BNP Paribas S.A.

Thank you. Good afternoon, fine ladies and gentlemen.

Trust you are doing well and welcome to BNP Paribas second quarter 2020 results presentation. Welcome from a sun-drenched Paris, where temperatures has reached 40 degrees or above 100 for those using body temperature as a yardstick.

In the usual way, I'll take you through the first three chapters of the slides, which I assume you have under your eyes and this before handing it back to you for Q&A. In a nutshell, the second quarter 2020 has seen certain activities being impacted by lockdown measures, especially in April, as far as Europe is concerned, with June showing a rebound in such impacted activities in most cases to pre-crisis levels.

BNP Paribas is financially very sound and has a diversified platform allowing it to fully serve the economy, as you can see from our revenues being up 4% from seeing very close to customers existing and new. As such, the second quarter confirms our overall guidance.

Before looking at slide 3, introducing the second quarter results, I want to take this opportunity to thank all the teams of the bank that have mobilized resources and expertise. Together with our diversified banking model, our effectiveness to support clients and the economy across Europe and beyond in front of this unprecedented health crisis has been proven.

And this ability to broadly finance the economy is the result of long-term work undertaken by the group to serve its individual, corporate and institutional clients. It is a reflection of its financial soundness, the diversification and integration of its businesses, its close relationship with its client, a prudent risk management and execution power of its platforms.

This platform has been bearing fruits and raising for its clients globally in excess of €250 billion in financing during the first half 2020, out of which €166 billion for European clients, over €45 billion for sovereign issuers, over €90 billion euros in syndicated loans and over €150 billion in bonds. Besides, since mid-March BNP Paribas has participated in 70, seven zero percent, of syndicated loans and 53% of bonds issues in Europe, Middle East and Africa.

On the other hand, the group has also contributed very proactively to the successful rollout of governmental support measures, including safe guaranteed loans. As such, close to 90,000 state guaranteed loans have been granted in the group retail networks as at June 30th.

If with this [ph] we can move to slide 4, we see that the group revenues reflected the strength of the group diversified and integrated model that I talked about with revenues at €11.7 billion, up 4% on the same quarter a year ago. Costs moreover went down 1.3% year-on-year, thus mechanically boosting gross operating income by 14.5%.

Our cost of risk rose to 65 basis points over outstanding, out of which 15 basis points, one, five, basis points consist [ph] in ex-ante provisioning for expected losses on the back of updated macroeconomic anticipations. So this is the element of IFRS 9 forward-looking.

Our net income for the second quarter came in at €2.3 billion, down 6.8% year-on-year, in line with the group's 2020 objectives. Finally, our common equity Tier 1 ratio stood at 12.4% confirming the strength of our balance sheet.

While on ratios the return on tangible equity clocked in at 8.7%. If with this [ph] you follow me and we go on to slide 5, which provides more detail on the impact of public health measures on the activities.

In a nutshell, lockdown measures impacted negatively transaction flows, as well as new loan production, especially for households, thus corresponding volumes reached a low point in April, May and bounced back from such low point in the latter part of the quarter, following the easing of the lockdown measures and a stronger than anticipated rebound in the activity - economic activity as evidenced by the PMI Composite index evolution on this slide. Conversely, certain businesses have witnessed exceptionally high levels of activity, in particular in corporate banking, but also global market and or retail banking networks on the back of the specific needs of the economy during this unprecedented crisis.

If with this [ph] you can swipe because I suppose you're on digital format to slide 10 for the revenues of the operating divisions. As said in the introduction, BNP Paribas remain fully open for business.

Nevertheless, retail activities at large have been impacted by the lockdown with respect to new business origination. While on the corporate and institutional side clients have quickly and actively managed their liquidity and balance sheet in anticipation of the effect of the health crisis.

In this context, both domestic markets and international financial services sold [ph] in total are retail activities. Should their revenues showed resilience in a context negatively impacted by the effect of the lockdown measures on new business origination and persistent low interest rate environment.

On the other hand, revenues in corporate and institutional banking were sharply up 33% as a result of the very high level of activity from all clients segments. If we now switch to slide 11, to see how the cost accompanied the evolution in the operating divisions.

First, domestic markets delivered a 2.8% reduction in cost and particularly in the networks with a drop of 3.6%. IFS, our International Financial Services saw a 5.7% drop in operating expenses or 4.2% on a like-for-like basis.

Thanks to the effect of its cost-saving measures. On the other hand, CIB operated with very positive jaws, I don't have another word for it, while it costs rose by 11% year-on-year due to the very high level of activities.

If we now move to the slide - we're starting at slide 12, where we talk about the cost of risk. So first, our updating of macroeconomic anticipations led to an uptick in ex-ante provisioning of expected losses, clocking in, this uptick at €329 million this quarter.

And this is equivalent to 15 basis points of outstanding customer loans. Our central scenario has taken into account several factors, including the longer than originally expected duration of lockdowns, the implementation of specific public health measures in certain sectors and the impact of updated measures undertaken by authorities to support the economy.

On a macro level, as you can see from the illustration on the slide, the scenario assumes a gradual recovery with a return to a level of GDP comparable to 2019, not before mid-2022. This of course, as I mentioned also before bearing any new crisis.

Last but not least, the level of ex-ante provisioning reflects also the quality of BNP Paribas portfolio, as well as its prudent and proactive risk management. If we now take the slides one after the other and we start with Corporate Banking on slide 13.

Cost of risk was up from low levels in the last few years on the back of write-backs and it clocked in at €366 million, due to the €52 million euros ex-ante provisioning of expected losses. If we now turn to the other businesses, which you can see as on slide 14.

Cost of risk remain low In French retail, so its downward trend at BEL [ph] in Italy interrupted by the ex-ante provisioning of expected losses and there is a moderate increase in Belgium retail with the impact of a specific file. In other retail businesses, personal finance saw an increase year-on-year on the back of a 70 basis points ex-ante provisioning for expected losses, as well as a low cost of risk in the second quarter 2019 due to some provision write-backs.

Lastly, costs of risk increased in Europe Med by 49 basis points and BancWest by 88 basis points, in both cases mainly on the back of the ex-ante provisioning of expected losses. If with this [ph] we synthesize and we leave the P&L and we go into the financial structure, which you see on slide 16.

You can see that the common equity CET1 ratio is up 30 basis points and clocks in at 12.4%, mainly due to the combined effects of the organic capital generation during the quarter. Of course, after taking into account a 50, five, zero percent dividend payout ratio and the effect of regulatory amendments usually referred to as the CRR Quick Fix.

The groups immediately available liquidity reserve rose sharply to a massive €425 billion and the group's Basel III leverage ratio clocked in at 4.0%. If we now go to the last part of the balance sheet, on slide 17, you can see that our net book value per share was up €2, and stands at €81 at the end of June.

And it stands at €71.8 when we look at our tangible net book value per share, which has grown at an annual rate of 7.3% since 2008, highlighting our continued value creation through the cycle. Finally, I remind you of the recent announcements by the ECB with regard to the extension of the temporary and exceptional recommendation not to pay any cash dividends until the end of this year.

You will find on slide 18 some key points on the continuous reinforcements of the group's internal control and compliance system. And if we go to slide 20, where you see a reflection of on our ambitious policy of engagement in society.

And here I would like to draw your attention to our strengthened commitment to withdraw completely from thermal coal financing by 2030 in the EU and OECD and by 2040 in the rest of the world. The effect is that the group does no longer finance actors that develop additional thermal coal capacity or those that do not have coal active plans consistence with our target exit dates.

The group's strategy in Corporate Social Responsibility, CSR has been consistently recognized and BNP Paribas has once again won the Western Europe's Banks best bank for corporate responsibility in 2020, as awarded by the Euromoney. I will now walk you through the results of each operating division.

And let's start with domestic markets on slide 23. Activity was up in particular with a very strong mobilization towards supporting clients during the health crisis.

You can see for instance that close to 70,000 state guarantee loans were granted, while close to 250,000 clients benefited from a moratorium. In addition, after a low point in April on the back of lockdown measures, the production of new loans to households, volume of payments by cards, as well as new businesses at Arval and Leasing Solutions bounced back later in the second quarter.

As a result, domestic market showed a solid loan growth, in particular in the French and Belgian retail networks and the specialized businesses. It also showed a steady rise in deposits in all retail networks.

The strength of our digital platforms is evidenced in particular by a steady increase in the number of customers active on mobile apps, as well as in the number of daily connections during and after the respective lockdowns. If we focus now on the P&L, revenues showed resilience, but we are down 5.2% on last year.

This was due to the negative impact of the slower new business origination during lockdown, especially on fees, as well as a persistent lower rate environment which were only partially offset by higher loan volumes and a stronger activity in specialized business, and particular if you look at Consorsbank in Germany. As mentioned earlier, we have seen a pickup in new origination in June.

In most cases back to pre-crisis level, which pave the way for healthier volumes, margins and fees going forward. Operating costs were down 2.8% year-on-year, with cost savings in the networks reaching 3.6%.

Pre-tax income was down 21% year-on-year on the back of higher cost of risk, due in particular to the effect of the ex-ante provisioning of expected losses. If we now browse to the different business lines, in slide 24 to 27, I'd like to highlight the following points.

On French retail banking, was very active and mobilized in providing support to the economy with close to 57,000 state guaranteed loans amounting in aggregate to circa €15 billion euros granted to customers. Beside, the equity investment envelope was doubled to €4 billion to support the development of French small and mid-sized companies between now and 2024.

As said, after a low point in April, French retail banking witnessed a rebound in card payments, as well as an acceleration in new loan production to households in the latter part of the quarter. Nevertheless, revenues were down given lower activity during lockdown on top of the low rate environment, which was only partially offset by enhanced credit margins.

As I said earlier, transactions fell during lockdown, but most came back strongly to pre-crisis levels in June. Costs were down 2.5% with the ongoing impact of cost optimization measures, pre-tax income down 43% on the same quarter a year ago.

If we now go south [ph] if we go to P&L, we see, which granted moratoria to close to 29,000 clients and saw a pickup in the number of state guaranteed loans in June with close to 12,000 loans granted at the end of June. Card payments bounced back after a low point in April, suggest [ph] monthly volume in June exceeded pre lockdown levels.

Revenues were down 5% due to the impact of the low interest rate environment, as well as the positioning on clients with a better risk profile on net interest and the impact of lower volumes on fees. Costs down 2.5% with a continued effect of cost savings and adaptation measures.

With cost of risk impacted by ex-ante provisioning of expected losses, pre-tax income was down 28% compared to a year ago. If we now go to the north [ph] and we go to the Belgian retail banking, which granted moratoria to close to 40,000 lines and stepped up the frequency of its contacts with his clients with 94%, nine, four, of its corporate clients having been contacted to assess their needs in response of the crisis.

Activity bounced back during the quarter, as evidenced by the evolution of card payments and the rebound in new mortgage loan production. Revenues were down 4.9% year-on-year due to the impact of low interest rates, the weaker contribution from specialized subsidiaries, only partially offset by high volumes on net interest income.

Fees were up slightly on last year, thanks in particular to good resilience in financial fees. Costs were down 6.8% due to cost reduction measures, including the continuing branch network optimization.

Thus Belgian retail banking operated with positive jaws this quarter. Pre-tax income down 25% due to increase in cost of risk.

Finally, the last part of domestic markets are the specialized businesses, they showed a very good drive and confirmed the swift recovery in activity after a low point in April. For instance, the financed fleet in Arval rose by 7.2% year-on-year and by 2.5% on a year-to-date basis.

Besides, June showed a strong pickup in vehicle orders. Similarly leasing solutions showed financing outstanding at 1.1% on last year and a strong rebound in new lease production in June, driven by information technology and logistics equipment financing.

With market volatility, personal investors saw a sharp rise in orders, an increase in assets under management, in particular at Consorsbank in Germany. As a result, revenues were up 8.2% on last year, with positive jaws effect, thanks to moderate increase in cost to accompany this business activity.

Pre-tax income rose sharply by 15.8%. To wrap up.

In the second quarter, domestic markets was fully mobilized to support the economy, proved resilient in a context strongly impacted by the health crisis and saw a rebound to pre-crisis level in the latter part of the quarter in those activities most affected by lockdown measures. If with this [ph] you turn to slide 28.

You will see that our International Financial Services division recovered its momentum in business activity in the latter part of the quarter. Thus, outstanding loans in the international retail networks were up on last year, with the rebound in new loan production in May and June.

Personal finance saw a decrease in activity due to the temporary closure of its partners points of sale during respective lockdowns, while the unit saw a gradual recovery in new loan production since the low point in April. In IFS, asset gathering units, net asset inflow proved resilient, while assets under management remained affected by the decline in stock market valuations.

Lastly, the real estate service business, which was affected by the slowdown in property transactions, and moreover, impacted by the suspension of construction work saw a gradual recovery following the easing of lockdown measures. When we know look at the P&L, and we start at the top of the P&L, with the revenues they were down 5.5% year-on-year, as the good resilience of international retail networks and the positive impact of the second quarter rebound on insurance revenues, only offset partially the drop in revenues in personal finance and real estate services that I talked about.

Costs were down 5.7% year-on-year on the back of continued cost savings and gains in operating efficiency. With the increase in the cost of risk driven mainly by the impact of ex-ante provisioning of expected losses, IFS pre tax income was down 33% year-on-year.

If we now look through the different businesses that you can find on the slides 29 to 34, I'd like to highlight the following. If we start with Personal Finance, so they recorded a slight decrease in outstanding loans this quarter, due to the temporary closure of its partners points of sale.

New loan production is gradually recovering with the reopening of search point of sale in auto loans in particular, the new loan production in June returned to the level seen in March. To support customers in the health crisis, Personal Finance increased by 50, five, zero percent.

Its resources allocated to after sale and collection and granted close to 470,000 moratoria to its clients as of June 30, with a satisfactory level of return to payment for those first loans that benefited from such payment deferral. Looking at Personal Finance Risk profile, it benefits from the portfolio mix in terms of products and geographies.

For instance, the portfolio of Personal Finance is mainly focused on continental Europe to the tune of 89% of outstandings and has no US exposure. Revenues were down 9.6% on the back of an unfavorable ForEx impact and a drop in new business activity due to the effects of the respective lockdown measures I talked about.

Cost improved by 8.6%, thanks to the sustained cost adaptation efforts. Pre tax income was down 53.7% year-on-year, due to the increase in cost of risk, while on a like-for-like basis, gross operating income remained stable in the first half 2020 compared to a year ago.

If we now go to Europe Med, which saw a 4.5% rise in loans at constant scope and exchange rate. As you know Europe Med is mainly, although it has European its name [ph] but it's basically outside the Eurozone.

So understanding the intrinsic flow, you have to do it at constant scope and exchange rates. And so 4.5% rate in loans with a notable increase in the corporate segment, mainly in Turkey.

New loan prediction and card payments picked up in the latter part of the quarter in June with the easing of lockdown measures. Moreover, digitalization facilitated the implementation of support measures by public authorities with for example 100% of related request made online in Poland.

Overall, on a comparable basis revenues were down 2.4%, while cost evolved by 0.8%, due amongst others to wage drift. Pre tax income on a like-for-like basis was down 44% due to the increase in the cost of risk.

If we now pass the ocean, well, two oceans well depending on where you are, but we go to BancWest on the Californian side, so a strong business drive, with loans up 4.3% and deposits 19%, one, nine, in each case on a comparable basis. BancWest was very actively involved in the implementation of the PPP, the federal support program, aimed at SMEs and granted in total close to 18,000 loans for a total amount of US$3 billion at the end of June.

Revenues were up 3.2% year-on-year on a like-for-like basis, while costs were down 2.4%, therefore generating positive Jaws. However, with cost of risk up 165 million on the second quarter due to ex-ante provisioning of expected losses, pre tax income fell by 86% on a comparable basis.

If we now turn to Insurance, we saw a gradual recovery in savings in Asia and in protection and savings in Europe during the quarter, while more than 20 partnerships were signed in 10 different countries. Besides, the business has no exposure to business interruption risk in France, or exposure outside France is negligible.

Revenues were up 6% year-on-year, thanks in particular to the positive accounting impact of the rebound in financial markets in the second quarter, which was partially offset by the effect of claims. Costs have been improving by 6% compared to a year ago due to cost - good cost containment and pre tax income at €548 million, up 18.9% compared to a year ago.

If you now do the last part of IFS, which is called Wealth and Asset Management, they showed good business resilience. Wealth management benefited from good net asset inflows from large clients in Europe and in Asia.

Asset management business saw strong inflows into money market vehicles of €3 billion, mainly in Europe in the second quarter, as well as strong momentum in thematic [ph] and socially responsible funds since the beginning of the year. Real Estate saw a sharp drop in activity due to the slowdown in property transactions, as I mentioned before, and however, business recovered gradually following the lifting of lockdown measures.

In some, revenues were down 14.6% due to the impact of the low rate environment on net interest income and wealth management, the unfavorable market valuation effect on asset management and the impacts of the lockdown on real estate. Costs were down 5% on the second quarter last year, due to the sharp decrease in costs in real estate services and the effect of the transformation plan measures in particular, net asset management and pre tax income was down 42% year-on-year.

And so this completes the overview of our Retail Banking and Services. And so, if I can now draw your attention to slide 35, on Corporate & Institutional Banking.

This Corporate & Institutional Banking called CIB had a very sustained level of activities in all its client segments in the second quarter, by being available and ready to support the specific needs of corporate and institutional clients during the health crisis. For instance, CIB raised over €160 billion in the second quarter in the global syndicated loan, bond and equity markets for its clients, an increase of 91, nine, one percent compared to the second quarter a year ago.

The division has displayed a driving role in financing the economy by contributing to the smooth functioning of syndicated credit bond and equity markets. And earlier in the quarter, it led several operations that reopened primary markets that have closed at the peak of the crisis.

The platform ensured liquidity on secondary markets by bridging the needs of corporate and sovereigns, borrowing clients and those of investors, institutions and asset managers. That is the key role that the platform does, it brings together all these aspects.

The level of activity of the divisions, businesses, and it exceptional mobilization capacity at the surface of the economy, at the height of the crisis, validate the strategic choices made in recent years to enhance the effectiveness of this integrated model and cooperation between business lines. One example of this is the capital market financing platform that was created late 2018.

This CIB platform is also benefiting from the greater number of client interactions made possible by the development of digital platforms in the various business lines, as well as from operating efficiency gains that have facilitated rapid adaptation of the setup during the health crisis. If we now look at the P&L, start at the top, revenues up 33% on the back of growth in all three businesses, with a very good performance in corporate banking, up 15%, one, five, global markets up 63%, six, three, and in security services 3.6%.

Costs accompany this, but to the tune of 11%, so on the back of the high level of activity, so generating, I don't know what the word is, let's call it very positive jaws. Overall, after taking into account the higher cost of risk in the second quarter, CIBs pre tax income was up 50%, five zero.

If we now turn to the next three slides, that's 36 to 38. Let's go into more detail of each of the three businesses.

If we start with Corporate Banking, 36, page 36. Revenues were up 15% as I said, and this on the back of a 35% rise in fees compared to a year ago in connection with intense origination activity.

Revenues rose in all regions with a very strong development in Europe and a very good performance in Asia. Transactions activities were down 6% on the same quarter a year ago on the back of a decline in trade finance, due to the lockdown measures and good resilience in cash management.

Thanks to an enhanced strategic dialogue with clients. Combined with best-in-class execution capabilities.

The business continued to be the leading player in the European investment grade corporate bond market, as well as in syndicated loans in EMEA. This combined with the top five equity capital markets ranking in EMEA, made the business line the number one European player in EMEA investment banking.

If we now swipe to the next slide, 37, global markets showed a very strong business activity, with very high client volumes and revenues up 63% compared to a year ago. If we now zoom in first on fixed income, so FICC revenues were sharply up with very strong growth in all activities, primary and credit markets, rates, ForEx, emerging markets, all geographies.

The activity benefited from exceptional levels of bond issuance in the second quarter, together with high volumes of interest rate ForEx and commodity hedging, including, for instance, over 60 significant deals for corporate clients. Also, portfolio relocations push secondary bond volumes higher, while electronic platforms saw spikes in volumes at two to five times the average daily volume seen in 2019.

Equity and Prime services. So the other part saw a gradual return to normal in a still challenging market, with the residual impact of dividend restrictions in Europe and weaker volumes in Prime services, however, picking up in the latter part of the quarter.

Finally, glancing at slide 38, Security Services continue to support a very good business momentum, with slightly lower asset volumes due to overall drop in market values, but with increase transaction volumes. Revenues were down 6% year-on-year, but up 3.6% when excluding the effect of specific transaction a year ago that we mentioned at that time.

Besides the business continue to win new mandates, as with Axa in Belgium and Eurazeo. Let's now look at slide 29 [ph] which will conclude today's presentation, and will give us the opportunity to share the outlook for 2020.

And so, this slide summarizes in five points. So first, the group has been exceptionally mobilized towards financing the economy and supporting its clients in this unprecedented crisis.

Two, standing by our clients to limit the economic and social impact of the crisis will further enhance relationships and will serve as a foundation for further market share gains and stronger positions. Three, the rise in revenues in the second quarter further validates our diversified and integrated model.

Four, the rebound in commercial activity witnessed in those businesses most impacted by lockdown measures in the latter part of the quarter, paves the way for improved revenue trends in such impacted businesses. And five, the common equity Tier 1 ratio at 12.4 confirms the group's financial solidity.

Based on this, our outlook for 2020 remains unchanged, and net income for 2020 should be about 15%, one, five to 20% lower compared to a year ago. This concludes today's presentation.

Ladies and gentlemen, I thank you for your attention. I'll be pleased to take your questions.

Hi, good afternoon. And I just wanted to ask two or three quick questions.

The first one is on the cost base. So you have a few divisions, in particular the domestic market where the decline in the cost growth or rather the speed of cost reduction is accelerating and obvious with the branch reduction, et cetera.

But the speed of search acceleration is also quite high in other divisions where we are not so used to have cost declines. And we are - in general, we have a lot of cost growth, like insurance is generally 4% or 5% cost growth, this quarter I think is 6% decline, personal finance minus 8, security services also a steep decline.

So, you get a number of these things or even in the other domestic market, where is generally 5%, 6% growth is now zero. And what I'm trying to understand is, whether these new cost base of now is a new base so to speak, or whether you stop some things or accessed furlough schemes or any of these things which may make the base for assessing going forward, for example, 2021 using 2019 a more relevant benchmark for example?

So I'm just trying to understand what's the relevance, what’s the new high watermark, if you want for the costs? And my second question on the retail part is, for example, in France on, but also in other countries, you have a very steep contraction of the net interest margins.

For example, in France, I think minus 13 net interest income versus plus 9 loan growth. I just wanted you to [indiscernible] took here on this particular domestic market, net interest margin if you - if you can, so that's for the operational side.

Then on the dividend side, we all seen the dividend recommendation by the ECB earlier this week, I just wanted to know whether come 2021 and obviously, if this is re-allowed [ph], you'd be willing to pay for example, two dividends or bigger dividend in the year or how you view your capital return policy from here, whether you need to adapt or change to a capital benchmark or anything that you feel is more relevant, to give visibility to your investor base? Thanks a lot.

Thank you for your questions. We do know that we only have one hour for the answers.

So I'll do my best. So if I'll take one at a time, if I take your first question on the cost base, there are several aspects.

If you start with domestic markets, so domestic markets we have already in the plan ramping up to this year, we have a review of interacting with customers, using less branches, using more digital and the likes. So that is something which is underway and that we have basically accelerate Jean, so that is why we will see the costs going down because we have accelerated those aspects.

Then the second thing, if you look at some of the aspects more on the International side, in the International Financial Services side, what you see is that several points or part of the costs are related to the point in sale. So on PF or in within insurance, when you have a point in sale, you have a related point in sale cost.

And so they're also - if there is no point in sale, those costs are going down. Nevertheless, also on the International Finance Services, there is an overall reduction effort which was underway, which has been amplified.

And this amplification, as we mentioned will be further stepped up. Because if I say “what we have been able to observe during this lockdown period” is that we can take the aspects of digitalization a step further.

In the past, like for example, saying we have an interaction with a corporate client once a month during two hours in a remote location, which takes overall six hours. Basically, what it has meant during the confinement period is that it was half an hour per week by videoconference, do the math, you see that it is actually very efficient on all fronts.

And so, that is something that we will now crystallize also going forward. So, an acceleration of the cost, some point in sale costs which are reducing and then stepping up materially, therefore it's related to - that we have learned from the digital.

So, that's on the cost side. If I then take your second question, on the net interest income.

So, the net interest income in particularly on our domestic markets has of course been impacted by some of the activities that have been lowered and that have been - that are typically also generating income. So, as I said, the drop in things like credit card, overdrafts and the likes, and those are returning.

Secondly, as you have seen, there are a lot of deposits that occurred and those deposits normally we have to guide our clients into different products and therefore, also improving the yield. And then there is all the lending that has occurred in the second quarter, this lending will have a full quarter effect going forward.

So that is basically what we see and then there is the effects of the financing that is happening. So these are all the reasons why we consider what we have seen in domestic markets in the second quarter has basically been a temporary drop, yeah, because the activities return, the effects of what we have underwritten and what we have attracted will yield and will yield fully and there is the financing effects coming in.

So, that is why we feel confident on that front on domestic markets. When it comes to dividends.

Indeed, the supervisory authorities have extended their recommendation not to pay dividends till the end of the year. And of course, we will comply.

And one assumes that when the environment does not further deteriorate, this recommendation will not be extended. At that moment, there is a return to normal, meaning the supervisory rules, as they were applicable pre-COVID will again apply and this implies that solid banks should then be able to return to their planned dividend policy.

In this case, BNP Paribas anticipates returning to its concept of the 50% payout ratio. So Jean-François that will be my three answers.

Thank you. But the 50 [ph] of in the past, is this one's gone forever now, the one that might have been paid as especially in the fourth quarter that was discussed in the first quarter.

Listen, the recommendation by the supervisory authorities is that it is extended till this end of this year. So the end of this year, nothing will happen.

After that, one has to assume that we will fall back to this kind of rhythm that we saw in the past, but let's wait until the situation crystallizes, and we'll take it from there.

Okay, thank you.

Yes, good afternoon. So many questions, but I limit myself to three and we'll make it quick.

First of all, Lars I'm surprised if I look at your CET1 which is 12.4, which is really good. It seems to me if I understand the footnote properly, that you've included the transitional arrangement from IFRS 9, which is strange, because you're in a really good shape, and it doesn't seem to have represented that much, anyway, so how much was it within the 20 basis points of temporary arrangement?

And why did you decided to include it? That would be the first question.

The second, you have good information on moratoria, on slide 41 I think, if I look at your annual reports or your half year report that you give at the same time, it seems you know, making a back of the envelope calculation that the amount of moratoria is about 35 billion in volumes. Is it okay?

Is it the appropriate number? And if it was possible to have separately what the government guaranteed loans in total in volumes have been that would be super helpful.

That's the second question. And the third one TLTRO will take up in June, just to have an idea of how much you took, if you took any?

Thank you very much.

Jacques-Henri, thank you. On your question on the common equity Tier 1, so on the common equity Tier 1, there is, of course, the evolution which is stemming from our or result generation.

And as I said, the result generation, we put aside 50% for dividend. And so it's the remaining part that contributes to the common equity Tier 1.

And then as there has been several efforts that have been done by the supervisor to basically address a bit elements which are not necessarily supportive on the European side, like SME supporting factors and the likes, of course, we have applied those. And the French, as there has been an effort and there is an orientation of Europe to say we support the environment to help the economy, we basically apply them all.

And so also on the IFRS, because let's be fair, the fact that you do not - that you have an impact in the P&L and in the capital is a little bit pushing the concepts we built, so therefore, we also took that phasing and that's the - on your question, it's around 5 basis points of it. And on your question on with respect to what we have on the moratoria, what we have is 54 billion, that is the amount.

And when it comes to the - yeah, and let's not forget that the moratoria, the big chunk of it two thirds, is basically corporate clients and one third is individual. And on the TLTRO, we, it's you know, there are so many, we optimize our overall liquidity.

And so we look at and so we consider TLTRO as part of the options in trending. And as always, we don't go to the TLTRO because there is no other option.

We don't go to the TLTRO because we want to do carry trade. We consider it just as an overall way of optimizing or liquidity cost.

So I'll leave it to that.

Sorry, last one more thing, just on the 54 billion margin [ph] is that clear, are you communicating on government guarantees in volume?

Government guarantees, no, we're not covering those volumes.

Okay. Thank you.

Thank you.

Good afternoon, and thanks for taking my question. So, three on my side, if I may.

The first one is to come back on capital. Just wondering, in terms of the trends for the second half of this year, what should we expect?

I mean, is there still a lag effect from state guarantee loans, which haven't had - have benefited from the zero percent risk weights that, you know, could reduce the bit RWAs or no, or do you expect any ratings migration or any other impacts we should be aware of? Also, if you could just add, you know, just clarify again - just remind us of the software benefits.

The second question on provisions. I mean, if we look at your first half cost of risk, which is around 65, 66 basis points, would you expect now that you've taken most of the IFRS 9 impact in terms of macro updates, macro assumptions?

Or should we expect the second half to be lower? Or is there going to be an increase towards year end?

And related to that? I mean, would you have any guidance for next year in terms of cost of risk, whether you would expect similar type of levels this year or lower?

And my third question is on fixed income, if I can ask on, you know, sort of the run rate we should expect really for the second half, because I guess, the 2 billion-ish is not sustainable. If you could, you know, maybe give us some qualitative comments on how July has been going?

Thanks a lot.

Sure, Delphine Thank you for your questions. So if I'll take the first one on capital.

So, yes, so, we are at 12.4%. So, what do we see bit the livers rolling in the second half of the year.

So, there are several effects related to the regulatory environment that are basically still to come. And so, there is this thing, where you have in France, is so called PGE, which for the first two months basically weigh on your risk-weighted assets, which are included and so, those at that period will be behind us, that will lead to an improvement of the common equity Tier 1.

Secondly, there is a software, so the software which has - the concept has been voted that it is applicable as soon as the EBA has crystallized what it means. So, that is also something to come.

And then the last one is there is the contribution of the bottom line with the 50% dividend, but nevertheless. So, these are the three levers that will lead to the further improvement, and that will more than offset whatever kind of evolution one could see on the risk-weighted side.

So that's on capital. The second question is on your provisioning.

So the thing is, how does it work? If you look at the provisions in the first half, so yes, they have been stepped up compared to a year ago.

But if you break it down, under IFRS 9, you basically take the cost of risk which is incurred, so a company that went broke or that has been for born whatever, you really take those costs, in an effect. The second thing is you have to take a forward looking view, so you have a forward looking view.

So you look at a scenario and in that scenario, you run the numbers and you see what your cost of risk would be, and you take it upfront. And so when we published the Q1 results, which we basically closed the books during April, in April, and when we also aligned a bit what the European entity said, we expected ending of the lockdown basically by the end of April.

So that is what we took into account. What we saw when we closed the books in Q2, is that actually the lockdown didn't end in April, but it ended in May.

So it basically extended this somewhat. And so we had to add another step up in that cost of risk.

So if, let's assume now, and I don't have the crystal ball, but let's assume that there is the situation is like it is, so there is not a step up then Normally, you would expect that there would be no further kind of forward looking kind of cost of risk. So in that situation, your cost of risk in the second half would be below that one of the first half year, but that is a situation.

Nevertheless, so it could be that there is still a bit of a pick up. But as you can see, given our diversified approach, given the strength and the rebound of the revenue side, overall, that doesn't impact our overall outlook for the 2020 period.

Then, on your third question with respect to fixed income. So indeed, the revenue that was generated in the second quarter is basically, of course, on the back of the platform that we have, the platform that is able to serve all of the needs of all of the customers.

And of course, there was a pickup, a strong pickup in volume and pickup in volume because, given the crisis, the outlook on the crisis, people wanted to position themselves and the likes. So it is, indeed, likely that the volumes will taper off a bit in the second half of the year.

Nevertheless, there is still this uncertainty. So I would say taper off of a bit.

Secondly, as I said, given the fact that the platform has shown that it is able to be very close to the customers with all the services needed, our market share has stepped up, and that is what we anticipate to remain. So Delphine that would be my three answers.

Just on cost of risk, any guidance for ‘21?

’21. Again, if we stay in a situation that we are now then normally the cost of risk should be below the cost of risk of this year.

Great. Thanks so much.

Hi. Good afternoon, Lars.

Thank you for taking my question. I have a few actually.

So the first one is regarding Corporate Financing. I'd like to understand what is the share of the income you have this quarter and so that would be helpful.

Another question will be on the equity business. Could you perhaps quantify for us the impact coming from additional dividend cancellation in Q2 and you're like one-off the impacts.

And also just to understand a little bit, you know, you're hedging strategy within H2, is it fair to say that you would want to, you know, remain where the hedge into the second half of this year? And last question on the Brexit, the slide you have on Brexit, so I just wanted to, you know, understand the reason why you have this slide, do you expect further market share gains - or is it just for us to understand that you are ready for whatever scenario comes up?

Thank you.

Thank you, Lorraine. On Corporate Finance, I will have to dig up.

And we will reach back to you. On the question of the impact on Equity and Prime services in the second quarter.

So as I said, there's two things to that, on the Prime side, basically, the demand at the beginning of the quarter overall was a bit subdued, and it ramped up to normal levels. So that is something where you would expect going forward to be at a normal run rate for the rest of the year.

And then when we look at equity derivatives, so there was - the market was a bit shaken by the late decision in March with respect to the dividend restriction. And so that had still a bit of uncertainty at the beginning of April, because then there were some decisions taken and then some other corporations also evolved on that.

And that - given that uncertainty, we manage that position in a very conservative way. And so that is - that degree of certainty ramped up towards the end of the quarter, and towards the end of the quarter, let’s say we are back to a normal run rate.

So if you take those two elements and look into the rest of the year, we anticipate that the run rate will be back to the normal run rate that you would have seen. And on the on the Brexit.

The Brexit is that we wanted to clarify - we wanted to provide some comfort, as there is uncertainty about what would happen. While we wanted to say that for us, BNP Paribas, the concern is that if there would be a Brexit, that some activities, services cannot be provided from outside Europe, outside continental Europe.

And so it basically means that is the 400 kind of positions that we talked about. And so for us to continue servicing, we will have to repatriate those 400 functions.

And so that is what we are doing. We are basically halfway there.

And so we have to deal with the half by the end of the year. So we just wanted to clarify that for us as we are a diversified bank serving our clients from within continental Europe, and there was this concern limited to this kind of 400 positions, and so that it is very manageable and it will be managed before Brexit takes form.

Thank you.

Thank you.

Yes. Good afternoon, Lars.

Three questions. The first one, if I look, it's regarding provisions, if I look at the first half the cost of risk was dominated by stage three, which accounted for 75% of the cost of risk.

Now, the costs were in lockdown, as other activity, so can we expect the stage three to increase in the second half of the year, as more bankruptcies come to reality? Second question is regarding the credit risk with debt [ph], which declined quarter-on-quarter and the total loans declined by 7.4%.

If we add that financial instruments at fair value in loans and advances to customers, does this imply a 7% risk with asset inflation due to credit migration? And then the third question is the ex-ante provisions BancWest accounts for close to 40% of the exempted provisions.

Does this imply that the GDP adjustments were more material for the US? Thank you very much.

Yes. On cost of risk, and the thing is, if I had a crystal ball to tell you how the stage three would go, I would be probably playing on the lottery and not be here.

So, I have no clue. What you actually do know is that we have the - when we are - as we are in the metropolitan areas, so we have the opportunity to focus on to good counterparties.

On top of that, as we are risk averse bank, we focus massively on collateral. So we don't do credit cards, but we basically do car financing or home improvement and the likes.

So, from that point of view, if you look at the overall stance and if the evolutions are a bit as we anticipate or return to back to normal, the overall cost of risk as I said should be below what we have seen in the first half. But to have explicitly what it means on S3 and therefore if there is a pickup in S3, how is it going back from sue [ph] honestly I have no clue.

But this is the overall elements why I feel confident of the cost of risk remaining well in that control. When we look at the cost of risk and when you look at the volumes evolution, if you look at it on the risk-weighted assets, if you look at the pure evolution, so, the credit side on the risk-weighted assets is going down and it is somewhat compensated by two effects, there is the ForEx effect which basically upset.

And then secondly, there is also the market risk which upsets them and the market risk upset why, because you look at the Arval [ph] and the Arval is looking at the historic trailing. So the Arval that we use into Q1 was not reflecting entirely because it was only one month out of the quarter, the pickup in the environment, which we now have for three months.

So that's a bit on the risk-weighted assets. And on your question of the ex-ante, I'm not sure, fully can you repeat your third questions, just to make sure I understood it correctly?

Sure. If you look at the BancWest ex-ante provisions, they account for 40% of the total ex-ante provisions, so quite a large share.

And I was wondering if that was due to higher GDP adjustments for the US than for the geographical regions?

Yes. If you look at the sensitivity of the models that we have in Europe, and that we have in the US, in the US, they are more sensitive, in particularly to the unemployment.

And so that is a bit why there is this step up in the anticipation. But again, these elements can evolve.

If you look at, for example, personal finance, in personal finance in the first quarter, we had a step up in the ex-ante provisioning because we were uncertain about how repayments would start, for example, on the moratoria and what we saw is that those payments basically step up very well. Therefore the cost of risk in that anticipation goes down.

Here at BancWest, we basically took the impact of the models foresee, we'll have to wait, how the post-summer evolves.

Right. Thank you very much, Lars.

Hi [indiscernible] everyone. Just a couple of quick questions, please.

First on the ECB comments on consolidation that we had this week. Why do you think ECB is now focusing on this topic again, and the timing of it, and from BNP perspective, how you see your role playing within that?

And secondly, is on the CAB [ph] and maybe on the corporate banking side, Can you discuss please, a bit in terms of pipelines, in terms of deals and volumes and what's being you’ve seen as delay to second half, that didn't happen in first half in terms of business? Thank you.

Thanks, Tarik. Thank you for your questions.

And when it comes to the ECB, so what we have seen, and which is a bit frequent situation that when the situations get dire, Europe basically steps up things that it does. And so they stepped up in like, for example, the 750 billion funding, and also the ECB stepped up by clarifying some of the rules.

It's not that they invented new things, but they clarified rules. So they clarified some elements if there would be banks grooming together, what would it mean, so at least it clarified this.

But intrinsically, it doesn't change. So for us, our stance remains that the current consolidation rules, they are basically applicable and support in country consolidation.

However, the cross-border consolidation at this stage is still hampered by Canada liquidity flow around are the contracts comparable and the likes. And so, for us, it remains at the point that at this stage, we remain growing in the way we do.

So we have a presence in the countries, in many countries in Europe, and we basically continue to build on that platform and on that franchise to grow. And we do that by investing in the digital and that's the way for us to grow.

And so that's basically on that aspect. This could trust as a mark, this could eventually evolve if at some point in time there is the deposit guarantee scheme which takes form, which can at least support liquidity to be flowing around.

So that's on the consolidation question. On the corporate side.

So the corporate side, there is no specific things going on, there has been a solid demand. And if you look in June, which has been continuing, and that's basically it, there was no event that things caught like locked up or got like postponed.

So the rhythm remains good, and that rhythm should continue. So Tarik, that would be my answers.

Thank you.

Thank you. Can you hear me?

Yes, I can hear you, loud and clear.

Okay, fantastic. Okay, so, and thank you for the call.

A couple of questions from me. So I want to go back to the loan moratorium, these 54 billion as of the end of June.

So how has that evolved since June, I assume they have come down by how much, if you can share that? And what sort of provisions have you taken here?

So, this will be my first question. Then on cost.

Can I ask you, so, I hear that you want to you know, build on what you learned on digitalization, enhanced some efficiencies that have been proven possible by colleague, but - and in the previous quarter you pointed to 300 million to 500 million of cost saves, does this still hold or how should we think about the cost line from here? And then a third one on cost of risk.

You mentioned that you factored in the measures that have been taken by authorities in your estimate. So, can you help us think this through, so for example, how do you factor in the guarantee from the French or other states, do assume multiple of sense of losses that you would normally see or how you think about that?

Thank you.

Yes. So thank you for your questions.

When we look at the loans and moratoria, so on general, the duration is there is basically let's say 70% of that is very short maturity. And so that basically means we start to see the first parts of it, let's say like 10% or so which is coming due recently.

And what we see is basically that those returned to payment. So from that point of view, that confirms that we have selected the moratoria, the extensions based on our criteria.

And so we see that evolving positively. So that's one of the moratoria.

On the digitalization. Yes.

So we announced that on the back of our 2020 plan, which is basically culminating this year, we would have a reduction of 1 billion in cost. And we basically said that what we are learning from the confinement period that would go up like to 1.3 billion.

And so we confirm that. And that's based on what - that's on elements that we have learned, where we see that the interactions, that some interactions, why for example, clients, in the end, they wanted to come to a branch, and that people still want to come to an office, we basically see that this can now be done differently.

So we can have a different way of transacting, which means less travel and entertainment kind of costs. It can also be instead of one group meeting, it can be several kind of phase meetings, which means the interactions can be much closer to the concerns at hand.

And so that's basically what we see. That is a step and that is what we're crystallizing.

That's why we basically said you know, we typically make multi year planning and we end one plan and we start another multi year one. And this one, we basically said, we're going to take a break, to ensure that we can crystallize, takeaway, and crystallize all the learnings that we saw.

Those learnings, which will already lead to 1.3 billion costs this year, that will become the full year effect with another wave the year thereafter. So that's really, let's say, all the aspects that we had in things like reduction of branches and operating differently, to some extent got the boost in acceleration in that confinement period.

And so that is why we feel confident to confirm the cost reduction and also look at it a bit for the base going forward. And then your last question, can you rephrase your last question on the guarantees?

Yes, well, we have been working on your possibles [ph] coming from the guarantee, the positive impact from the guarantee?

Yes. The thing is, as I said earlier, and it's a bit like what we see on the loan, the loan moratoria, is that we take that, we have our clients, which were when we extended the moratorium, we wanted to make sure that they are in good shape.

And so this basically means that they were impacted, if they are impacted, they are impacted by the COVID period. And so that is basically what we said we can give that guarantee.

And that is basically the stance that we take. And yes, as always, some sectors might be getting into some kind of headwinds, others will have some tailwinds.

And so that's basically the elements that in our modeling we have included that and it's not like just the effects of the guarantees, it is much more looking at some sectors, so some sectors will be impacted and other sectors will actually be doing better. And that's the elements.

And that's more the kind of the sectorial kind of approach, more than in, particularly the guarantees. And that is included in our cost of risk outlook.

Thank you.

Hi, good afternoon, Lars. One question regarding Arval, I was quite surprised by the fact that the fleet management was increasing by more than 7%.

And in this context, it's quite, it's quite strange, I would say. And I wanted to know if there has been any extraordinary contract, or if there was a specific geography for instance, where these business works?

And I also wanted to know what was the impact of used car valuation in your revenues in this business, if you can give us some color on that? Regarding the insurance business, which you said that you were not exposed to business interruption, but you also mentioned that your combined ratio has suffered.

So I wanted to know if that degradation comes from credit insurance, creditor insurance products or any of other product, because for car for instance, motor insurance for Italy combined ratio as improved during the consignment. And my next question is regarding BNP real estate.

I wanted to know if - I would say from a structural point of view, you were worried concerning the evolution of company organization, specifically regarding remote work, that could lead to less transactions in this business? What is your view regarding the future of BNP Paribas real estate according to this to this topic?

Thank you.

Pierre, thank you for your questions. And if we take them one by one, if we look at Arval, first, So indeed, I mean, Arval or that business or car business in general, it went to a roller coaster in the second quarter, right?

So it is a thing that basically slow down, grounded to a halt in April and then recuperated in the end very fast. And that is what you see in the volumes, yeah, so it's not that there is like one specific contract, it is really a pickup in volume.

And when we look at the second hand car, so as a reminder, the second car sales price is part of the valuation of what you see in the top line at Arval,. And also here, given that the production also of new cars is like somewhat limited, given all the impacts of the pandemic, that if you look at the second hand car price, they are finally holding a very well.

So if you look at the price in April, it's of course a different thing. But if you look at and it's basically fair value, if you look in June, the second hand cars have been doing well.

So that's Arval. When we look at insurance, in insurance, and as a reminder and Pierre, you know, but just as a quick one.

If you look at the top line, the top line of insurance is in our revenue line. So if you have the claims, for example, that are falling, they are into that line.

And indeed, if you look at the top line of insurance, it's of course rebounding due to the fact that the markets rebounded, as you remember, there's a part of the assets that we have in insurance that are in mark to market because they contain very mild structuring options and the likes. And so that one has partially rebounded in the second quarter, which is lifting the top line.

But then at the same time, as you always have, as I said, claims are reflected in the net banking income and they have slightly migrated up. And that is in some of the things, some of the elements which are in there, yes, it's not motor insurance in France.

But as you know, in insurance we are active, we have a global kind of reach. And so it's not in all areas where the cars were blocked, and therefore there is no claims falling from that.

And it's a bit a myriad of activities outside of France, basically, which is happening. So there is limited impact in France.

But it's a bit - the outer networks that are having that impact. And then when it comes to real estate, which is a bit of switching forward in the strategy.

If we take a picture, of course, real estate those activities it ground to a halt in April, but it is ramping back up. And then on your question on saying, hey, where are you guys going to operate differently and well, not humid, but everyone's going to operate differently.

And so this basically means that the real estate, there is a need for it, but it might be in a different form and shape. And so that is the kind of things if you look at what - how real estate is organized, that they should be able to fully play a role in the promotion and the changes that are going on.

So from that point of view, the accidents [ph] that are put on the strategy might evolve, but our real estate is well positioned to handle that. So Pierre, that would be my three answers.

Thank you.

Yes, thank you. Good afternoon.

I have three questions of royalty. The first is on the dividend.

I'd like to please come back to this question that was raised earlier, just to make sure that your comments don't get misinterpreted. Should we simply forget about the full year ‘19 dividend?

So we assume it will remain zero. And you're going to apply a 50% payout from the full year ‘20 EPS [indiscernible] get the approval from the ECB, or is it possible that we see at some point in ’21, provided you know, there's a new crisis, provided ECB approved that and does not need to ban?

Would you then consider being a special to try and offset the lease payments for the full year ‘19? So that's the first question.

The second question is on the capital ratio. Just can you please clarify the target common equity Tier 1 ratio, whether you still target to be at 12% or if you're thinking whether in terms of MDA buffer, booked new 9.2%.

And the last question is regarding personal finance and more specifically the cost of huge scale. Obviously, this is a business that tends to be more at risk in a crisis, from a provision point of view, you've provided in the slide back some details on the product mix, to geographic mix, can we say that you feel more comfortable on the cost of risk on that business?

Because the mix is now more geared towards auto loan? And less towards personal loans and credit card.

And could you just elaborate on why if I'm not mistaken, there were some write-backs in France in that business? Thank you.

Thank you, Flora. So on the dividend, the one thing, so it's all very - we have to see.

So first of all, the ban has to be lifted and which basically means one can return to normal and so the normal means that you can return to your dividend policy because a dividend policy applying a dividend policy is typically reviewed in what is called the supervisory review process. So as a bank, we are supervised by authorities, which have a process, it's called in our lingo or their lingo, it's called disrupt the supervisory review process, in which they basically look at the overall outlook of the bank, and what the dividend payments in that sector matter.

And so typically, in the normal run of the mill, everything being good, that's for us, for example, the 50% payout is part of that. And so, the thing is, when we said that there will be no further deterioration of the environment, it will all depend on that and if it - that there is no environment that deteriorates, is the one that improves, so just to see what the outlook would be, therefore, what the impact will be on this rep and therefore, what kind of would make sense has a payout ratio, so that's basically all I can say at this time.

And as you have seen, we continue to satisfy the 50% on the 2020 results. So we'll have to follow it up.

But that's basically what we read. Then your second question is on the capital ratios.

So don't get me wrong, because we are 12.4%. This is not the new normal.

Yeah. So we said that under Basel III, we basically had the 12% ratio.

That's basically what our objective is, and not the 12.4%. But a 12.4% puts us in a position to be comfortable, even if there would be events that we can fully continue to serve the economy.

So that's basically where we stand. So don't see this that we are hanging on to this, we go for 12th, and that's it.

And then when we look at the cost of risk of personal finance, and what we - the way it works, indeed, we have been focusing ourselves in the past on the collateralized kind of products, yes, so no card business, but cars that people typically need for their jobs or their home improvement that they need for their home. That's the kind of things that we do.

So it is collateralized and collateral that basically matters to those persons. So that's basically what to do.

But then again, of course, the question is, what will indeed be the tendency of the customers to protect that kind of collateral? What I mean by that.

is in the first quarter in personal finance, we took a stance of all of the elements where the customer would run into Dire Straits, what will be the fraction that he would see and that we would end and write down on the auto loans. And what we basically saw come May and June, is that the amounts were better than what we had anticipated.

And that is why we updated our modeling and our anticipation and that's basically why we reviewed slightly the cost of risk in that area. So Flora, that would be my three answers.

Thank you.

Hi, sorry, can you can you hear me?

Yeah, there is a little bit of wind, but I can hear you.

Oh, brilliant. Okay.

So three questions for me. So just as we just coming back to the moratoria, please.

And on the 54 billion, exactly how much of that meets the criteria defined by the EPA that it should automatically transfer to stage two? Is it basically all of it?

And then I didn't hear the answers on whether that number was higher off to the quarter, and also how much provision there is against that. I know you highlighted what you had in the slides about the short term duration, but if you could press on those two points, that would be helpful.

Secondly, then on the rebound in activity at the end of the quarter in retail and consumer credit, some banks are saying that things like the jumping activities, more of a catch up on transactions that would have happen were not for the lockdown, and that underlying activity, you know, is still lower than pre-lockdown effectively. That doesn't seem to be what you're guiding.

So for retail businesses specifically, are you saying that volumes, volume growth should return to pre-lockdown levels as early as next quarter, is that what you're saying? And then the third question, maybe just slightly longer term one, but the [indiscernible] this report highlighted a key risk being the leveraging indebtedness in the SME sector in France, relative to European peers, both going into the crisis and how that's increased because of this crisis, clearly given your provisioning, you don't seem to share that as being as much of a key risk.

So maybe qualitatively, could you address your thoughts on the health of the smaller corporate sector in France? Is it just as simple as you know, interest rates low, so the leverage doesn't really matter?

Thanks.

Thank you for your question. First of all, if we - to make it simple.

On the moratorium on the 54 billion that we done, we don't want to have a gazillion amounts of ways of presenting things. So this is the EBA kind of format that we have.

And then if you see the effect that is what we mentioned, it's basically tapering off right, its duration is short. And so that's basically what we see happening.

If you take the two thirds is like three months, you can assume that part of that is already tapering off. So that's basically what we said.

When it comes to the rebound. Yeah, so what we see is that intrinsically, we see elements of the activities, rebounding.

And as I said, on average, this rebound stems from some activities rebounding quite strong, stronger than before. And so motors will flow.

And it can be even in a sector, if you take the clothing sector, kids clothing are just much above what we saw before, men's clothing is not. So that's the kind of trend that we see on.

What we said is that we expect it to be at the 100% rate that we saw before, as that - in a given month would be, let’s say by a year end, we put it in our modeling by year end. And so we see that that is a trend that is evolving.

And as I said, the overall GDP level we would see that by mid 2020. So whatever we see in the tapering up, we see that totally coherent with those assumptions.

So that's on the rebound. And when it comes to leverage, as you know, there is - if you look at the leverage that is also being taken by the states for example.

So, it is indeed somewhat stepping up. We see that some companies took it and are now basically restructuring themselves around it.

There is a bit and as I said, there is a bit of the step up that you see for example in the countries and indeed in this current low rate environment, intrinsically, that should be addressed at some point in time. But that is what we have ahead of us.

So, Omar that would be my three answers.

Thank you. Just sense a very cheeky follow up, just on the dividend.

Could you just make clear that the mechanically you could still pay the 2019 dividend as long as you're allowed, you know some time in the first half of 2021.

As I said, so for the moment there is this recommendation, when if - as I said, assume that at some point in time that recommendation will not be conducted. And that basically means that you fall back to the normal territory, and in the normal territory this is if you talk to the supervisor, they say normal territory doesn't mean you can do whatever you want.

Yeah, you can do something which is in line with your overall trajectory. That is a conservative stance.

And so therefore, that kind of what you can do will depend on how the environment looks, and depending on that. So that's all I can say, guys.

You should talk to the regulator if you want to have more. The only thing I said - what I understand is that if it's lifted, it is back to normal.

Normal means you can pay the dividend payout ratio, which is in line with your overall risk profile.

Got it. Perfect, thanks a lot Lars.

Good afternoon, Lars. I wanted to ask on two things, please.

The first one on your highest price nine scenarios that you use for estimating expected credit losses. Thanks for the granularity on that.

And it looks a bit surprising that you actually assign a higher weight to the favorable outcome then to the adverse outcome. And that actually has become even more likely since the end of 2019.

So I was wondering if you could talk a little bit about the rationale there. And also relate to this, you provide this very helpful sensitivity, which says that there would only be 100 million provision difference from moving from your current mix of adverse versus favorable to 25, 25, equally weighted position, I'm surprised that the difference is so small.

Maybe you could add a bit of color on why that is. And the second question goes back to liquidity.

You have more than 100 billion extra liquidity reserves build up year-to-date. What would you say has been the cost of holding this extra liquidity in the first half of the year if any?

Thank you.

Stefan, thank you for your question. And when we look at IFRS 9, the scenarios and the scenario weight.

So indeed, under IFRS 9 you have to take into account a central scenario and then an adverse and a positive scenario. And the reason why they do this is because if you only have to take a very adverse scenario, at some point in time when you are in a downturn, you will become a downturn from doom.

Yeah, which will become very, very low. And so that is why, as long as you believe that the economy works in cycles, if you are at the low point of the cycle, it is more likely that you will turn into a positive scenario than in a further negative scenario.

And so that is basically what we do. So we have our central scenario has a weighting of 50%.

And then the adverse or the positive one depends on where you are in the cycle. So if you would be on the positive side of the cycle, your adverse scenario would weigh more because it would be more realistic that the cycle would turn.

And here it's a bit the same thing, as you are at the bottom, you assume that there is more chance that it will improve, then it will deteriorate and so that's a bit the concept. The concept of IFRS 9 is not to have a scenario of doom, but to have a scenario which is as realistic as possible, and therefore the weighing of the other scenarios, as I just as said.

So that’s a bit the way that it is being done. And yes, for information we provided, if it was the two, but then I said there is the effect, and it's not that the weighting [ph] is so much different, right?

It's a couple of percentage points. And so that is what the impact does.

And when it comes to your question on liquidity, indeed, the liquidity buffer stepped up in the second quarter, because the deposits have outgrown the credits, as you might have seen in our balance sheet. And so the question indeed is, so the cost, let's say in the second quarter, given the fact that that is coming on average in the quarter is relatively limited, the question is going forward.

And so going forward, what are the ways to mitigate that cost. So, one way is to redistribute this liquidity and credits Yeah.

So, there will be demand for credit. So, there will be redeployment of the liquidity.

The second, the second part is that to some extent, the TLTRO 3 will also overall make the overall funding costs on older instruments cheaper and that would also come in, in the second half of the year. So, that is why when I look at the interest income in particularly in our domestic markets, I have a positive stance because as I said, there will be loan growth that will be generating and using that liquidity and then there is also the TLTRO which will optimize those liquidity cost.

So that is a bit how we see to handle and not have a negative impact on it.

All right. Thank you very much, Lars.

Yes. Good afternoon, Lars.

A couple of questions from my side. So firstly on Prime services, you mentioned weaker volumes, but then a rebound coming through at the end of the quarter.

But more just sort of taking a step back, I'm just wondering how you think about the earlier ambitions, you know, before the virus when you first, you know, contemplated the Deutsche Bank, Prime services acquisition, you know, a lot of those market share ambitions and the budgets and revenue targets you had in mind, are they still applicable given the, you know, the more challenging environment we've seen since that deal was first contemplated. So really just your thoughts and update and progress there on Prime services?

And then on IFS, and particularly some of those areas where you're seeing a recovery in the June, July origination volumes? Do you think the loan book stops shrinking in the second half of the year for IFRS and in particular, I'm wondering where your, you know, your risk appetite and where you're lending criteria fit into that discussion, particularly in areas like personal finance.

And would that be a potential sort of headwind for volume, stabilization or volume recovery in the second half of this year in specific do with IFRS, sorry IFS? Thank you.

Thank you for your question. No on Prime services.

So as a quick reminder, Prime services, we’re very pleased to onboard these activities because as we said earlier, our equity derivatives department is really focused at this stage on equity derivatives. And so we want to have the wider set of services for the institutional clients and Prime services are really an important part of that.

So that is basically going well. Of course, as I said earlier, in the second quarter, in particularly, at the start, the demand for Prime services, the volumes was a tad lower, but again, this is something that structurally should return.

So we remain very pleased with this activity as part of our overall diversified platform. And then when it comes to IFS, and if you look at the loan book, as I said earlier, and if you look at personal finance, there was of course, the impact in April with the lockdown of the points of sale.

And so that one is returning - is basically there, but at the same time, we remain, as you know, we are a boring prudent bank. So we basically look at making sure that when we extend lending, that the counterparty is well reviewed and is in line with it.

So we have and as you know, we are boring and conservative. So we'll have to see Kiri.

I don't know what it will be, but it's we will stick to IFS in a very conservative stance.

Right. Thank you, Lars.

Hi, good afternoon. Couple of questions on French Retail, I hear you on your optimistic stance on the NII, would you expect also fee to rebound supported by the high amount of deposit that you had in addition of a lot – return to activities.

And when you look at costs, given the exercise that you have done and the speed that you are showing in focusing on cost, would you expect to be in 2021 the efficiency of the division to improve compared to what was pre-COVID already in 2021. And lastly on dividend, I'm not going to ask you about how much, but I'm going to ask you about how, you always talk about payout and cash dividend.

Could you consider a buyback given where the shares are trading? If this would feel the chaser when you will be allowed to pay dividend?

Thank you.

Sure. Thank you.

On the fees, and on the outlook. So as I said the second quarter in domestic markets has been impacted on one hand by the lockdown and on the other hand by the elements that I mentioned before.

So on the interest income, there are the elements that should make it return to normal that I mentioned. So the deposits being deployed and the growth to take place and the TLTRO to optimize pricing.

And when you look at fees, and part of the fees that have dropped, they are basically dropped because there were less transactions happening and there were less related activities. And so there were less transactions that are being asked.

So, that is also something that could come back in domestic markets to the levels that we saw. So that is on that part.

So that is, when I when I say one can assume that in the second half domestic markets returns that's basically on all elements. Then when we look at the cost, indeed the cost that we are having as a reduction now, it will come into play full year effect next year.

And as I said, it will be extended because we will draw the lessons from what the impacts are. So don't ask me what the cost income is.

Yeah. The cost, yes, the effect will be full next year.

And there will be another wave of learnings that we will put in place. So the cost, where we were in very focused on it, and we will continue to optimize it.

And as I said, the confinement has been a lesson for that. On the dividend.

Listen, the thing is, it's basically you hear when we listen to you, right? I mean, we have investors that basically say, I'm interested in this.

And then we have a set of investors that are basically interested on dividends. And so by paying dividends in cash, all options are available.

So that's basically where we stand. So we listen to you, shout if you have a preference.

All right, that will be my answers. Operator, I think we're at the end of the call.

Thank you all.