically what we keep on providing and stepping up and guiding and providing counseling and service.

And therefore also that can then lead to project finds that goes -- comes with it, that we do to make a difference. So, yes, we started that early and we continue to be on the vanguard of things by setting objectives, but also making sure that we have an organization that is fully there to provide additional services on this front to our clients. So Lorraine, that would be my two answers.

Operator: Thank you, madam. Next question is from Mr.

Jean-François Neuez from Goldman Sachs. Sir, go ahead. Jean-

François Neuez: Hi, afternoon, and thanks for the presentation. I just would like to ask very quickly, on -- so you mentioned that the cost of risk is below your 45. Sorry, yes, 45 to 55 long-term range bps, which is great.

Then the question is, the reference to that range was based on your historical loss -- loan loss experience. And obviously, the mix for over the time period has changed quite a lot in the domestic market. There are many, many more mortgages compared to corporate loans. In the corporate loans, there is a few more state guaranteed ones quite a bit. And obviously they can last up until a very long time.

Also, in CIB, you've gone out of some of the maybe more high octane, so to speak, energy loans, overtime, et cetera, et cetera. And I just wanted to understand how relevant you think that long-term rate is [indiscernible] or whether your mix has changed so that this range is probably now either too conservative or not. Then the second question I had was on the insurance run rate. So you say this quarter it has benefited from less capital gains in the revenue side. The question is, what's the right level as a base for that business? Is the base where you have a bit more capital gains because it's part of the business? Or was the run rate of before maybe a bit too elevated? And lastly, I just tried to understand, could you please let us know what you think the contribution from the Deutsche business was also this quarter? Because you given Exane, I think, I haven't been able to back out the Deutsche Bank contribution.

Just trying to understand your kind of organic growth in equities. Thank you.

Lars Machenil: Thank you, Jean-François. On the first question on cost of risk, you are right. And you know, we are a bit of a bank that works on medium term horizon.

So the horizon of the average cost of risk over the cycle, which we oriented in the previous plan by 45 to 55, was basically the horizon we had at the start of the plan. But the plan indeed led to several businesses to be positioned a bit differently. And so the examples are indeed BNL, where we stepped out of some activities, or also personal finance, where personal finance, we shifted much more into collateralized businesses. So that that's basically what we see. And so that implies that, yes, over the cycle, cost of risk will probably go down.

I invite you to come back on February 8, where we will crystallize that. But it is not unlikely that in the current evolutions that is done in the plan, the average rate would rather be 40 to 45. So even beyond that, compared to that one, we are at the low level. And then I don't want to jump ahead, but then that 40 to 45 is then what we have as a picture today, yes. That could then still further evolve with whatever kind of evolutions that we would embark on.

But that's it. But so at 32, we are well below, let's say, the historical average. And even if you look at this kind of new average that we will clarify for the next plan. We are below that as well. Then when we look at insurance, yes, I understand your question.

Sometimes in insurance in a bank insure is not always easy to read in the sense that if you look at the top line, the top line includes contribution of investment books, but also for example, contains claims. It is as if the cost of risk of a bank would be deducted from the top line, so that makes it a bit. Moreover, often our insurance is active through partners distributing in order channels, and that basically means that you see the contribution to that coming through the equity line. So the line by line isn't that complicated. And then you have those evolutions within the quarter.

So if you would look at the impact of the top line, you -- if you take the run rate, you really have to look at it on a yearly basis. And that -- that's a bit it. So the run rate that you see on the investments is a tad low given the low interest rates and given the impact on the portfolios. And then on the other hand, if you look at the bottom line, you have some participations that sometimes you have impact. There can be, flubs, there can be whatever, not that impacts, but that is a rather one-off kind of element.

So, yes, that's a bit [ph] of a thing. So I -- what else can I say then, having you look at insurance on a run rate, on a yearly basis, rather than on a quarterly basis. Then on your question on the prime brokerage. So, yes, the prime brokerage, as you know, we have to -- they have a wonderful system. We have to transfer that system in our environment.

And we have to make sure that it is totally connected also with our system, because that's what we want to do, right? We want to serve customers, and also serve them on the other services. And so that means we have to integrate this the prime broker service with our services, and then we have to migrate the customers to that, and the other product. And so that is a bit what we are doing now. So this is ramping up. And so we are doing this by the year-end.

And so you can imagine that the rather more -- how would I say, more intricate, more interaction, more different businesses impacting activities will be routed towards the end. So the impact in the third quarter is rather marginal on CIB as it stands. So it's rather in the tens of millions. So, Jean-François, that would be my three answers.

Operator: Thank you, sir.

Next question is from madam Delphine Lee from JP Morgan. Madam, please go ahead.

Delphine Lee: Yes, good afternoon, Lars. So I'd like to ask my first question on the buyback amount of €900 million. Would you mind just elaborating a little bit the rationale for that amount.

I mean, do you see it more as a way to achieve something above or closer or above 60% payout, this include the 50% dividend. Just trying to get a feel of sort of how you came up with that number. And related to capital as well, [indiscernible] finalize a couple of days ago. So just wondering if you could provide any updates on the impact and how you're thinking about what level of capital you're going to run at, that would be helpful. And then just a numbers question, if I may.

If you don't mind sharing with us just like the one-off -- quantifying the one-off negatives that you had in revenues in personal finance and the one-off positives that you had in Belgium. Thank you very much.

Lars Machenil: Thank you, Delphine. Yes, if we look at the €900 billion, so the idea with the things that we undertake, we want to have a continuation and things. Yes, so we just don't want to have a one-time activity that we then cannot continue.

So our aim is when we start up return to shareholders that we can do it in a recurring way, so not one-time, and they're not. So it becomes a new basis. Initially, what we typically do is we do that in our plan. So every time we have a plan, we look at the environment, what capital can we free up and therefore redistribute. And so we ended to one-off 2020 with a 50%, which by the way, we paid in September of this year.

And then normally we would review that in the plan going forward. And then 2021 was a -- is a bit the year in between. Remember, at the beginning of the year, there was still a lot of uncertainty with the vaccination and the like. And so we said this is probably an interim year before we start in the new plan. And then we looked at and basically in the past, we did we had in the previous plan a 50% payout ratio because we basically said, listen, of the 100% earnings, there is like 30% that we need to cover the growth, the balance sheet growth.

So we need to retain some capital. There is 50% that we pay out in dividend and then there's 20% that we keep for uncertainty. There was uncertainty, it's true. What is trim? Is it going to be grim? What is the stress has gone to do, what is the finalization of Basel going to do? And so, what we have seen now is that, that in 2021, we are performing very well. We are building on all the strength of all the market share that we keep on grabbing on all the platforms.

So, we have a very solid performance in this year 2021. And that we see that is translated in return on tangible equity above 10, and a common equity Tier 1 of 13%. So that basically says that we are really ready in a year that was a bit uncertain. Well, basically, BNP Paribas does very well in this year. And so that is why we thought like, maybe we can step up as there is now less uncertainty.

I come back to your other question on Basel 4. The trim is behind us. And for us, BNP Paribas, it was not grim. The same is true for the stress test, and within Basel, the inflation that we anticipate without acting on anything, so I'll come back to that, it basically is fine. So we're in good shape.

And therefore we thought, like, we can take a step up, and therefore we say we can roughly go to something like 60%, what have you not. So we calibrated this at €900 million to basically launch it now. So that -- that's a bit. It's in the continuity of things, we are in very good shape. And, well, as we are going to review it in the next plan, as this 2021 is a year in between.

But as we are shooting all stars out, I thought we can already step it up. And so that's basically it. So, yes, well, we can step it up, we will step it up, we have the approval, and it's basically going to launch on Monday. So on your question of the finalization of Basel. So, yes -- so it is now -- if you look at the text and yet this text still has to be discussed, trilateral and all of these things, but at the text of the basis, if you look at it for us, and so if we don't do anything, we just apply it, it would lead to an inflation of 8%.

So that's basically very fine for us to cater with. And again, as I said, we have to see what the final number is. And then we'll have to see if that would mean that there are still some products on which we have to take a different stance or what have you not, or that the market will take a different stance on. But intrinsically for us, listen, that's why in 2019, all those regulatory uncertainties, the trends this stress test is basically behind us. We're very well-positioned.

We focus on the business, we have the platforms, we're going to grow. And basically, we should grow at a very solid way. And then on your question of the one-offs here. So what are those one-offs? We typically have every quarter, some small one-offs left, right and center, sometimes positive, sometimes negative. So what are these things.

Sometimes these are nonoperational things. These are, for example, if you take in credit, it can be a customer that, well, nonperforming and the restructuring, basically, we help the customer to restructure and we take on an equity stake in the company that is in Chapter 11 and that is being restructured. That's what we have. And then from time to time, very often, actually, these companies get back out of Chapter 11 in good shape. And then we basically sell those entities and those entities therefore crystallize again.

So these are the things, but you understand that we're not saying it's company XYZ, we don't do these kinds of things. But, of course, let's be fair, this is not a massive amount. If it would be a massive amount, we would list it explicitly in our exceptional elements. So that's basically the answers, Delphine.

Operator: Thank you, madam.

Next question is from Mr. Stefan Stalmann from Autonomous Research. Sir, go ahead. Stefan-

Michael Stalmann: Yes, good afternoon, Lars. Two questions from my side, starting with your evolution of credit risk weighted assets in the quarter.

You had about €8 billion more during the quarter, but you had only €10 billion additional loans. And so it seems that maybe there was quite a bit of credit risk weighted that's inflation outside of lending, possibly counterparty credit risk. I was wondering if maybe this reflects the initial transfers of Deutsche Bank prime positions, or are there any other drivers for credit risk weighted inflation this quarter? And the second question relates to TLTRO. I was wondering if you have actually started to book the bonus rate, the second bonus rate already in the third quarter, or whether it's only still to come. Thank you very much.

Lars Machenil: Stefan, thank you for your questions. On the risk weighted assets, so on the -- in our slides presentation on Page 86, you have the evolution. So if you, if you look at what is driving the increase, the main one is the increase in credit risk there. So you've seen that our credits are going up. So the credit risk is going up.

The other elements just to put a number, so we have more than €700 billion of Basel 3 risk weighted assets. There's €1 billion increase in operational risk, €1 billion in market risk. And so there's €1 billion in decrease stemming from -- we do the securitization of the banking book. And so the main driver of the pickup of the €8 billion is the credit risk. So there is nothing particular on that.

Yes, it is the growth of the balance sheet that we accompany. On the TLTRO. So the TLTRO for us, the impact is spread over time. So that's basically and as you know the impact for us in TLTRO as a general or the liquidity, for us, it is part of our overall liquidity. So we attract liquidity by ourselves.

We attracted from customers, but we also attracted in the market. And let's not forget that TLTRO is securitized lending that we do. And so if BNP Paribas, as you know as well, we have a good reputation in the market. If we go to the market, we basically do that at, and if we do that in a securitized way, we also get very good pricing. So from that point of view, yes, we basically have it at all the other elements, it spread in time, and it's part of overall funding approach, funding cost.

So Stefan, that would be my answers.

Operator: Thank you, sir. Next question is from …

Lars Machenil: If I may, I get reminded that on Delphine, I didn't answer her question on one-off on personal finance. So of the one-off on personal finance without specifying everything else, but it's basically a one-off litigation effect that we have. And on the one-off in Belgium, it's real estate related.

So that’s basically it. So, operator, back to you.

Operator: Thank you. Next question is from Mr. Omar Fall from Barclays.

Please go ahead.

Omar Fall: Hi, there. Could you give some color on the strong Belgium top line, especially when it comes to fees. One of your peers is raising their banking daily package fees. I just wondered, if that's something you've done to explain the growth there because it's kind of plus 18%, which is more than the growth in savings and payments.

And then similarly, on personal finance, or conversely rather, the top line performance was a bit weak. I know that there's this negative one-off that we don't know exactly how much that is, but even looking at loan growth, that was -- that fell sequentially on consolidated outstandings, which seems a bit surprising at this stage. Are there issues around supply chain disruption and lower auto transactions impacting volumes or something along that? And then lastly, just on BancWest, sorry to take three questions. If you could, again, give a bit more color on the performance there, which does seem a bit weaker than expected. Thanks.

Lars Machenil: Omar, thank you for your questions. Well, if I take them one by one, if you look at Belgium, in retail, it's a tribute to a bit the generic thing, right. I mean, in an environment of rates in Europe, we focus on providing our customers with services, which are then also fee generating. So that can mean that we provide them on investment products with service. It also can mean that we have pricing in our packages that change to cater for that.

So that is the kind of things that we continue to do. Fees are a main focus of what we do. We have the services and the products to basically do so. And that is what we continue to do, you see it in Belgium, you see it in France, and we will continue. Then on personal finance, yes, personal finance actually, if you look at the business, that's fine.

But personal finance, it's a bit what I mentioned earlier also on insurance. It is a tad more difficult to read the P&L. Why? Because on one hand, you have the production, so the production is up, that's fine. But the P&L is impacted basically by the production that happened a couple of quarters before. And so the production in the quarters before given there was the confinement has been lower.

So that is why you see the production is basically back to a pre-pandemic rhythm. But it will take a couple of quarters to basically replace the lower volumes that we have in the previous quarters. So that's basically this. And on the cars. [Indiscernible], maybe there is some lower amount of new cars, but people need cars.

So what people do is they basically take secondhand cars, and if it's a new car or a secondhand car, they need financing. And who provides financing? So that's basically the read on [indiscernible]. So things are fine. There is just a backlog of the confinement of the last couple of quarters that's in there. And again, you focus on the top line, and you see maybe something that triggers a concern, but you could also go down in the bottom line.

And you could see something that triggers a good sign, which is that basically there is a tremendous focus on the delinquencies and under recuperation, and you basically look at the bottom line, the bottom line is very fine. Thank you. And then on BancWest. Well, it's a bit the other way around here. In BancWest, things are -- I don't know if you've been well, no, I was going to say if you've been to U.S., but not yet, you can probably in a week or so.

But the activities have been solidly rebounding and that is what we see. Again, there has been from time-to-time you have a portfolio that you can crystallize. And that's what happened at Bank of the West a year ago. And so if you look through that, you'll see that the revenues are evolving positively. And the same thing, if you go down to the lines, you can clearly see that the other elements like the cost of risk, are showing that things are going very well.

So Omar, that would be my three answers.

Operator: Thank you, sir. Next question is from madam Giulia Aurora Miotto from Morgan Stanley. Madam, go ahead. Giulia

Aurora Miotto: Yes.

Hi. Good afternoon, Lars. So my first question, a bit technical on across the risk and COVID overlays. How much do you have left? And given that, the situation looks rosier, could we see them return back this year already? Or is that 2022 business? And then, secondly, a clarification on the payout distribution. So for the Investor Day, or full year results, you have already signaled that you intend to increase the overall payout.

And I guess part of these will be in buybacks. But [indiscernible] correctly, that you are like the 50% in cash is probably here to stay and then whatever comes on top is on buy backs, or perhaps could you also reconsider a lower cash component given where the shares trade, pretty discounted versus book value. And then last, technical one, IFRS 17, any comments there? Thank you.

Lars Machenil: Thank you, Giulia, for your questions. If you look at the cost of risk, indeed to the COVID overlay, so to speak, let's quickly remind here.

In the U.S., you have CECL, which is a different approach to what we have in Europe, which is IFRS 9. And so IFRS 9 basically ask you to look at a scenario which is a dire scenario and see what impact it made. And so in 2020, the dire scenario was a continuation of the pandemic and of COVID and the likes. And that basically what we saw. So, in that scenario, at BNP Paribas, we took like roughly €1.4 billion in provisioning on performing loans.

So that's basically that. Now, what you see that, that took into account a scenario. Scenario where one says, in Q3, that was back in 2020. A scenario, you say, in the third quarter of 2021, there will still be an impact of COVID, and in the fourth quarter, and in the first quarter 2021, and so forth. So as time comes by, when you arrive in the third quarter, you basically see, well, things are good.

Yes, look at our results, things are very good. And so that basically means that, that part, you write it back. So you shouldn't anticipate that there is a full ride back of that amount. But as time goes by and that time becomes and demonstrates that everything is fine, you will have that right back So for us out of the €1.4 billion that we provisioned, it's only a small part that we written back like it's a few 100 and that's basically it. And so that will continue over time.

On your second question on the payout. Yes, well, I invite you on what the amount will be and what the part cash and share buyback will be. I invite you on February 8, it's a point I hear you, if I talk to fixed income investors, if I talk to pure equity investors, they might have a different thing. So we have both investors. So I asked you to just bide with me and come back on February 8, hopefully, physically, to get some clarification on what it will be.

But of course, you see what we have done now and so you it gives you an orientation of what we want to do. And then if we talk about IFRS 17, all of those wonderful numbers. So IFRS 17, if I was young, I would have suppose it replaces IFRS 16, right. No, it doesn't. It replaces IFRS 4, yes.

And these are -- and it's normal that the numbers are different, because these are totally different animals, describing how to handle insurance. And IFRS 4 was -- more something which was introducing the local regulation, because the insurance we are operating before that on a local regulation, and it was kind of providing an umbrella for that local regulation. And those local regulations could be quite different. So if you look at us, it's in France GAAP, if you look at other parties, it will -- it's in local GAAPs and that can be quite different. And so therefore, if you look at what we stand at, the IFRS 17, and in the end would be relatively close to what we have in France GAAP.

And so, over the horizon, let's say the plans, the contribution, be it 17, or be it 4, will be very similar. And so that is why in order not to lead to confusion of new modeling, we will basically we keep under IFRS 4 in our plan in February, Giulia. If you come, we will see that we keep on having that outlook on IFRS 4, because that's in the continuation of what you have. And as I mentioned, if you look over the cycle, and the cycle is short for us, it's basically fine. And again, it's different.

I don't know, Giulia, where you are physically based, but for example, in the U.K., the GAAPs used are quite different than the ones that we have in the French GAAP. So that's a bit the situation. So for us over that horizon, not really different. So, we will give the plan under IFRS 4 and then later there will be the first time adoption that we will clarify. So, Giulia, that would be my three answers.

Operator: Thank you, madam. Next question is from Mr. Matthew Clark from Mediobanca. Please go ahead.

Matthew Clark: Good afternoon.

So just a quick question on cost inflation. Some of your competitors have flagged increasing global wage and inflation depression on the cost line, both at present and looking out. Have you got any comments on that? Are you seeing that as well? Or is this -- is the kind of flattish costs you guided for this year on a constant scope basis, still your kind of expectation and can be sustainable going forward? Thanks.

Lars Machenil: Sure. Well, if you look at the cost, what I mentioned, if you look at the overall cost, as the revenues are up not to inflation, because they are really up.

Some of them come with cost related to the cars that we provide or the cost of the people and so forth. So but that is linked to that, that is one thing. I think your inflation is rather on the aspects of saying do we see the increase in rates therefore also leading to inflation and salaries and/or the fact that there are difficulties to attract people. Now, if you look in particularly in Europe, where with all the planning that is being done by the -- by Europe and by the countries, which is phased over time. You have some countries like if you look at U.S., where at some point in time, there will be massive checks going out in a very limited time.

Whereas in Europe, it is phased much more over years, which basically means that people can redeploy from one activity to another and so they should not be massive shortage of people. And when it comes to the shortage that you have in production leading to pricing. if you look at it, if you listen to what also the ECB said yesterday after having done the tour with the majority of European corporates is that one believes that this is relatively limited in time. So that's basically where we stand. So for us, with the view we have along the lines, as I just mentioned, that is not something that would be of a material impact on the profit going forward.

Back to you, madam.

Operator: Thank you, sir. Next question is from Mr. Pierre Chedeville from CIC.

Pierre Chedeville: Yes, thank you.

Good afternoon, Lars. Thank you for taking my question. First question is regarding the discussion between ILD and [indiscernible]. I was wondering if you could give us some update regarding your partnership with Element in Canada? How does it work? And do you think that it would be possible to reinforce this partnership, for instance, with a capitalistic agreement going forward? A follow-up question regarding insurance. You mentioned with Jean-François the volatility of your revenues in the insurance due to capital gains.

But you also mentioned ongoing impact of claims. I wanted to know what do you mean by that? And my last question is related to Allfunds. Could you give us a clarification regarding your strategy, with this participation with the stake in this company, because as far as I understand what is the business where there are Allfunds. I can see that there are some I would say industrial synergies with your asset management business, or complementarities, call them like you want. And I don't understand why you are leaving this company.

To be honest, do you want to sell the stake and enstore [ph] partnership with it? So how do you see your future with Allfunds? Thank you very much, Lars.

Lars Machenil: Yes, thank you for your questions. When it comes to the car leasing, as you know, we are very happy campers. We have a good platform, we are focused on Europe and that's basically it. When you mentioned Element, don't get me wrong, but across Atlantic merger it's not something that is of or that is of interest.

So for us, we're very happy. And if in some areas, we can bolt on some stuff, that's fine. But there's nothing more to say we're happy campers in the growth that we can have in the platform that we have. So that’s basically that. On insurance, yes, the claims that I mentioned, is that from time to time in the non-life part here.

I'm not talking about the life part. In the non-life part you can have occasionally, a major incident. I'm thinking about the water incidents to the flooding that we had, if you think of Belgium, the Netherlands, Germany. And so if you have a non-life activity, you are exposed to these kinds of things. That -- that's what you can have and that that's basically the reference to that.

On Allfunds, yes, we are very happy. We had an activity -- regional activity. And we saw that it was useful to basically combine that with others and make that the basis of a larger platform. And that's what Allfunds have become. And but Allfunds, we're not alone.

We're there with partners. And so we basically want to stay at that same level with that partner. So if that partner basically floats a part of it, then we will do that same thing and we stay a bit at the same level with that partnership. So that's why we stand here.

Operator: Thank you, sir.

Next question is from madam Anke Reingen from RBC. Madam, please go ahead.

Anke Reingen: Thank you very much for taking my question. I just have some follow-up questions, please. Firstly, on the [indiscernible] for the 8% in [indiscernible] asset inflation, is that the term 2025 impact or is that the full impact over the whole implementation period? And then secondly, on costs.

In Q3, there was a bit of a step up and you mentioned investments and obviously is good business environment. But, I mean, looking into Q4, we have a bit more seasonality on the revenue side. Should we still think Q4 could be positive jaws or I mean, should the focus will be on the full year trend? And then the third one on the buyback. So why did you think you need to announce this now? I mean, obviously the positive news, but usually expect this sort of like with full year results. I just wondered why now.

Thank you very much.

Lars Machenil: Thank you, Anke. When it comes to the 8%, yes, for the moment we've calculated it on 2025. Thereafter, there is phasing a lot of stuff. So it's probably going to be roughly the same, but technically, the number we've done is we've calculated it on 2025.

But it shouldn't be that materially different. It might be a tad better over time. But that's basically it. And I remind you, this is the 8% applying the numbers, right, that excludes any actions or optimizations repricing that the sector or ourselves would do. When it comes to your cost evolution, yes, well, the thing is, it's a bit on the cost, it's a bit like insurance, right.

You have to look at it on a yearly basis. You have some volatility coming in a given quarter. So you should look at it over the full year, and look at the evolutions that we have on a specific quarter. It is a bit -- don't get me wrong. And if by accident, people of CIB are listening, I excuse myself.

But basically on CIB, the whole corporate and institutional environment takes 2 weeks of holidays. I'm joking, but the volumes that one sees in December is like half of what you normally have, and then everybody is back in January, and that 50% comes back. So that's the kind of thing that you which is a bit of peculiarity of what you have in Q4. So that's basically that. When you come -- when you talk about the buyback, so the buyback you basically want us to do it later.

Is that what you say? No, it's just -- it's in line with what you do, right. We see that the year is progressing very well. And then there will be -- and it's to indicate that what will come will be also a recurring event, yes. And so that is why we do it in 2021 over '21 And then what we will announce will be going forward so that we will do it in '22 for '22 and '23, '24, '25. So we thought it was useful to engrain that it is basically a recurring process that we do in the year.

But again, Anke, if you tell me that I should stop the share buyback, tell me now, I might still have an option to do so. Joking, right -- joking, sorry for that. Operator, back to you.

Operator: Thank you. Next question is from Mr.

Kiri Vijayarajah from HSBC. Please go ahead.

Kiri Vijayarajah: Yes, good afternoon, Lars. Thanks for taking my questions. A couple of questions on CIB, if I may.

So firstly, on the cost base in CIB, looking into 2022. I’m wondering what's the natural kind of mechanical cost inflation we should expect when things like travel budgets restart hopefully, and normalize next year. Plus, you're going have the full year effect of Exane coming into the cost equation. So really some guidance on CIB costs would be helpful for next year? Or if not, then what kind of jaws would you be targeting in CIB? And then a similar question really on RWAs and capital allocated to CIB. With the outlook there kind of steady state from here, are you expecting the kind of strong demand to keep growing RWAs and CIB at the current pace? And I'm thinking particularly on the financing side, when I looked at the last few quarters.

So some color on sort of costs in RWAs and CIB? Thank you.

Lars Machenil: Sure. Listen, if you look at that CIB cost base 2022. Now, intrinsically, we always want to operate with positive jaws, yes. If you want to see what are the things that we will have, I would like to invite you on February 8 to have that.

But intrinsically, that's basically what we want to do. Now, there is indeed the Exane cost base. So if you take it that on a yearly basis, that will be like around €200 million, yes. But that is just -- it's not additional cost. It's the consolidation effort.

So that's basically how the base will change. And for the rest, we continue to have the operating jaws as the element. So that means that there can be some cost because the revenues come, right. That's the things I just said. So that's that.

And S1O that's therefore also the answer to the jaws. So we keep focused on that. We are not going to do ridiculous things, but there are some costs that will be accompanying that. So that's the cost. And so that means you, Kiri, you basically on the scarce resources, if I may.

So on the cost, as I said, we basically, we've shown we have them under control. We keep them under control. But of course we accompany the growth in its form, but we keep them under control with positive jaws. And then on the other one, on the capital. Yes, on capital, you mentioned global banking.

I would like to draw your attention. I don't have the exact number. But if you go into the appendices where you have the global banking evolution, you will see that the revenues of global banking advanced to a higher speed than the capital requirements. And so why is that? Because what global banking is doing is more than just shelving out loans, yes. What they are doing is operating within capital markets.

And they are working on generating fee business activities. And so that is what we will continue to do. So what I mentioned earlier, that fee business is an important part when it comes to retail. Well, it's basically also an important part when it comes to CIB because of the interaction with what we do. So when global market interacts, or the needs of clients with global markets, through what we then call capital markets, that is basically an activity where we leverage the relationship that the global banker has with the product and the knowledge of global markets and that is basically generating fees.

And that's basically what you see. So that is why the revenues at global banking or corporate banking as we branded goes faster than the capital requirements. So that that's basically the answers, Kiri, on the scarce resources for CIB.

Operator: Thank you, sir. Next question is from Mr.

Andrew Stimpson from KBW. Sir, please go ahead.

Andrew Stimpson: Afternoon. Thanks for taking my questions. Two questions for me.

One on ESG, please, and then the next one on leverage, please. On the first one, on ESG. I think the commitments that you've been giving on funding to coal and oil and gas are all amongst the better ones in the sector, which is great. And it's clear that you're on top of this topic, which is all good. But then when I look at Slide 17, I suppose I'm wondering why you're not being more ambitious on your financing volumes.

It shows that the bottom of that slide, you're wanting to deliver €2.2 billion extra lending to renewables over the next 3 years, which to my mind it just seems like a small number, a small ambition for a bank of your size. So wondering why that is? Is that just no demand for bank loans on those assets [indiscernible] or is there in fact, quite a good amount of upside to on this theme, and on those volumes. And then secondly, on leverage. Your CET1 ratio look healthy enough and grew in the quarter, which is good and the buybacks are very welcome. But the leverage went down very slightly.

I'm just wondering how much the leverage ratio is factoring into your mind when you're considering what the real constraints are for you when you're managing the business. I suspect part of the reason the leverage is more of a constraint is because of the excess liquidity position, which is also welcome. And you've got an LCR of 136%. So wondering, two parts. So that one, I suppose, how are you thinking about the leverage ratio? Is that really the true constraint on your business now? And then secondly, to what degree could you improve that by reducing the LCR? What level would you feel comfortable at? Thank you.

Lars Machenil: Andrew, thank you for your questions. Yes, so on ESG, we're always -- on one hand ambitious, but also very prudent. And so probably, we can do more. But the main thing is that we don't necessarily go for the easy wins here, because if you remember, if you want to accompany ESG with our clients, there's basically three buckets. Yes, of course, there are easy things, stop using plastic and what have you not, and that's something you can do, and you can fund.

But then you have the mid-term kind of things. These are things that are not carbon neutral at all today. But where there are routes ahead, which are clear, but take time. For example, with cars. Cars, that they should go into other things, they should go into hydrogen, or they should go into batteries and the likes.

And if that is what you want to accompany, there's a lot of project finance going on here and that is longer term. So you need your manufacturers to adapt, then you need the outlets to get or hydrogen or electricity, what have you not. So these are all the kinds of things that you have to do. And then you have the longer term ones where there are things like in construction, I don't know if you are in a concrete building, but imagine you are, concrete is really generating a lot of airways. Absolutely not carbon neutral, because already -- one, because of the products; and then secondly, because of the heat that you need in order to make it.

And so that basically means there are a lot of levers to work on. And yes, you can go for the easy ones. But you have to make sure that you can accompany the other ones. So, yes, we are very ambitious on this and we can probably step it up, but we want to have the accompanying of all the sectors and that's why we have introduced this new task force of zero carbon bankers. So that is indeed very ambitious and we will keep on being ambitious.

On the leverage, if I may, the thing is there are so many regulatory requirements that, honestly, it becomes so complex that I cannot give one to our banker because it wouldn't make sense. So we basically take one. The one that basically, if we comply with it, with some structural elements is basically fine. So for us by saying, listen, we have a 12% common equity Tier 1. We have 1/3 domestic markets, 1/3 IFS, 1/3 CIB, basically makes us coherent in all the other elements.

It makes us coherent in the TLAC, makes us coherent in the leverage. And so these metrics are also rather stable. The balance sheet that is being used in the leverage is not fluctuating that rapidly. So from our point of view, that's how we work. So we basically say, if we look at the metric of the common equity Tier 1 with the distribution that we have, that is it.

And then from time-to-time, you have to look at changes in business. If you on board the prime brokerage, prime brokerage consumes a bit more of leverage. And that is where we have to look at how can that be contained and reduced? So it is one element. Intrinsically, we pilot the business through the common equity Tier 1 and the other ratios that we have. By that, basically, that means that the other metrics like TLAC and the likes are manageable, given the issuance that we have.

I give the example right on leverage. It is the Tier 1 capital. So that means that next to the balance sheet, you also have the Tier 1, you have many other levers to basically contain it. So that's what we do. I'm not saying we are not looking into it, they are there.

But they are not the primary one on which we pilot the business. So, Andrew, that would be my two answers.

Operator: Thank you, sir. Next question is from Mr. Jacques-Henri Gaulard from Kepler Cheuvreux.

Jacques-

Henri Gaulard: Yes, good afternoon. Two questions. First, I think there is €149 million of goodwill impairment in the result this quarter. Any topic in particular, in particular, where you impaired the goodwill in terms of break down would be great. And I guess, I'm sorry, I have to ask you, because believe me, I'm as tired than you are, but I have to ask you about BancWest, whether it is core, noncore, or none of the above.

Thank you.

Lars Machenil: All right. I like your options. So I should get a buzzer, that I can push the option. Now, as far as on the goodwill, listen, this is just -- these are things that have been acquired a long time ago.

So when you have goodwill, it basically means you shelved out money for an intangible. And then from time to time you review and you see that given some uncertainty in some areas with COVID, what have you not that we say, well, listen, it's now a decade ago and with this uncertainty around us in that area, we basically say listen, we impair that goodwill, yes. So that doesn't mean anything. It just means that probably 10 years ago, some cash has been paid for that. So that’s that.

Listen, I will leave it to that as core. So there is not really a concern. It is something that has been bought well before the new banking environment where the yields given the regulatory changes and so forth. The yields are not the same as the yield that we paid at that time. So that's basically the impairment.

And on BancWest, listen, BancWest, as you know, the U.S economy, and particularly California is doing well. We have a good positioning, we have a lady who's in charge who's hitting all cylinders. So from that point of view, we are happy campers. But as you know, there are things happening. And so, yes, we keep our eyes open.

So there is nothing new, I can say. So those will be my two answers.

Operator: Thank you, sir. We have one last question for Mr. Tarik El Mejjad from Bank of America.

Please go ahead. Tarik

El Mejjad: Hi, good afternoon. Just quick question on cost, please. If we assume the cost inflation we have now is, stays longer than we think now. I mean, next plan, which we understand will be missed focusing on growth and contrary to previous plans, less so on identifying cost savings and so on.

One, are you surprised by this inflation? And now I'm thinking on the next plan, are you incorporating elements of cost savings to preserve the jaws that’s for -- who are willing to present to us to justify double-digit ROE? Thank you.

Lars Machenil: Tarik, thank you for your question. Listen, at this stage, we don't see that cost inflation to last year. We see that there is a temporary pickup due to all the reasons that I mentioned before. So at this stage, or central scenario remains that it will be under control and therefore we stay focused on capturing the growth.

I mean, we are really kicking on all cylinders. We have the platforms. Clients come to us, we take market share, we're going to remain focused on that. If at some point in time, I will be mistaken and there will be inflation, and I don't know what, then basically, we will adapt. Tarik, you've been following us for a while.

You know that we are very agile in adapting what it is. The thing that is ahead of us now is we are very well-positioned to capture and accompany that grow. That is what we will do. If there will be another phase kicking in or whatever, we will adapt at that time, yes. But I'm not going to break things and not capture the things that are really tangibly ahead of us because of some things that could happen.

If these things will happen, we'll adapt as we have always done. We are an agile bank. We are very responsive. Look at us. Where were you? I know where you were a year-ago in 2020.

There was the COVID hitting, everybody got scared, many banks retracted. We didn't. Look at us. What happened because basically we stay to our clients, we stay to serve them, we stay to strengthen our platforms. So that's what we'll do and that's what we will continue to do.

Operator, back to you.

Operator: Thank you, sir. We have no other questions. Back to you for the conclusion.

Lars Machenil: So, first of all -- well, not first of all, last of all, thank you all for having spent the time with us.

You have seen that we had a very solid result that as a bank. We are very well-positioned to capture the growth that is ahead of us. We are firing on basically all cylinders. So I look forward to see you again in early February to give you an update going forward. Thank you very much.

Have a very good weekend. Bye, bye.

Operator: Ladies and gentlemen, this concludes the call of BNP Paribas third quarter 2021 results. Thank you for your participation. You may now disconnect.