Q3 2017 BNP Paribas SA Earnings Call
Oct 31, 2017 AM CET
BNP.PA - BNP Paribas SA
Q3 2017 BNP Paribas SA Earnings Call
Oct 31, 2017 / 01:00PM GMT
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Corporate Participants
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* Lars Machenil
BNP Paribas SA - CFO
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Conference Call Participants
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* Alex Koagne
Natixis S.A., Research Division - Analyst
* Anke Reingen
RBC Capital Markets, LLC, Research Division - Analyst
* Bruce Allan Hamilton
Morgan Stanley, Research Division - Equity Analyst
* Delphine Lee
JP Morgan Chase & Co, Research Division - Analyst
* Jean-Francois Neuez
Goldman Sachs Group Inc., Research Division - Executive Director
* Jean-Pierre Lambert
Keefe, Bruyette & Woods Limited, Research Division - SVP and United Kingdom Analyst
* Jonathan Matthew Balfour Clark
MainFirst Bank AG, Research Division - Director
* Karl Jonathan Peace
Crédit Suisse AG, Research Division - MD
* Lorraine Quoirez
UBS Investment Bank, Research Division - Director and Equity Analyst
* Maxence Le Gouvello du Timat
Jefferies LLC, Research Division - Equity Analyst
* Omar Fall
* Pierre Chedeville
CM-CIC Market Solutions, Research Division - Analyst
* Piers Brown
Macquarie Research - Analyst
* Stefan-Michael Stalmann
Autonomous Research LLP - Partner, Swiss and French Banks
* Tarik El Mejjad
BofA Merrill Lynch, Research Division - Equity Analyst
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Presentation
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Operator [1]
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Good afternoon, ladies and gentlemen, and welcome to the presentation of BNP Paribas Third Quarter 2017 Results. For your information, this conference call is being recorded. Supporting slides are available on BNP Paribas IR website, www.invest.bnpparibas.com. (Operator Instructions)
I would like now to hand the call over to Lars Machenil, Group Chief Financial Officer. Sir, please go ahead.
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Lars Machenil, BNP Paribas SA - CFO [2]
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Thank you. Good afternoon, fine ladies and gentlemen, and welcome to our third quarter 2017 results presentation. In our usual way, I'll take you through the first 2 chapters of our Q3 results presentation, and then I'll be pleased to take your questions.
So I hope you all have the slide presentation in front of you. And in any case, let's get started with our key message on Slide 3, with BNP Paribas delivering a good level of income in the third quarter. If you look line by line, we see that the revenues were slightly lower due to an adverse ForEx effect, but were actually stable at constant scope and exchange rates.
Costs were well under control, thanks to the continued implementation of the operating efficiency measures. Cost of risk was again at a low level this quarter, standing at 36 basis points in terms of loans outstanding.
Notably, this quarter was the successful IPO of SBI Life in India, through which we sold a 4% stake that generated a EUR 326 million capital gain in our Q3 accounts. And as a reminder, the market value of our remaining 22% stake is around EUR 2 billion. So overall, the group delivered a good level of net income, which stood at EUR 2 billion, up 8.3% compared to last year. And our common equity Tier 1 ratio clocked in at 11.8% at the end of September versus 11.7% at the end of June.
Now if you move to the exceptional items of the quarter, which you can see on Slide 5, where you can see that they were overall negligible in the third quarter, while they have been EUR 300 million negative in the corresponding period of last year. They included this quarter the capital gain on the sale of the 4% in SBI Life I just talked about and also the impairment of the goodwill of TEB in Turkey.
Now if you can swipe to Slide 6, you can see the performance of the group and of the operating divisions that was affected by an unfavorable ForEx effect this quarter. As already said, the group delivered EUR 2 billion of net income, up 8.3% year-on-year.
Now if you advance to Slide 7, you can see the good operating performance of the operating divisions in the first 9 months of the year. And in terms of net income, the group has so far delivered EUR 6.3 billion of net income in the first 9 months.
Now zooming on the revenues of the operating divisions. If you turn first to Slide 8, you can see that the operating divisions held up well despite an unfavorable environment this quarter. In fact, at constant scope and exchange rate, revenues of the operating divisions were down just 0.7%. Domestic Markets revenues marked a slight decrease due to the low rates, though they displayed good business development. International Financial Services revenues marked a significant growth like for like, and CIB was affected by the unfavorable context for Global Markets showing, however, growth at Corporate Banking and Securities Services on a comparable basis. So all in all, showing more -- once more, the strength of our diversified business and its integrated approach.
If you now flick to the following Slide #9, you will see that cost of our operating divisions were actually down, thanks to the implementation of the cost-saving measures. At constant scope and exchange rate, they were only slightly higher.
CIB costs were again lower, benefiting from the launch of the CIB transformation plan at the beginning of 2016, so on average, a year before the other. IFS cost evolution reflected the business growth, while Domestic Markets, where costs were higher on the back of the continued development of the specialized businesses.
Indeed, if you look at the average cost evolution of the 3 main retail networks, so France, Italy and Belgium, costs were down 0.1%.
If we stay on cost and if you could swipe to Slide 10, you'll see that we are actively implementing our ambitious program of new customer experience, digital transformation and savings. And this is across the group and it entails a total investment of EUR 3 billion by 2020.
The launch of the plan has started in line with the defined timetable and the programs are being implemented gradually. At group level, we have already identified some 150 significant programs. In the first 9 months of the year, we have already booked for EUR 484 million of transformation costs and generated EUR 309 million of recurrent cost savings. The bulk of these cost savings were as expected in CIB, which launched its plan at the beginning of last year, with the remainder almost equally split between the other 2 divisions.
I remind you that we expect to book EUR 0.5 billion of cost savings by the end of the year.
If we now shift to the cost of risk, I would kindly ask you to flick through the 3 specific slides on the topic. And they start at Slide 11. You can see that the cost of risk was again at a low level this quarter. On the whole, the decline of cost of risk resulted from the continued decrease at BNL, combined with write-backs in some businesses.
Looking at the different businesses one at a time. In Corporate Banking on Slide 11, you'll see that the provisions were offset by write-backs this quarter. If you now turn to the next Slide 12, you'll see that the cost of risk was low in French Retail, very low in Belgian Retail and continue to decrease at BNL in Italy.
In the other retail businesses on Slide 13, you see that Personal Finance saw a low cost of risk this quarter, benefiting from the low rate environment and the gradual shift that they are doing towards products with a better risk profile.
Europe-Med's cost of risk decreased and was positively impacted by a provisional write-back. And BancWest is still at a very low level.
If we now turn to the financial structure, which is synthesized on Slide 14, you can see the further improvement of our common equity Tier 1 ratio to 11.8% that I mentioned before.
Our Basel III leverage ratio was at 4.1%, and our liquidity coverage ratio stood at 111%.
The group's immediately available liquidity reserve totaled EUR 324 billion at the end of September. So the group is in good shape when it comes to these prudential ratios.
I'll leave you to peruse the remaining 3 slides of this introductory part and would now kindly ask you to advance to the divisional results, starting with Domestic Markets on Slide 19.
Indeed, Domestic Markets showed good drive in the business activity in the third quarter, with good loan growth in all the networks and in the specialized businesses. Deposits also continued to increase in all countries, so a positive evolution. Moreover, Private Banking confirmed a good trend, with assets under management increasing 5.8% and Hello bank! continued to attract new clients.
So Domestic Markets continued to develop its digital offering. As you may remember, it closed back in July, the acquisition of Compte-Nickel in France, which will add to the set of dedicated to new banking usage and it's geared to customers looking for a very simple, convenient and cost-effective service. And alongside this, Domestic Markets also continued to develop new customer experiences, launching this quarter new digital services in all of its businesses. For example, Welcome, a corporate on-boarding solution; and Finsy for factoring. And these are examples in French retail. When we talk about Italy, we have MyAccounts@OneBank, which is a digital accounts opening for the subsidiaries of corporate clients. And then in Belgium, we have Itsme, a digital ID application.
Looking at Domestic Markets now. Let's look at the P&L. The third quarter revenues were almost flat at EUR 3.9 billion. As I mentioned, we saw a good business drive in our Domestic Markets but we continued to be impacted by the low interest rate environment.
And on the back of our continuous focus, the commission income market increased in all the networks.
Operating costs were moderately higher due to business development investments in our specialized businesses. Indeed, taking just the 3 large retail networks, as I said earlier, costs in those 3 were actually down 0.1% on average.
Given the continued reduction in cost of risk at BNL in Italy, pretax income stood at close to EUR 1 billion, only slightly below last year's level.
Looking at each country and business, I can mention in particular that French Retail showed revenue resilience on the back of good sales and marketing drive. BNL bc revenues were, however, reflecting a gradual improvement in business activity. Belgian Retail showed good business evolution in a low interest rate environment. And finally, the specialized businesses continued to deliver a good business drive.
So in conclusion, in the third quarter, our Domestic Markets showed good business activity and continued to develop their digital offering, but of course, still in a low interest rate environment.
If we now continue on this Retail Banking & Services and if you could advance to Slide 25 on your device, you can see that our International Financial Services division showed good business activity. In particular, Personal Finance continued its strong drive. International Retail Banking also showed good business growth and Insurance and Wealth and Asset Management showed a good rise of assets under management.
In particular, the division also continued its digital transformation and continued to develop new customer experiences with the launch of new applications in various businesses. The expansion, for example, of a digital bank in Turkey, with Cepteteb; and in Poland, with BGZ Optima. And also, the acquisition in Asset Management of Gambit, a provider of digital investment advisory solutions.
When we look at the P&L, revenues were down by 0.5% compared to last year due to an unfavorable foreign exchange effect this quarter. They were up 3.4% at constant scope and exchange rate.
Costs evolved on the back of business development and cost of risk stood at a low level.
Bearing in mind that other nonoperating items included the exceptional impact of SBI Life capital gain, pretax income rose sharply to EUR 1.7 billion, up 27% compared to last year.
Now if we zoom in on to the different businesses one at a time, you can first flick to Slide 26, on Personal Finance, which continued to show very good business drive in the third quarter, with outstanding loans increasing by 8.8%, thanks to higher demand in the Eurozone on the back of the initially mentioned favorable economic backdrop and also the positive effect of new partnerships. So Personal Finance also forged ahead with its digital development, as shown, for example, by the fact that over 70% of the loans are signed electronically in Spain and also the launch of electronic signature called Quick Sign in Belgium.
In term of results, revenues were up 3.9% on the back of this good volume growth combined with a shift, of course, towards products offering a better risk profile, as mentioned before. Revenues progressed particularly well in Italy and in Spain.
If we now look at costs, they progressed on the back of the increased level of activity and cost of risk was at a low level, and therefore, pretax income reached EUR 420 million, up 2.2% on last year. So in conclusion, in a context of solid growth in Europe, Personal Finance continued to show a very dynamic business drive in the third quarter of this year.
If we now move to International Retail Banking, let's start with Europe-Med on Slide 27. Business activity showed good growth, with loans increasing in all regions and deposits also marking good progress.
We mentioned earlier also the good growth in digital offering in Turkey and Poland. If we now look at constant scope and exchange rates, revenues were down 3.7% due to the impact of higher rates on deposits in Turkey, which have not yet been offset by the gradual loans repricing. The other region progressed well on the back of good volume growth. Costs increased as a result of the good business development. And overall, given a lower cost of risk, Europe-Med's pretax income was up 7.3% in the third quarter of this year.
At a historical scope and exchange rate, it actually showed a 4% reduction due to the unfavorable ForEx evolution. If we now leap across the ocean, one ocean, the Atlantic at least, and then even some more territory and we go to Slide 28, we see BancWest, which confirmed a good business drive. We see that the loans were up 6.2%, driven by both individuals and corporate lending, while deposits increased 9% compared to last year.
On a comparable basis, the assets under management of our Private Banking marked a further progress of 13% on last year to stand at USD 13 billion. And on the digital front, the users of BancWest online services already exceeded 410,000. BancWest also continued to foster cross-business cooperation with other group businesses such as CIB, Leasing Solutions and Personal Finance.
If we now look at the constant scope and exchange rates evolutions, revenues were up 6.1%, essentially on the back of good volume growth. Costs were kept well under control at BancWest, generating a largely positive jaws effect in the quarter. On the whole, BancWest's pretax income increased by 9.5% on last year, confirming a strong operating performance in the third quarter. It was up 3.4% at historical scope and exchange rates, as I said, given the unfavorable FX evolution.
If you could now kindly flick to Slide 29, on our Insurance and savings businesses, which saw assets under management increase further to stand at EUR 1,041,000,000,000 at the end of September. Assets under management were positively impacted by good asset inflows since the beginning of the year in all our business lines and a positive performance effect, partly offset by an unfavorable ForEx effect. In fact, over the past 11 quarters, our assets under management have increased by EUR 147 billion, with nearly 2/3 coming from net asset inflows.
If we now focus on the Insurance business as the first of the 2 and we look at Slide 30, Insurance continued to show solid business development with good net inflows, especially in unit-linked policies. As I mentioned, this quarter, we saw the successful IPO of SBI Life in India, which was finalized at very good conditions.
Through our insurance subsidiary, Cardif, we held a 26% stake in the company and we took the opportunity to sell a 4% stake, which generated a EUR 326 million gain in the third quarter.
In terms of value creation, you might want to note that the market value of the remaining 22% at the IPO's price is in the region of EUR 2 billion.
In terms of P&L, Insurance revenues were a tad lower, but in comparison, one must consider the high level of capital gains booked a year ago.
Costs were up due to the continued development of the business. And overall, after accounting for the SBI Life capital gain, pretax income marked a strong increase to stand at EUR 740 million in this quarter.
If we now move to the second part of this activity, which is Wealth and Asset Management on Slide 31, and it also showed good business activity in all its business lines. So WAM, as we shorthand this activity, forged ahead with its digital transformation and development of new customer experiences with the acquisition Gambit Financial Solutions, a leading European provider of digital investment advisory solution, "robo-advisory", geared for retail and private banks in Europe.
When we look at the P&L, Wealth and Asset Management revenues progressed by 4.9% despite an adverse ForEx effect. Indeed, if we look at constant scope and exchange rate, revenues were up 8.3%. If we look at cost, they marked an improvement leading to largely positive jaws. As a result, pretax income marked a near 30% improvement to stand at EUR 208 million in the third quarter.
So having looked at retail, if you could now kindly cast your eyes on Slide 32 on Corporate and Institutional Banking, which continued its good business performance, but faced a lackluster market context this quarter. So revenues stood at EUR 2.7 billion, down 8.5% compared to a high-comparison base last year and impacted by an unfavorable ForEx effect. Indeed, at constant scope and exchange rate, revenues were down 5.9% only. If we now look at the operating expenses, they showed, again, a significant reduction of 6.2% or 3.3% on a comparable basis. And this on the back of the cost-efficiency measures that we have been implementing in the CIB division since 2016.
Going forward and on the digital front, CIB has identified 200 processes that could be optimized by end of next year. CIB's cost of risk marked a small net write-back this quarter. And as a result, the division generated EUR 787 million of pretax income, down 4.2% compared to last year and 1% down on -- 1.6% down on a like-for-like basis.
If we now look at the next 2 slides, that's 33 and 34, we take a closer look at each of the businesses. So if we start with global markets, revenues were lower, marking a 14.6% contraction at constant scope and exchange rate, as FICC activity was affected by challenging market conditions in the third quarter. Indeed, FICC saw lower client activity across the board, in contrast with the favorable market context of the corresponding period a year ago, so resulting in a 23.6% decrease in revenues.
In this lackluster context, we confirmed our top ranking on all bond issues in euros and #9 position for international bond issues. If we then look at the other activity in Global Markets, equities, we see that the revenues showed good growth of 9.4% on the back of sound performance of Prime Services and equity derivatives.
If we now turn to the second activity within CIB and we turn to Securities Services, we see that revenues progressed by 4.2% on the back of growing outstandings and higher transaction levels. The business also continued to win new significant mandates.
Finally, if we look at the third part of CIB, Corporate Banking, the revenues were a tad lower due to an adverse ForEx effect. At constant scope and exchange rate, they progressed by 2.1%, transaction banking marking good growth in particular. It consolidated -- the Corporate Banking consolidated its leading position in trade finance in Europe and was ranked amongst the top 3 in Asia for the first time. The business reported good development of its digital offering with the success of the Centric platform, which already has over 7,700 corporate clients and increased -- or an increase of 23% compared to the end of 2016.
So to sum up, in a lackluster market context, our CIB showed a resilient performance, thanks to a diversified setup and continuing focus on cost reduction.
So ladies and gentlemen, this concludes my introductory remarks for the group's third quarter results. As a takeaway, I would like to retain that: First, BNP Paribas showed good business development in an improved economic backdrop across Europe, however, the market context this quarter was unfavorable for market activities; secondly, the group delivered a good level of income, clocking in at EUR 2 billion, up 8.3%; three, our CET1 ratio increased further to 11.8%; and four, all this confirming a good start of our 2020 plan.
So fine ladies and gentlemen, thank you for your attention. I'd now be pleased to take your questions.
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Questions and Answers
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Operator [1]
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(Operator Instructions) We have our first question from Mr. Maxence Le Gouvello from Jefferies.
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Maxence Le Gouvello du Timat, Jefferies LLC, Research Division - Equity Analyst [2]
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The first one is can you give us an idea of where do you expect to have the jaws effect improving the most in 2008 (sic) [2018] for business? The second one would be in Belgium, I'm a bit surprised by how the corporate loans are rocketing for Belgium and Luxembourg. Is there a special event? Or is it a new trend going forward? Third one would be on the cost of risk in BNL. I'm a little bit surprised that the cost of risk doesn't adjust more after the cleanup program that you launched in H1 and you are still very far from your 60 bps targets. So can you give us a little bit of outlook and when can we expect to see significant improvement? The fourth one will be on your stake in SBI Life. Is there any kind of lockup or can you get rid of it when you want? And the last one would be on G-SIB factor. You have been quite vocal over the last 2 years about potentially having a reduction of G-SIB factors, can you give us an update on that one, please?
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Lars Machenil, BNP Paribas SA - CFO [3]
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All right. We have questions, time permitting, Maxence, it's good. So if we look at your first question, so where do you anticipate in 2018 the jaws to improve? As we said, if you look at this year, you saw a strong improvement in the cost in CIB because they basically started early on their planning. So next year, we should see the other parts also stepping up on these cost improvements and that should basically be the evolution. When it comes to the cost of risk tapering off at BNL, so we indeed confirmed that the new production that we are going on should lead to a 50, 5-0, basis points, so over outstandings cost of risk. And so for the moment, we're still around 100 basis points, so we're tapering off towards that 50. And that is taking time. Also, in the process that we have in Italy, where normally the duration of the workouts and all the related can take time, which is a bit specificity to what we see in Italy. So we said that we would anticipate to continue to taper off towards the 50 basis points in the coming years and that would be more -- the 50 basis points would be the horizon 2019, 2020. When it comes to SBI life, yes, there is a one-year, basically, lockup that we're facing. And when it comes to G-SIB, yes, indeed, there has been a -- as always, you fine gentlemen and ladies, you've seen that the bank and that's what you basically also observed, that the bank has been working on its balance sheet to improve its overall G-SIB exposure. But that's basically all I can say. So we haven't received a formal update from the supervisory authorities, which should normally happen somewhere in November or December. And so if, of course, if that 50 basis points reduction would come, according to some of the figures, that is something which would be a reflection of the efforts done. Nevertheless, probably we will, for the moment, we keep our overall objective of 12%, given the uncertainty around the Basel environment. So that would be my answers to your questions, Maxence.
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Operator [4]
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Next question from Mr. Tarik El Mejjad from Bank of America Merrill Lynch.
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Tarik El Mejjad, BofA Merrill Lynch, Research Division - Equity Analyst [5]
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I have a couple of questions, focused mainly on domestic retail business and one on SBI Life. So first, on the retail, which is holding quite well, actually, despite the pressure from negative rates. So in France, could you please expand a little bit on the drivers for the solid volume growth? You reported this quarter, actually, in 9 months, so mortgages growth was strong, remain high -- was strong despite like a slowdown in refinancing, so I wanted to understand where this mortgage growth is coming from. And also in corporate -- and one thing, I mean, there were headlines saying that your stabilization of revenues will be, should be expected by end of 2018 or 2019. What do you mean by stabilization? Should we expect the revenues to be flat year-on-year in end of '18 or NII? What exactly were you referring to here? And very quickly on SBI Life, so what's your plan for the remaining stake in there?
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Lars Machenil, BNP Paribas SA - CFO [6]
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Tarik, thank you for your questions. If we look at France or in general in Domestic Markets, indeed, we see a pickup in growth and a pickup in growth, which since the beginning of the year, is basically across the board. So it's on the individual segment, it's on the corporate segment, it's on the mid-cap segment, so it's all of these which are reflecting the kind of growth that we mentioned earlier, that we see in Europe. So it's the case in France. It's also the case in Belgium and so forth. When it comes to revenues, allow me to clarify, because I think there was some misunderstanding. What we have done with France, we have revised our outlook. Initially when we did an update, we said that the revenues would go down by 3% by year-end. Now what we see and the evolution in the volumes and the pricing, we basically review this to minus 1%. So that is basically what we said. And the other question is when would there be a turn in the interest rate environment and there we basically said, in our plan, we haven't basically focused on that, but it's not something that should happen. Or we don't expect it to happen in 2018 somewhere soon. So that is on France and on Domestic Markets. On your question on SBI Life, so, yes, no, we have this working relationship that we have with SBI Life. There was a decision to float a part of it, which is basically what we've done and so this is where we stand.
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Operator [7]
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Next question from Mr. Jean-Francois Neuez from Goldman Sachs.
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Jean-Francois Neuez, Goldman Sachs Group Inc., Research Division - Executive Director [8]
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Let me ask you about, in France and in Belgium, when you look at NII versus fees, was there interest rate pressure still present on NII? It seems to me that the quarter-on-quarter development has been maybe less worse, if you want, than what have been expected and the fees were rising. You mentioned the financial part of it and you see volumes growing, in particular in France and in Belgium, 5%, 10%, leading me to think that there is a strong amount of pressure on normal transactional banking fees. So I just wanted to try to understand the pricing and the margin dynamics in these 2 areas of the revenues in the Domestic Markets. Now obviously, there's been -- second question on the REIT, on the asset portfolio. There is also First Hawaiian, which at the turn, I think, of 2015, you said that, obviously, you would IPO when you have done the first bit. Is the plan still to dispose of the rest of the business? Or now you're happy with the 60-odd percent stake that you have? And lastly, I wanted to ask about the cost in CIB. So the cost in CIB, they have been -- they have fallen this quarter, but the revenues also have. I'm just trying to understand what's in the bag in terms of reduction versus what is variable and what will come back if revenues pick up. So say if revenues had been flat, what would the cost line have done, if you can quantify these type of things?
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Lars Machenil, BNP Paribas SA - CFO [9]
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Thank you for your 3 questions. So if we indeed look at the top line in France and Belgian Retail, there is a different dynamic. If you take, for example, the net interest income, the dynamic between the 2 countries is different. In net interest income, for example, in Belgium, which we're paying for deposits, Belgium has basically adapted the price of deposits with the lowering in the interest rate. So that has been a dynamic which is different, where you basically see that now in France, it is picking up, it's turning. Whereas in Belgium, it is having the impact of the lowering of the deposits, which is coming to the end and which now has to shift into repricing on the asset side. When it comes to fees, in an environment like we've seen over the last couple of quarters, there is, of course, a further demand on, for example, assets under management, Private Banking-related activities which generate fees. And so that is the focus that we do and that is basically leading to a pickup in fees. For the rest when it comes to pricing, it is, of course, of transaction banking, it is, of course, a competitive market. Nevertheless, in the overall pricing in a lower rate environment, you can imagine that the pricing is done in an appropriate way. And when it comes to your question on First Hawaiian, as I said before, we're not in a rush. So yes, we announced that Hawaii is a bit further away from our core activities when it comes to cross-selling and the related stuff. However, as I said, we're not in a rush. So we'll take the time and we'll see how these things evolve. And when it comes to the cost of CIB, yes, of course, there is a part of the costs which are variable related in the activities, but let's be very fair that the large part of the costs are the more traditional kind of fixed part, which is being ramped down with the initiatives that we took. So that would be my answers.
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Jean-Francois Neuez, Goldman Sachs Group Inc., Research Division - Executive Director [10]
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But so on First Hawaii, you still plan to leave the whole thing, regardless of the timing? Just to be clear.
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Lars Machenil, BNP Paribas SA - CFO [11]
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No, as I said, we have the intention to basically do so, but as I said, we're not in a rush. I mean, if markets are -- should happen, so we'll take the time to complete this.
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Operator [12]
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Next question from Mr. Bruce Hamilton from Morgan Stanley.
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Bruce Allan Hamilton, Morgan Stanley, Research Division - Equity Analyst [13]
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Firstly, just looking at the outlook for Arval, obviously, a number of competitors have given fairly cautious commentary on the outlook for auto leasing, given the state of the resale market due to residuals. So I just wanted any sort of comments there. Obviously, Q3 looked fine as it was. Secondly, just looking at the Compte-Nickel deal, which allows you to reach the retail customers via an alternative source to the normal branch network, plus the growth in Hello bank!, does that give you any scope to accelerate the optimization efforts in the branch network? Or is that really all captured in the existing cost-reduction plans? And then third and finally, just looking at the equities business within CIB, you're obviously still showing pretty decent year-over-year momentum versus peers. But just to understand the sequential weakness and volatility, I take it that's a function of the mix of the business, the weakness in derivative structuring in particular. And I just wanted to test whether there had been any change in sort of the environment coming into Q4 or any change in competitive dynamics to make you, perhaps, more optimistic as we look forward?
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Lars Machenil, BNP Paribas SA - CFO [14]
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Bruce, not sure I understood your last question. Could you rephrase?
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Bruce Allan Hamilton, Morgan Stanley, Research Division - Equity Analyst [15]
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Yes, sorry. So on the equities business, you're up year-over-year, but obviously, the sequential move down is quite a lot worse than many peers. I suspect that, that speaks to the skew of the business to derivatives and structuring, which has been soft. But I just wanted to get a sense if that's right, whether you see any improvements as we run into Q4 or whether we should expect that it continues to remain quite challenged.
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Lars Machenil, BNP Paribas SA - CFO [16]
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All right, Bruce, thank you so much. So if we look at first at Arval, so our car leasing activities. As you know, we have basically honed our overall approach where we basically, initially, when we buy the cars in order to basically lease them, we already make a selection to be sure that we have cars that can be "easily resold." Secondly, we also look at the overall pricing and the duration of those contracts. And thirdly, as you know, we basically initiate the cars in a first-hand market and we basically resell them in a second-hand car market. And so that basically gives us sufficient flexibility in pricing and not to be totally dependent on things that might happen in that first-hand kind of market. And that is what you see in our top line evolution, which basically holds up well. And secondly, when it comes to Nickel, so indeed in France, we basically have 4 different approaches to interface with a client. So 2 of them are basically the standard branch interfacing that we do. Then we have Hello bank! that we launched already a couple of years ago, which is the full bank in a digital way. And now we have the Nickel, which is basically providing simplified banking at the different pricing and so forth. And so this is basically, we want to have those 4 offerings and basically see how our customers shift eventually from one to the other and that is then, basically, the speed at which we will optimize our branch network, which is what we have always been doing and this is what we will continue to do. When we look on your question on equities, so yes, we had overall a good run. And when you look at the Q3 versus before, there is typically the summer which is impacting our -- the evolution. So Bruce, that would be my answers.
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Operator [17]
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Next question from Mr. Pierre Chedeville from Crédit Mutuel CIC.
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Pierre Chedeville, CM-CIC Market Solutions, Research Division - Analyst [18]
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My first question is about companies accounted by the equity method in the Insurance business, where there was SBI Life. You told us that in 2016, the net -- the participation of SBI Life in that line was around 15% of the global amount in Insurance. And I wanted to know what was -- what were the other companies participating in this equity method line in the Insurance business. And do we have any other JV in emerging market that could be potential capital gain or things like that in the future? My second question is also related to another equity method line. In Belgium, this quarter, we have a significant, I would say, EUR 17 million, and I wanted to know what was it about and what kind of subsidiary is it. And my last question is related to the Asset Management business. Compared with some of your peers, I'm thinking about Amundi or Dutch Asset Management, net inflows were quite disappointing in absolute and relative terms. I was wondering if it was the effect of treasury products with corporates and what was your net inflows with retail networks and institutionals and corporate?
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Lars Machenil, BNP Paribas SA - CFO [19]
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Thank you, Pierre. When it comes to your first question on equity method, when it comes to Insurance, the one other relevant is Ageas that's the other one. Then when it comes to Belgium, there is nothing in particular. It's a mix of smaller entities or smaller -- so it's not a particular element that is at stake. When it comes to the net inflow in the third quarter, it's basically -- yes, it has been a calmer period a bit across the board. So in general, it's, of course, the fixed income kind of products by all kind of demands that is a bit lower. And that's basically all I can say on this.
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Operator [20]
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Next question from Madame Delphine Lee from JPMorgan.
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Delphine Lee, JP Morgan Chase & Co, Research Division - Analyst [21]
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Just 2 quick ones on my side, I mean, just first of all, on -- I just wanted to know your thoughts around Basel IV, about the 72.5%, if you, I mean, if you have any color that could give us a little bit of an idea of the impact and how you're thinking about it and the likelihood and maybe timing. The second is on -- just on the assets. Looking at -- so potentially, you could have SBI Life a bit later on, but what about, for example, Ageas, so other assets that you would consider as non-core in terms of your strategy?
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Lars Machenil, BNP Paribas SA - CFO [22]
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Delphine, thank you. When it comes to Basel IV, yes, what can I say, what I observed is that these discussion now are going on for quite a while, yes. There have been discussions a year ago, then again, by this summer, then this again now. And so I remind you that the G20 in Europe, basically said yes, that they have reflections on stabilizing the regulation and that in the end, there should not be a material impact on the capital requirement. So the other thing is what I observed, as you mentioned, one of the impacts that somebody talks about is saying should we have a floor on the credit risk-weighted assets. Whereas, overall, let's not forget, one should not look just at one sliver. I think if people want to come up with a stabilization and a uniformization, one has to look at the credit risk rates but also the FRTB and [so I'll end]. So one has to come up with an overall approach, which applies to all and which is probably taking some time because, for example, some other regions are reflecting if the FRTB is what they want to do. So that is the discussion which is ongoing and we'll see how this one settles. When it comes to...
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Delphine Lee, JP Morgan Chase & Co, Research Division - Analyst [23]
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Yes, just a follow-up, if FRTB is, I mean, I think at European level, it's quite confirmed that this is going ahead, there is no -- or is there any plans to amend this? Or did I miss something on here, on market risk?
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Lars Machenil, BNP Paribas SA - CFO [24]
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I think, Delphine, you're more in the secret of the gods than I am. But if I talk to some U.S. banks, for example, yours, then there is a reflection or there is an observation that may be on the U.S. side, there is not necessarily a full review of seeing if the current FRTB should be implemented or if it should be further evolved. And so I think that's all part of the discussion. One cannot look at one sliver of regulation without looking at the other slivers. And so that is why it's taking time to come up with a comprehensive and overall approach, which basically makes sense. So I think here -- Yes, go ahead.
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Delphine Lee, JP Morgan Chase & Co, Research Division - Analyst [25]
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And on other items like operational risk or mortgage-risk rates, is there anything which is also on the table, or not really?
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Lars Machenil, BNP Paribas SA - CFO [26]
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No, but as you say, that's a bit of a discussion. When it comes, for example, the FRTB, some say we shouldn't do FRTB, others say well, we should have FRTB but we should not do the [non-multiple] risk, we should not do this and we should not do that. And it's the same thing when it comes to credit risk. So there's many different routes and discussion elements that are on the table. So we have to let that go on and see once they have come up with an overall approach. As I said, which should be, and what basically the G20 in Europe said, it should be stabilizing the regulation and there should be no material impact on the capital. When it comes to your asset question, if I may, it's a good question. But I will basically, if something happens, I cannot say this. For the moment, we are happy with all the participations that we have. If that changes in some time, we'll make a statement about that.
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Operator [27]
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Next question from Mr. Omar Fall from Mediobanca.
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Omar Fall, [28]
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Firstly, why has loan growth slowed so much in Corporate Banking, please? I think it's running at just 1% now against the high single digits at the beginning of the year. Secondly, can you give us a sense of the outlook for asset quality in Personal Finance? Should we expect that to trend towards the 170 bp target? Or are these product mix changes likely to offset that? Also, what exactly are these product mix changes? That would be helpful. And then just to help us with our modeling, could you give us an indication of the profit or revenue contribution of the GM European car financing acquisition that I think is closing in Q4? And sorry, lastly, what was the actual value of the provision write-back in Europe? And you've given this in the past, but I can't see it this quarter. I'm assuming it's in the Ukraine.
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Lars Machenil, BNP Paribas SA - CFO [29]
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Omar, thanks. If you look at -- with respect to your question on the corporate, the lending activity, let's be very fair, as the world has changed a bit, it's a bit more cyclical. So the lending goes on and then there is some securitization also going on. So typically, there is a pickup at the beginning of the year and then with a bit of a slowdown, as we said, over the summer. So that is the more cyclical kind of nature in what we see. When it comes to the asset quality of Personal Finance, we've indeed focused on an improvement of that cost of risk. So for example, what do we do? We focus on products which have a collateral. So instead of just having a credit loan, for example, we shift more into car lending so that -- and I know the moment you drive the car out of the dealership, it loses some money, but it doesn't go to zero. So that means there is a collateral if ever the customer has trouble paying back the car. So that is why, basically, the overall cost of risk expressed as basis points overall outstanding has a trend to improve. For the moment, it's a bit also flatter by other effects. So we basically say that overall, we would have the one that are below 170 basis points that we go for. When it look -- when we -- on GM, I would be happy to basically give you the insights. So it looks like -- but I would prefer to give you the final number once we really have closed and we can give you the numbers. But what we had at end of 2016, there was a pretax profit which was gravitating around EUR 120 million. So but let's come back or let's discuss once the closing is done and we have that information. So that would be my answers, Omar.
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Omar Fall, [30]
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Just on the provision write-back in Europe-Med?
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Lars Machenil, BNP Paribas SA - CFO [31]
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Oh, yes. No, it is not very material. It's indeed in the tens of millions and it's in the area of indeed, Eastern Europe.
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Omar Fall, [32]
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Okay. And very sorry, but I'm not sure if I caught whether you gave a value for the residual risk at Arval? I might have just missed that.
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Lars Machenil, BNP Paribas SA - CFO [33]
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Sure. So we basically -- talked about -- the residual risk, no, we don't disclose the residual risk. What we said is that the evolutions that you might have with respect to the pricing of the residual risk is basically managed by us. As I said, initially by doing the acquisition of the cars and of the selection of the cars so that they are resellable in an easy way. And secondly, as I said, we originate them in one country and we basically sell them in a second, in a market which is dominated by a second-hand car environment. So that is basically why we said we don't -- we really think that overall impact is very manageable, which is what you see in our profit and loss.
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Operator [34]
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Next question from Mr. Jon Peace from Crédit Suisse.
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Karl Jonathan Peace, Crédit Suisse AG, Research Division - MD [35]
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My first question was on Europe-Mediterranean, I think at the 9-month stage, even adjusted for scope and exchange rates, revenues were up 2%. In your business plan, you were looking for 10% CAGR. So do you think you'll still be able to get there? And if so, how? And then my second question is just on the risk-weighted asset evolution into year-end. Do you expect to see any upward pressure from the ECB TRIM exercise?
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Lars Machenil, BNP Paribas SA - CFO [36]
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Thank you for your questions. When it comes to, indeed, Europe-Mediterranean, as you see in this quarter results, there is a little bit of a dip in the top line, which is stemming from the repricing in Turkey. So in Turkey, there is a repricing of the deposit ratios on the upside, and therefore, we basically will have to adapt our pricing on the asset side. But that pricing on the asset side, that takes time. It's a bit of the same thing you see in Belgium, right? The deposits, it basically happens on the balance sheet. When it comes on the assets, it basically takes that fraction of the assets which are repriced. So that is basically what we go for. So we still believe that overall, this is good. The second thing that you should know is, for example, in Turkey, even if there is some overall pressure on top line, there is a compensation which is happening in the cost of risk line, because there is also a focus on the better quality leading to that. So overall, I think it's a point of attention, yes, but that's basically it. When it comes to your question on RWA evolution and TRIM, I think you should call Germany. So for the moment, there is nothing that we can mention with respect to that.
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Operator [37]
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Next question from Mr. Jean-Pierre Lambert from KBW.
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Jean-Pierre Lambert, Keefe, Bruyette & Woods Limited, Research Division - SVP and United Kingdom Analyst [38]
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Three questions on my side, if possible, Lars. First one, on the guidance you gave for French Retail revenue, the plus -- the 1%, is that full year? Or is it fourth quarter guidance? And also, what led you to change your estimates for the full year? Second question is related to the leverage ratio, which slightly went down this quarter. I was wondering if you have some indications of what were the moving parts? And finally, regarding cross-border consolidation, your Chairman Jean Lemierre indicated that cross-border consolidations are unlikely for now. Do we read this as meaning there is no appetite on your side for such transactions?
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Lars Machenil, BNP Paribas SA - CFO [39]
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Jean-Pierre, thank you. On your first question on French and the guidance we gave. So the guidance we gave is basically for the full year 2017. So initially, at the beginning of the year, we guided that we anticipated a minus 3%. And as we saw the evolution in the price again and the volumes, we review that to be minus 1%. So it's an improvement from what we said earlier. And I know -- so going forward, we will not give guidance anymore. You see once we've given guidance and we make a correction, even a positive one, we have to keep on repeating it. When it comes to leverage, leverage, there's really nothing spectacular to mention. It is just the balance sheet which picked up a bit towards the end of the quarter and that's basically what has done it. So as you know, for the moment, the current regulation suggests that the leverage ratio in Europe should be 3%. There can be an eventual G-SIB add-on and that's why we basically put ourself to be above 4%, but that's it. So everything which is above 4%, I am a very happy camper and that's basically where we stand. So there's nothing else to mention. When it comes to the cross-border, yes, the cross-border, so as you know, what we are doing since a couple of years since there has been that regulation which impacts a bit cross-border capital, is that we've been doing bolt-on acquisitions. So if you look, for example, in Germany where we have a plan in organic growth, and that's basically what we're doing in our specialized businesses. Because indeed, it is true that if you look, for example, at the G-SIB, if you are -- I'm rounding the numbers, but if you are a bank with a balance sheet of 1,000 billion, and you are a U.S. bank or you are a Chinese bank, you don't get any additional capital from G-SIB. Whereas if you are spread over several countries in Europe, you basically do. So that is basically what we guided at. So for the moment, there is no regulation that basically supports these kind of evolutions. So Jean-Pierre, that would be my answers.
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Operator [40]
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Next question from Madame Lorraine Quoirez from UBS.
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Lorraine Quoirez, UBS Investment Bank, Research Division - Director and Equity Analyst [41]
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Just a few questions for me. The first one is on the tax rates. Obviously, we hear quite a lot of things, firstly, perhaps in Belgium, with a lower tax rate going forward and also in France. It looks like the government is looking to find 5 billion to fund the reimbursement of the dividend tax. So I was wondering whether you could give us a little bit of color for what we should think for next year in terms of tax rate. The second thing is regarding IFRS 17. I was wondering if maybe you could explain to us how this will impact the account for the Insurance business. And that will be it.
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Lars Machenil, BNP Paribas SA - CFO [42]
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Thank you, Lorraine. When it comes to tax rate, honestly, your guess is as good as mine. So I haven't seen, for the moment, any legal text, basically, says to change. Now let's be clear, let's be very simple, if these things would happen, if you just do the math, so if you suppose that our overall tax rate of BNP Paribas would go down, for example, with one point because the major countries bring it down for several points, well, you can do your math and see basically what is improved. So of course, if the tax rate would go down, that is something which should be supportive of our overall evolution. But as I said, so far, I haven't seen any text that basically supports this. So there are reflections going on. So the moment they are cast in stone of legal text, we'll let you know. So that's basically that. And so for IFRS 17, that has basically no real impact on the day-to-day of the accounts. So Lorraine, those would be my answers.
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Lorraine Quoirez, UBS Investment Bank, Research Division - Director and Equity Analyst [43]
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So just to be clear, in Belgium, we should not expect anything in Q4, like special items in the P&L related to...
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Lars Machenil, BNP Paribas SA - CFO [44]
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No, I think what your question is -- so let's remember how this technically works. If at some point in time a country decides to lower the tax rate, as of that moment going forward in the accounts, for example, next year, we will have a lower tax rate. So basically, our bottom line will improve by that amount. Now what can happen is that if in the past you have losses that you activated in what is called deferred tax assets, DTAs, having a lower tax rate might basically mean that you would have some impairment of these tax rates. But that's it, basically. And that has no impact on the capital. So from that point of view, that's basically it. But in the end, there is -- going forward, there is always a positive impact. But as I said, it has to be voted and we will let you know of the impact.
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Lorraine Quoirez, UBS Investment Bank, Research Division - Director and Equity Analyst [45]
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So on DTA in Q4, you'll guide for 0 impact?
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Lars Machenil, BNP Paribas SA - CFO [46]
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No, no. The thing is what we said is that in some situations, our DTA situation, like for example, in Belgium is rather complex in the sense that the activations that have happened years ago have not necessarily be complete. So that means that if there is a tax-rate reduction, which might lead to some impairment of DTAs, it would still mean that some DTAs -- some losses can be activated. And so the overall calculation of that is quite complex, and we basically need the text to do those impacts. So it cannot be included that there is somewhat of an impact on DTA impairment, but it's too early to say.
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Operator [47]
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Next question from Mr. Stefan Stalmann from Autonomous Research.
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Stefan-Michael Stalmann, Autonomous Research LLP - Partner, Swiss and French Banks [48]
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A couple of questions, some of them follow-ups. First one on the Indian joint venture, SBI. Could you make it clear whether that is actually a strategic activity for you going forward? Do you have strategic interest in the Indian insurance market? Second point on Turkey. You made some, let's say, relatively constructive comments on business conditions, yet you have fully impaired your goodwill. What is driving the timing of that? And what are you seeing, maybe a couple of years out in Turkey to justify this full impairment? Or is it just an act of prudence? And maybe the final point, going back to the dividend tax, assuming that is enacted, you would probably see a benefit from that. Do you expect this benefit to be taken in the fourth quarter? And can you guide on how big this benefit could be?
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Lars Machenil, BNP Paribas SA - CFO [49]
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Stefan, thank you. As you know, it's -- some of the activity that we have in which we have participations, like in India and like what we have in Belgium, they basically make sense for us because we can also lever on the experiences we have. So that's basically what we have done. And we've just, in this case, participated in a (inaudible) which was done by the other participants. When it comes to Turkey, yes, in Turkey, we have just been conservative. So if we see that there is a downtick on the top line, which is what you've seen this quarter, we basically are very conservative and we say if this would be the steady state, what would be the impact? And that's basically what we do. So in our impairment testing, as you know, we are boring and conservative -- we have a boring and conservative approach. So there's nothing more to say than that. And when it comes to the dividend tax, well -- so it all depends on what the text is. You see, we can go on for hours without having a text. So one could assume that, for example, if Belgium would vote a text, that they would say that as of next year the corporate tax rate would be, I don't know what, you pick a number. I'm not going to say a number, because otherwise we're going to [go on] for hours and I cannot say it. But it will specify when it is applicable, how it is applicable, if there are essential thresholds. So as long as that is not clear, we cannot say. But one can assume that the minimum text will say what the new corporate tax rate is, and as of what moment, let's say, next year, or in France, it can be 2020 or whatever, they will say what the period is in which it is applicable. And once we know all that, we can then do the estimate and see what it does for our multiyear plan and what it does for our balance sheet.
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Stefan-Michael Stalmann, Autonomous Research LLP - Partner, Swiss and French Banks [50]
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Just a follow-up. I'm actually less interested in the ongoing impact of different tax rates. I'm more interested in the dividend tax in France and the abolishment of that seems to be fairly certain. Can you guide on the impact there?
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Lars Machenil, BNP Paribas SA - CFO [51]
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Here, also, sir, as long as we don't -- haven't seen that because, I mean, there can be an abolishment of this, there can be something else that is being replaced. So there's not much we can say. So we'll have to wait what the tax is or what the text is when it comes and then we'll let you know what the overall impact is, if there is one.
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Operator [52]
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Next question from Anke Reingen from Royal Bank of America.
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Anke Reingen, RBC Capital Markets, LLC, Research Division - Analyst [53]
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It's from Royal Bank of Canada and it's Anke Reingen. Two questions. First, I'm not quite sure if that was just answered, but your goodwill impairment on the Turkish operation, should we read anything into it with respect to the targets you have given at the Investor Day earlier this year about Europe-Med? And then secondly, just on the cost control, given the seasonal slowdown, I was hoping the cost savings would be coming through a bit faster or is that just -- should be all of them -- seeing coming through in Q4? And I guess, this is all going to plan, but I just wondered if you couldn't be running a bit fast on your cost savings, if the revenues are coming down a bit more.
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Lars Machenil, BNP Paribas SA - CFO [54]
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Sure, Anke, thank you. No, when it comes to the goodwill in Turkey, it's just, as I said, we're having a very conservative approach to goodwill. So that's basically it. So there's nothing else to read into that. When it comes to our cost control, let's not forget that our current plan 2020 is a tad different than the one that we had before. The one that we had in the previous plan called Simple & Efficient, really had as objective to make things simple and efficient. Whereas this time, we look at how the customer journeys are changing, how we can adapt to them by digitalization. And then as a consequence, the savings we can capture because in those digitalization, maybe the customer does things himself or maybe other systems do it and so forth. So that is why it takes a bit more time and it's difficult to accelerate those savings. So that's basically my 2 answers on that.
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Operator [55]
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Next question from Mr. Piers Brown from Macquarie.
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Piers Brown, Macquarie Research - Analyst [56]
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Lars, I have just got 2 left, actually. One is on the risk-weighted asset development. So you're down quarter-on-quarter, which you have explained is due to, largely due to foreign exchange moves. But I'm sort of starting to reconcile this, because if I look at the loan-growth trends, even on constant scope and exchange rates, they're pretty much up in every division. And the leverage assets look like they're up a couple of percent as well quarter-on-quarter. So the question is, is there anything else going on in terms of the risk-weighted asset number in terms of model or methodology changes, which is pushing that number lower? And then the second question is on Germany. The termination of the consumer finance joint venture with Commerzbank, I think that's about a EUR 3.5 billion book of consumer credit that's been ceded to Commerzbank, I'm just interested to know, in terms of looking ahead, do you feel you need an alternative partner, a branch-based partner in Germany or do you think that you now have a sufficiently strong digital presence in the market to be able to compete in consumer finance without branch support?
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Lars Machenil, BNP Paribas SA - CFO [57]
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Yes, Piers, thanks. No, you're absolutely right. If you look at our RWA evolution, as we mentioned, it's indeed the ForEx which basically keeps it flat. Let's not forget there is 2 things first on that one, which explains a bit how the volume growth is coherent with that. So the first thing is that for this quarter, the market risk is very low. If you've seen our VaR, I have hardly seen a VaR that low. So that basically means the market risk is low. Secondly, as you know, part of what we do is we have old portfolio -- older portfolios which basically, in the new regulation, do not yield what is expected and we basically get out of those products whenever we can. So that's the 2 reasons. So yes, there is indeed volume uptick. There is a compensation coming from the fact that the ForEx is going in the other way around. There is optimization of heritage kind of structures and then there is the market risk, which is kind of low. So that's basically it. And on the leverage ratio, yes, sadly, if you look at the leverage, which is not just the balance sheet, so the leverage is a selection of elements and then constraints. So you cannot really read honestly what intrinsic evolution is. So the main evolution on RWA is the one that I just mentioned. When it comes to Commerz in Germany, yes, we used to have 50% of something that was owned 100% with Commerz and now we have 100% of 50%. And as you mentioned, we basically split the one which are in the branches are back to Commerz and we have the other one. Now as you know, in our plan that we have in Germany, it's focused a lot around the specialized business. So indeed, what we're doing with Consors or what we're doing with Corporate Banking is we have the kind of distribution angles that we believe are appropriate to capture the growth that we have in the plan. And that's basically it. And let's not forget, from time to time, we can do or we have done and we are doing bolt-on acquisition in Germany, like, for example, General Motors, that is supposed to be announced somewhere shortly. So Piers, that would be my answers.
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Operator [58]
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Next question from Mr. Matthew Clark from MainFirst.
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Jonathan Matthew Balfour Clark, MainFirst Bank AG, Research Division - Director [59]
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Two follow-up questions from me, I'm afraid. Firstly, on the Personal Finance division, it looks like the revenues are now tracking the volumes a bit more than they have been in recent quarters. Should we interpret that as a big mix shift away from flat-screen TVs and towards car loans is now over? It is kind of -- or should we expect that trend, and therefore, the mix-shift pressure on top line margins to come back in coming quarters? And then second question is going back to French Retail Banking, comments and the comments on Bloomberg earlier this morning about a turnaround end of 2018, start of 2019. You said earlier you don't expect a turn in the interest rate environment in 2018. When you say that, are you just saying you don't expect the CB to raise rates or that you don't expect to see any improvement in your P&L from the interest rate environment? Because I would assume that your P&L is affected with a lag from whatever happens in the outside world. So maybe if you could just clarify your comments there a bit more and maybe give us an idea of when, from your P&L perspective, the low rate headwind should be coming to an end?
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Lars Machenil, BNP Paribas SA - CFO [60]
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Sure, Matthew. When it comes to Personal Finance, indeed, the evolution that we are seeing by shifting in the more collateralized kind of products will start to taper off. So it's something that we started several quarters ago and so the impact will be tapering off going forward. Then when it comes to French now, as I said, the main thing was, it's probably a misquoting on Bloomberg. What I really said is that when we gave a forecast for the year 2017 and top line, I basically requalify that. When it comes to the question on the rates, you're right. So even if there is a pickup in rates, it basically takes 2 to 3 years before we have the full-fledged impact that is happening from that evolution. And so we basically said that in the plan, as we have -- we don't have a specific point that we've taken into the plan and we haven't taken the impact, at least on the P&L in 2018.
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Operator [61]
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Last question from Mr. Alex Koagne from Natixis.
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Alex Koagne, Natixis S.A., Research Division - Analyst [62]
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Just a follow-up question from me on M&A. On the M&A basically, is it fair to consider that if we have a full implementation of the banking union, it could be a game changer for M&A, cross-border M&A in the Eurozone, as the Eurozone should be considered as one country. And just staying on this topic, I'm just trying to understand how the ECB and the Financial Stability Board are communicating, because my understanding is that the ECB is pushing for more cross-border M&A, but at the same time, banks are reluctant to do so because of potential ECB buffer increase. So I'm just trying to understand what is or could be the game between the ECB and the Financial Stability Board? If you have a foot on that, that would be helpful.
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Lars Machenil, BNP Paribas SA - CFO [63]
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Sure, Alex. As a reminder, what basically Europe said a couple of years ago is that in order to have this pan-European kind of market, you would need a supervisory mechanism, you would need a resolution mechanism and you would need a deposit-guarantee mechanism. So the first 2 are there. So probably what Europe is waiting for is basically the implementation of that third one. So I guess that's basically what the status is. So Alex, that would be answer.
So I guess, this was the last one -- go ahead, operator.
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Operator [64]
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No, sorry. We don't have any more questions. Back to you for the conclusion.
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Lars Machenil, BNP Paribas SA - CFO [65]
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All right. So I want to thank you for your kind attention. You've seen that we have, overall, a good business development in an improved economic environment in Europe. Nevertheless, there was an unfavorable market context this quarter. We have EUR 2 billion bottom line, a good level of income, prudential ratios like, for example, the common equity Tier 1 are doing well at 11.8%. And we're off to a good start of the plan. Thank you so much. Have a good day. Bye-bye.
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Operator [66]
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Ladies and gentlemen, this concludes the conference call of BNP Paribas' Third Quarter 2017 Results. Thank you for your participation. You may now disconnect.
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