Credit Agricole SA
PAR:ACA
| US |
|
Johnson & Johnson
NYSE:JNJ
|
Pharmaceuticals
|
| US |
|
Berkshire Hathaway Inc
NYSE:BRK.A
|
Financial Services
|
| US |
|
Bank of America Corp
NYSE:BAC
|
Banking
|
| US |
|
Mastercard Inc
NYSE:MA
|
Technology
|
| US |
|
Abbvie Inc
NYSE:ABBV
|
Biotechnology
|
| US |
|
Pfizer Inc
NYSE:PFE
|
Pharmaceuticals
|
| US |
|
Palantir Technologies Inc
NYSE:PLTR
|
Technology
|
| US |
|
Nike Inc
NYSE:NKE
|
Textiles, Apparel & Luxury Goods
|
| US |
|
Visa Inc
NYSE:V
|
Technology
|
| CN |
|
Alibaba Group Holding Ltd
NYSE:BABA
|
Retail
|
| US |
|
3M Co
NYSE:MMM
|
Industrial Conglomerates
|
| US |
|
JPMorgan Chase & Co
NYSE:JPM
|
Banking
|
| US |
|
Coca-Cola Co
NYSE:KO
|
Beverages
|
| US |
|
Realty Income Corp
NYSE:O
|
Real Estate
|
| US |
|
Verizon Communications Inc
NYSE:VZ
|
Telecommunication
|
| US |
|
Walt Disney Co
NYSE:DIS
|
Media
|
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
This note will be permanently deleted.
Credit Agricole SA
You don't have any saved screeners yet
Ladies and gentlemen, thank you for standing by, and welcome to Crédit Agricole Q1 Results 2020. [Operator Instructions] I would now like to hand the conference over to your speaker today, Jérôme Grivet. Please go ahead, sir.
Yes. Good afternoon to every one of you. And I want to apologize for this little difficulties that we had in the starting of this conference. I understand that some of you have been queuing in order to be connected. So I suggest that everybody can follow the conference and the presentation on the webcast. And then, of course, I imagine that, at the end of the presentation, you'll be finally able to talk through the call.I want to start this presentation by expressing my gratitude for all the teams within the financial department of Crédit Agricole Group, the different department of the different subsidiaries for having produced this set of figures in some, I would say, very specific and special circumstances. All this work has been put together completely remotely. And in my appreciation, at least, I think that in terms of quality of the analysis and the documents, we are completely in our standards. So again, I want to express my gratitude to all the teams.I am here with Philippe Brassac, who is attending directly this call and Clotilde. And so we'll try with the help of the teams, which are also online to answer your questions after this presentation.Let me now start with the key figures on Page 4 of the document. You can see that the group, Crédit Agricole Group, globally is posting a net profit for the quarter, a little bit above EUR 900 million, EUR 908 million to be precise, minus 32.8% as compared to the first quarter of 2019. And the underlying figure would be EUR 981 million, minus 31.6%. At CASA level, the figures are EUR 638 million for the stated net profit, minus 16.4%; and EUR 652 million, minus 18.1% for the underlying figures.I think these figures must be read across 2 different prisms. The first one is the one of the activity of the group and of our different businesses which was -- and which has been quite positively oriented during all the first quarter of this year. And of course, the second element that impacted those figures, and that fully explains the fact that the net profit is slipping a little bit, is the fact that, of course, since the beginning or the middle of March, we have been facing some major turbulences, both on the market and also in the day-to-day life of all our activities.Let me go now to Page 5, on which you will see more precisely what happened exactly during the quarter because as you will see, at the level of CASA, actually, we are posting gross operating income, which is up 7.9% on an underlying basis. And even more sharply up on a stated basis, which is the combination of a very good level of revenues, which are up around 5% and a good cost control. And indeed, the cost-to-income ratio at CASA level improved further by more than 1 percentage point and reached 62.2%. And then, of course, the drop in the net income is due to the rise in the cost of risk, which is itself, mainly driven by a provisioning of performing assets. And the cost of risk is multiplied by more or less 3, 2.8 on the perimeter of CASA and even 3.3 on the perimeter of the group.The solvency, both at CASA and at group level, even being a little bit impacted by different elements this quarter remained at a very solid level, 11.4% at CASA, which is significantly above our target and even more significantly above any minimum requirement -- regulatory requirement. And at group level, it stands at 15.5%. It's always amongst the highest that you could find on the European landscape. Lastly, on this page, I want to insist on the fact that the liquidity of the group has significantly improved actually across this first quarter of 2020.If I go now on Page 6, digging a little bit inside the revenues at CASA. I told you that the revenues on an underlying basis was up close to 5%, actually 4.8%. And this is a combination of a mixed -- of mixed evolutions across the different business lines. Actually, we have had very good resilience within our retail banking activities with amongst those retail banking activities of the group, of CASA Group; a good performance, very good performance at LCL where the revenues were up more than 2%.We have had also a very solid performance within the large customer division, with revenues up at CACIB and even much more rapidly up at CACEIS with, of course, a scope effect, which was positive. Within the specialized financial services division, we continue to have a very strong competitive pressure and we had also a drop in the production of new loans in March in our different markets, which explains the pressure on the top line.And lastly, on the asset gathering division, the activity was very good, but the revenues were definitely impacted by some valuation end of period. I will, of course, comment a little bit further these elements. This was partially offset by a stronger contribution from the Corporate Centre, in which we have more or less a partial offset of the depreciation that we had on the asset gathering division.And if I try to assess finally what was the cost of the dislocation of the markets on the overall level of revenues at CASA level, it's not a, I would say, an audited figure that I will give to you, but roughly, we can estimate that this dislocation in the market, if I net the positive and the negative elements, represented a hit on our revenues, which was around EUR 200 million, EUR 210 million, and a hit on the bottom line -- on the profit line, which would be around EUR 150 million.If I go now on Page 7, I'm talking a little bit about the cost line. I think that globally, we have had a very good monitoring of the cost basis of all the business lines and of the group with costs, which are up 2.9% on an underlying basis. But actually, within this increase of a little bit less than EUR 100 million in the quarter, we have had some tax effects both at the insurance -- within the insurance activities and within the consumer credit business. And we have also definitely the scope effect at CACEIS, which represents, in itself, more than EUR 35 million of additional costs.You can see that the IFRIC 21 costs continue to increase much more rapidly, including the contribution to the Single Resolution Fund, and I cannot rule out the fact that we could have to complement this provision for the Single Resolution Fund in the course of the second quarter because, obviously, it seems that the request of the Single Resolution Board was even higher than what we have booked in our accounts.If we go now on Page 8, I want to highlight some key elements regarding the cost of risk evolution and the quality -- starting with the quality of our portfolio. I told you that the cost of risk is sharply up. It's a multiplication by around 3, but this takes place in a context where the quality of our assets remain very high. And indeed, the level of NPL, both within the group and within CASA only, is slightly down as compared to what it was end of last year. It stands at 3.1% at CASA and 2.4% at group level.Considering the additional provisions that we are booking this quarter, the coverage ratios continue to significantly increase 72.4% at CASA and 84.3% at group level. And so clearly, the cost of risk is driven mainly by an anticipation of future risks, so, i.e., the provisioning of Bucket 1 and Bucket 2 assets. In this provisioning, we have taken into account both the downturn of the economic environment, but also the expected effect of all public measures that have been decided and announced and that are starting to be implemented, especially with our own health since the end of March.This is leading to cost of risk on outstandings, which is at 61 bps on an annualized basis at CASA and at 40 bps at group level. It's, of course, significantly higher than the levels that we posted last year, which were around 32 and 20 bps. And it's also quite significantly above the level that we had in mind in terms of across the cycle levels when we published our medium-term plan in June last year, where we made the assumption that we could have an average cost of risk across the cycle of around 40 bps at CASA and 25 bps at the level of the group.If I go now on Page 9, what you can see on Page 9 is that we haven't had any leeway, I would say, on the level of Bucket 3 cost of risk. You see at CASA that we have this quarter, EUR 382 million of cost of risk on nonperforming assets. This compares to an average in 2019 of EUR 362 million. And at the group level, the figures are EUR 516 million versus EUR 476 million. So clearly, there's no significant deterioration in the cost of risk with regards to nonperforming assets.This is the same situation that you will see on Page 10, where we have the breakdown of the Bucket 1 and Bucket 2 on the one hand and Bucket 3 on the other hand, provisioning on the different business lines. And you can see that within the regional banks, within LCL, within CA Italia, within CACF and within the financing activities of CACIB, we have the same type of breakdown with a rather stable level of Bucket 3 provisions and the increase mainly or mostly explained by the additional Bucket 1 and Bucket 2 provisioning.This is leading -- and you can have it on Page 11. This is leading to the evolution of the net profit in each business line, which is clearly down. It's minus 18% globally at group level. And in average, for the different business lines, it's minus 23%. But clearly, this is due mainly or essentially to the evolution of the cost of risk line because in most cases, and this has been particularly the case for the retail banking activities and for the large customer division, the operational level has been performing very well in the beginning of this year.On Page 13, I think I will not comment in length the figures that you have here. But this is saying exactly the same thing, i.e., in all business lines, we have had a very positive commercial momentum in the first quarter of 2020. And I simply want to insist a little bit on one figure, which is the customer capture in the retail banks in France and Italy.In the first quarter of this year, we managed to capture an additional 416,000 new customers in a single quarter, which is leading to a further increase in the customer base. And then you can see that all the traditional indicators of activities, outstanding, number of policies and so on are up this quarter. But definitely, the revenues have been impacted by the situation. The net interest margin is quite resilient. The commissions show a mix of performance depending on the type of commission. But of course, was more negatively impacted is all the revenues, which are impacted by depreciations linked to unfavorable market dislocation.If I now look a little bit more precisely on each business division, starting with the asset gathering and insurance activities, I think that on Page 14, the most interesting thing to note is the fact that actually across this quarter, the net inflows were around 0, I would say. So no massive outflows in March and still the benefit that we had of positive inflows in January and February.On the other hand, the market effect was absolutely massive, and it represented a hit on the global assets under management of above EUR 125 billion, but still as compared to the end of March 2019, the assets under management continued to be slightly up.I just want to zoom a little bit on this page on the performance of the wealth management activities, which post their best performance in 3 years' time. This is the translation of significant efforts that have been undertaken in the last 18 months to improve the efficiency of this business, plus also the fact of our customers having had a very active behavior in the first quarter facing the very volatile markets that we had. On the insurance activities to summarize in a few words what happened in the quarter, we have had a very good level of activity. It's been definitely the case in nonlife activities, both in P&C and protection businesses, where, again, our premium income is up 7% to 8% in the quarter as compared to the first quarter of '19, but it's also been the case in the savings and retirement activities, in the life activities, where, of course, the level of premium was lower than the one we had 1 year earlier, but the level of unit-linked inflows was -- stood at a record level. In terms of revenues, I already said it, the revenues are significantly impacted by the crisis effect, especially the impairment of some assets which are accounted for -- through profit and loss. And also the fact that again, in connection with the evolution of the market, we had to book an additional EUR 60 million of technical provisions on the unit-linked activities. All these elements are mainly reversible if and when market will finally pick up.In terms of cost evolution, this quarter, the cost evolution is actually driven by a tax effect because outside this tax effect the cost base of Crédit Agricole Assurance is more or less stable in the quarter. And then the last point I want to mention, of course, is the solvency of Crédit Agricole Assurance, which stands -- continues to stand at a very high level of 234% under Solvency II.On Amundi and the asset management, you have all the information that you could want on this business because I mean we already published its quarterly results. But maybe we can keep in mind the fact that Amundi has had in the quarter a very light level of outflows with a strong performance of retail network plus the JVs, almost compensating for the outflows within the institutional and corporate customers.The P&L shows very good resilience with a good level of operational revenues, which are up and a good level of cost control. Simply the P&L is impacted by -- like it's been the case at Crédit Agricole Assurance by market valuation on the financial part of the revenues.If I go now on Page 17, French retail banking activities, LCL, it's been a very good quarter in terms of activity and in terms of customer capture. Of course, with a significant slowdown starting mid-March, where all customers changed their priorities and all the network started to dedicate its means and its activities to answer to these new customer needs and to maintain the functioning of the basic services of the network for its customers.Loans outstandings are up. Savings -- customer savings are also significantly up, up despite the fact that we have had a market -- negative market effect on the savings linked to equities market. The level of revenues is up 2.2%, and the cost base is again down almost 1.5%. Of course, you see that the gross operating income is significantly up, but the net income group share is down in connection with a significant increase in the cost of risk, again, due to the provisioning of performing loans.In Italy, more or less the same profile, even though the evolution of the different figures are a little bit less dynamic. It's clear that in Italy, the activity started to slow down earlier. And actually, what we've seen is that after a very dynamic start of the year in January and February, we have seen a drop in the production of new loans and of new activities globally by 30% to 50% in March as compared to the average of January and February. But thanks to very good cost control, actually, Crédit Agricole Italia managed to keep stable its cost-to-income ratio and to absorb this decrease in the level of revenues. And again, we see that due to the increase in the provisioning of performing loans, cost of risk increases by a quarter and the level of net profit decreases by around 20%.For the rest of the international retail banking activities, nothing much to mention. Here also, we have booked some prudential provisions in the cost of risk, but nothing else to mention I think.Specialized financial services, we have seen a production of new loans, which has been very significantly impacted. You know that CACF is either directly consolidating or at least managing a loan book, which has 2 important focuses outside France, Italy plus car financing businesses. And by -- definitely, those 2 areas of lending activities were directly and very severely impacted by the COVID crisis and, indeed, the production of new loans in March was only EUR 2.6 billion, when it was EUR 7 billion for the first 2 months of the year. So it's a drop in the production of a quarter in March as compared to the average of January and February, and it's been a sharper drop, of course, at Agos and within the car financing JVs.The consolidated loan book is just stable as compared to the end of last year. And as the competition continues to be very fierce, actually, there is still this pressure on the margin, which is explaining the decrease in the level of revenues. Again, we see an increase in the cost of risk, again, led by this provisioning of performing loans. And this explains the evolution of the net income group share.Within the leasing and factoring activities, we have more or less the same story, with a good level of commercial activities both in the leasing business and also in the factoring business. Revenues, which are impacted more by a mix of activities, no specific worry on the level of margin, but a switch in the mix, which was less positive and a cost of risk which is entirely due to the provisioning of performing loans.Let me go now to the large customer division, which posted very positive figures for the quarter. I think that globally, we have had a very good level of activity and, of course, a contribution which has been impacted by the increase in the cost of risk at CACIB. If I start, nevertheless with CACEIS, I want to mention that this quarter was the first quarter in which we had the full effect of the integration of KAS Bank on the one hand and Santander Security Services on the other hand. This is leading for CACEIS to a very sharp increase in the level of the assets, which are either under custody of the fund which are administrated. The revenues are up close to 30%. Costs, of course, are up 25%, but only 6% organically. The rest is due to the scope effect. And the net profit at CACEIS is sharply up 27%, despite, of course, the minority interest that we now have within this business division. And interestingly also, CACEIS is providing a significant amount of liquidity to the group, which has reached record levels in the first quarter of this year.At CACIB now, on Page 22, I think that to put it in a nutshell, the way the first quarter of this year developed was clearly an illustration of the relevance of the business model of CACIB, which is centered on trying to answer to the financing needs of its corporate customer basis, whilst using all the necessary tools to do so, including, of course, capital market activities, but capital market activities, which are clearly here to help to serve the customer needs and not to generate trading revenues by themselves. And so this has led to a quarter through which we have seen, of course, a level of revenue in the financing activities, which was a little bit down with a slow start of the year and an acceleration starting in mid-March; and a capital market and investment banking revenues, which are significantly up, clearly driven by the customer demand and with a very low level of volatility on our capital market activities with a level of VaR, which increased a little bit by definition in the very dislocated markets that we have, but not reaching high levels and with no significant volatility in the P&L of our capital market activities.The cost base is a little bit up, but less than the evolution of the revenues. The cost of risk, by definition, is significantly up. And actually, compared to the first quarter of '19, where we still had some minor loan loss provision reversals, it's an inversion in the cost of risk. But around half of the cost of risk of CACIB this quarter is led by, again, the provisioning of performing assets. And so this is leading to a very good resilience of CACIB this quarter with net income group share, which is down only 13.5%, despite this very sharp increase in the cost of risk.RWAs are up around EUR 12 billion, half of it being explained by regulatory effects on the securitization, which we had already mentioned before the start of the quarter. So we had perfectly in mind that this was going to take place this quarter. And with this type of amount, the rest being explained specifically by either the credit line draw downs and also some market effects with a significant increase in the RWAs in connection with the credit risk on the trading book.The Corporate Centre on Page 23, as usually, we are going to analyze separately the structural Corporate Centre and then the volatile component of the Corporate Centre. The structural part of the Corporate Centre is slightly down, but it's mainly linked to nonrecurring elements like some elements in the cost of risk or in the way the cost base is spread across the year. So nothing really structural. The revenues of this structural part of the corporate center continue to improve regularly.And as far as the other elements of this division is concerned, the significant improvement is led to the positive effect this quarter of intra-group elimination. It's in connection with debt issued by CASA and purchased either by Amundi or by Crédit Agricole Assurance for their own activities. And within the consolidation process of those 2 entities, we need to eliminate the effects of this debt, which is generally, and again this quarter, positive when market conditions are volatile and negative the other way around. So it compensates, as I said already, partially -- only partially, of course, the negative market effect that we had within the revenue lines at Crédit Agricole Assurance or at Amundi. If I go now on Page 25, some elements regarding the regional banks of Crédit Agricole. From an activity viewpoint, you will find more or less the same trend as the one we have seen at LCL, i.e. a good level of activity; a strong evolution of the loan outstandings, plus 7%; and also strong evolution of the customer assets. This is leading to a level of revenues, which is if we take a look at the operational revenues, which is up more or less like at LCL. But the revenues globally of the regional banks were impacted also by the market conditions because a significant part of their high-quality liquid assets that they keep for liquidity purposes are not directly held but are held through mutual funds, which are accounted for through P&L. And so this has led to some significant P&L impairment this quarter, which explains the evolution of the revenues at the regional banks. This is, of course, the consequence of the implementation of the International Accounting Standard. And you can see that within the French GAAP standards, actually, this does not fully translate the same way. And the evolution of the net profit of the regional banks under the French GAAP is much more comparable to what we had at LCL around minus 22%. This is clearly the effect of the evolution of the cost of risk, which is very sharply up for the regional banks because the level that they had in terms of cost of risk in the first quarter of 2019 was especially low, only EUR 56 million, leading to a level of more than EUR 300 million this quarter, but again, driven by the provisioning of performing loans and still at a level which is low as compared to international standards, I would say.If I go now on Page 27, you will see both at group level and at CASA level, the evolution of RWAs. Let me start with CASA. You see that RWAs increased quite significantly from EUR 324 billion end of last quarter up to EUR 348 billion end of this quarter, but this is led -- this is driven by different elements; I want to describe a little bit. I already told about the regulation impact on securitization, plus EUR 5.5 billion of increase. The growth within the business line, which includes not only the development of their activities in terms of lending, but also ForEx effects and also the increase in credit risk linked to the trading book at CACIB is EUR 11 billion all in all. There is a decline in the equity stake of -- the equity value of the stake in the insurance companies linked to the decrease in the OCI reserves, which represent a decrease of close to EUR 5 billion of RWA. So this is leading to, I would say, a normal "evolution" of RWA from EUR 324 billion up to EUR 336 billion. And then there is an additional EUR 12 billion, which is the consequence of a decision that we have taken last year that we have announced end of last year -- confirmed, I would say, end of last year, which is the partial dismantling of the Switch mechanism. And of course, this creates an increase of EUR 12 billion of RWAs.At group level, you will see that we will find the same trends as I just explained for CASA. Outside, of course, the RWAs linked to the dismantling of the Switch because you know that at group level, the dismantling of the Switch is completely neutral. So the EUR 5.5 billion of increase linked to the regulatory impacts, the EUR 11.7 billion linked to the growth in the business lines, including the regional banks of Crédit Agricole and the minus EUR 4.7 billion linked to the decrease in the value of the stake in the insurance activity. So this is leading to a solvency ratio at CASA, which is now at 11% end of the quarter. And this 11.4%, excuse me, end of the quarter. And this 11.4% is the result of a series of elements, which are described in the waterfall on this Page 28.We start with the level of 12.1% that we had end of last year. The dividend that we had initially provisioned in the accounts of 2019 and that we are not going to pay by application of the decision of the ECB is reintegrated in our solvency, then we have the regulatory impact, minus 20 bps. We have the retained earnings of this quarter, and I want to mention that I'm talking about retained earnings, meaning that, of course, we already deducted from this amount the AT1 coupons, plus a provision for a 2020 dividend of 50%, applying our normal dividend policy.The OCI reserves decreased by 33 bps of ratio. The evolution of RWAs consume around 40 bps of ratio, and this is leading to a level of 11.8% end of March. And then in addition to that, we have 44 basis points of solvency consumption, which is, again, the result of this decision that we have taken -- that we have announced and that is going to produce additional results at CASA going forward, which is leading to the 11.4% figure. Again, I want to insist on the fact that this unwinding of the -- progressive unwinding of the Switch mechanism was announced and is the perfect translation of the policy that we have within the group which is to monitor CASA with a solvency ratio, which remains, of course, significantly above any regulatory requirement, which is not too high in order to preserve the capacity of generating the best possible return on equity for the shareholders of CASA.And then, of course, the idea is that the excess of capital of the group has to be kept at the highest level, i.e., at the level of the regional banks, leading to the ratio at group level. So this is the explanation of where we stand now.And let me just finish on this page by indicating that actually, despite this decrease, we had, end of last quarter, a buffer above regulatory requirements, which was of 340 bps of capital. And the buffer has indeed improved this quarter by 10 bps and is now at 350 bps in connection with the different decisions announced by the ECB and by the different central banks on the Article 104a and on the counter-cyclical buffers easing. So this is decreasing by close to 80 bps the requirements for CASA. And so this improves actually indeed the buffer that CASA keeps above its -- or has above this minimum requirement.At group level, you'll find the same waterfall with the same elements explaining the evolution between the end of '19 and the end of Q1 '20 with a solvency ratio, a CET1 ratio end of March, which stands at 15.5%. And again, we have the same phenomenon which is that the buffer above any minimum requirement, which was of 620 bps end of last year, stands now at 660 bps. So it has increased by 40 bps in the course of this quarter.The TLAC ratio continues and the MREL ratio in terms of RWAs continue to be covered without taking into account any element of eligible senior debt. And the decrease in the MREL ratio in terms of TLOF is completely explained by the increase in the size of the balance sheet in connection with the different refinancing operation that we've put in place in March this year, taking advantage of the different windows that were opened, namely by the ECB.In terms of liquidity, I already mentioned it. I just want to give now some figures. The liquidity of the group improved. Liquidity reserves are up close to EUR 40 billion from EUR 300 billion end of last year to EUR 340 billion. The LCR ratio improved also. And end of this quarter, it's even above 140% and our stable resources position continues to be significantly above EUR 100 billion, actually EUR 132 billion.Market funding on Page 31. We are -- we have completed our medium- and long-term market funding program by 2/3 end of April. Actually, we've managed to take the opportunity of the market improvement in April to realize 2 significant benchmark operation, 1 of covered bond and 1 of senior nonpreferred bond, which were both very successful.Let me now conclude this presentation and go to your questions simply by saying that we are in a very specific, very unprecedented situation. We are facing this situation with -- in a very good, very robust, very solid position. We have a balanced and diversified business model, which suits perfectly to the situation. We have a very good operational efficiency. We have a conservative risk management DNA or culture, I would say. We have a very strong capital position and a very good liquidity position. We are fully operational, and we have proven it in the last 8 weeks, actually, because all the banks in its different capacities has been functioning completely operationally. And we are behaving in a completely coherent manner with our raison d’être; with our mot d’ordre that we've elaborated and published end of -- or middle of last year which is to act every day in the best interest of all of our customers.And I think what is really very important to note is that we are in a position to completely play the card of the strategy that has been put in place by the different public authorities in France and in Europe at the European level, the monetary fiscal authorities, which is to offer to all the businesses and to all the household, the capacity of getting from one side of the shutdown of the economy to the other side with the help of the banks providing liquidity and funding to all their customers. And this is because we are completely involved in this process and mobilized in order to develop this policy that we have been able as soon as beginning of March and you will see those elements on Page 35 to start to put in place some moratorium for business loans for our customers in order to help them. It's now reaching more than EUR 3 billion of moratorium that have been granted end of April. This is with this attitude that we've been very proactive in putting in place the state-guaranteed loan in France. And we have now studied and, I would say, processed close to EUR 20 billion of state-guaranteed loans end of April again.This is with this approach that we've put in place a dedicated, specific support for professional customers, which have their multirisk -- professional multirisk insurance with us, covering business interruption, but not covering the case of a pandemia. And we have had the same approach in Italia, where we have put in place a EUR 6 billion dedicated loans to support corporate and this is also with this approach that we've been supporting our individual customers, both in France and Italy through our retail network and through CACF.So this is it. This is the presentation I wanted to make today. But I'm, of course, now ready to answer your questions. I don't know if somebody is taking care of the questions. Hope so.
The first question comes from the line of Delphine Lee from JPMorgan.
So can I ask on your cost of risk if you could maybe give us, share a little bit the assumptions you are using for the impact this quarter? I mean I can see on your Slide 37 that you have some GDP forecast. I don't know if this is what you're using. And if you don't mind also giving us, I mean, a bit more color on sort of the provisioning that you have on the sectors which are most affected. And if you have, by any chance, like a range for full year in terms of cost of risk, any guidance that you could provide. Then secondly, on capital. If you could just give us a little bit what we should expect in the next few quarters. Is there any impact from credit ratings migration? Is the TRIM impact still expected for this year? And maybe more maybe medium, long term, do you still expect to achieve 50% reimbursement on Switch 2?
Well, 2 important and interesting questions, Delphine. Thank you. Cost of risk, you know how it works with IFRS 9. We are putting in place different scenarios. We are weighting the different scenarios. And we have an approach, which is combining actually a top-down analysis and a top-down provisioning, complemented with a bottom-up approach. So across the board, we have made some scenarios. We have been weighting each scenario, and we are going to update those scenarios by the end of each quarter in order to make sure that we are completely coherent with our macroeconomic assumptions and our financial figures. And then we are complementing this top-down approach, which is leading to a first layer of, I would say, additional cost of risk and additional provisions. And we are complementing this top-down approach by a bottom-up approach, which is developed entity by entity and which takes into account both, of course, the geographical aspects because, as you know, we have activities in different countries and also our influence in different regions of France. And also, we are taking all into account in this bottom-up approach, in this, I would say, local forward-looking exercise, we are taking into account some specific industrial sectors. So obviously, what we've been taking into account is the hotel, restaurant and entertainment sector, which is facing some specific difficulties and which probably is going to get out of the shutdown later than some -- and most of the industrial sectors. We are also taking into account the oil and gas sector because by definition, this sector is particularly impacted by the oil prices evolution. We have been also taking into account the specific situation of the air transportation sector. So this is a combination. I'm not going to give you figures on each industrial segment or on each entity or on each geography, but the level of the Bucket 1 and Bucket 2 provision is the result of those 2 approaches. I would say the central forward-looking approach, which is top-down and complemented by bottom-up local forward-looking approaches.In terms of prospects, it's very difficult to answer to you because, by definition, we closed the accounts of the end of March with all the information that we have at that time. And we are going to close the accounts at the end of Q2 with an update of this information and with an update of the assumptions that we need to make. And in the circumstances that we are facing, the volatility of the assumption can be higher than in, I would say, normal times. So we are going to reassess all this hypothesis by the end of the second quarter. And I wouldn't be surprised to note that this review of the assumption could lead us to an additional provisioning of Bucket 1 and Bucket 2. But by definition, what we needed to do in the first quarter was done in the first quarter. I'm not going to give you some guidance or some figures for the full year. I think it's not really relevant. And clearly, what we think is that part of the answer is and lies in our hands, i.e., the more efficient we are in deploying actually the different tools I was just presenting at the end of my presentation, the better and the faster it's going to be the recovery and the pickup. So we are dedicated to make everything possible in order for this to happen as rapidly as possible. But what I can tell you is that if the evolution in the cost of risk or if the level of the cost of risk remains more or less what it is now -- what it has been now for this quarter for the remaining 3 quarters of the year, it wouldn't prevent us from continuing to help our customers and to be able to lend to our customers and it wouldn't jeopardize our solvency or our capacity of continuing to remain on the safe side of all European banks. This is the best answer I can give you.In terms of capital, well, the 2 questions are connected, but clearly, we are committed to dismantle half of the Switch mechanism. We've done 35%. We still have at least 15% to go. We will do it. We have time to do it because it's a commitment that is supposed to be fulfilled by 2022. So we have time. But the intention continues to be to do it, clearly. There's no issue about that. We are still at a very comfortable level of solvency at CASA even after this first layer of dismantling, 11.4% as compared to the target that we have. We note that our target is now significantly -- more significantly above the minimum requirements. This is an element which is important also to have in mind. And at group level, we have absolutely no doubt that we will continue to remain amongst the best capitalized banking groups in Europe. So the capital issue is not a real issue in our viewpoint. We will continue to take into account all the modifications of the regulation when they take place. So we understand that some elements are going to be decided by the European Commission in the next weeks in order to be applied by end of the second quarter. We will apply any elements that is going to be provided for by the regulation.
Yes, on TRIM and maybe just to follow up on those positive impacts from -- coming from the changes by the European Commission.
Well, I read and you read probably also that European Commission was thinking of modifying a little bit the way the IFRS 9 first-time application effect could be taken into account within the solvency. I understand that it's also reflecting on the software deduction. So these bits and pieces, we are going to implement them when they are appliable.
Okay. And TRIM?
And TRIM, we were close to the end of the TRIM process. And when we talk about TRIM, actually, we included in this process what indeed took place in the first quarter, which was the EUR 5.5 billion increase in securitization, which is not directly a TRIM impact, but when we published the capital planning of the -- within the medium-term plan, we had given some guidance on all the regulatory impact that we could have to face. So clearly, one of the big pieces of that was the securitization. But TRIM itself what was -- the remaining part of TRIM has been officially postponed, if I understand correctly what the ECB said, probably 2021.
Your next question came from the line of Giulia Miotto from Morgan Stanley.
I'm sorry, I was on mute. Can you hear me now?
Yes.
Okay. Sorry, I was on mute. So 2 questions on my side. One, again, on cost of risk and the other one on revenue. So on cost of risk, if I think about the diversified portfolio of your businesses, which one worries you most or which business are you looking at more closely? Is it consumer finance? Is it Italy? So any color that you can give us there would be quite interesting.And then on revenues, what are you expecting on the revenue side? And perhaps any early signs that you have seen in April in terms of loan growth or margins? Or any comment there would be helpful.
Well, to answer your first question, I would answer all because we are watching permanently all our portfolios. And actually, each business line is and has the duty of monitoring all its portfolios. Simply, we are taking a look at the different portfolios, taking into account all the elements. And you were mentioning, for example, consumer credit. Well, consumer credit business in France, where most of the household, most of the individuals benefit from social, I would say, fallback and security elements is not the same issue as in the U.S., where many, many people lose their jobs and lose their revenues at the same time. So it has to be looked at, taking into account all the context. And so this is why each business line is better placed to assess globally the situation of the quality of its risk portfolio with taking into account all these elements. So we are -- the risk department and the Risk Chief Officer is definitely following all the different portfolios with a closer look probably at the few industrial sectors I already mentioned as being quite sensitive in the present context. But with all the uncertainties that we are facing, we must take a look at all the categories of risks and all the context elements I have been mentioning, all the social security lines that exist in France. I can also mention, of course, the fact that for businesses and for corporates, we now will benefit from the state guarantee on the new loans that we are putting in place nowadays.And the second question was on revenues. Well, on revenues, of course, we continue to be active. We continue to develop our different activities. And we hope that with the end of the period of confinement that we are now getting close to in France and in Italy, we are going to have a more normal level of activity on business, I would say, besides the liquidity facilities that we need to provide to help the businesses and to help the household. So we hope that -- and we will work in order to continue our, I would say, "normal" course of business. But clearly, this is not the revenue line that is going to be the main driver of the profit line. Clearly, the cost of risk is going to be -- is going to have a bigger impact as it did actually this quarter already on the bottom line than the top line, clearly.
Got it. And can I just ask a very quick follow-up on the capital question that was previously asked? Your minimum is 11% or, at least, your -- according to your plan. But of course, you have quite a bit of buffer versus SREP. Would you consider possible going below 11%? Or is 11% still the floor for you?
Well, the target is 11%. We are not going to change the target every quarter. What we note, as I said, is that this target was providing a buffer of around 230 bps above any regulatory requirement end of '19. This is now generating a buffer, which is above 300 bps nowadays because of all the evolutions that took place in the course of the quarter. So this is, of course, an element that we must take into account, but we haven't changed the target of 11%.
[Operator Instructions] Your other question comes from the line of Jean Neuez from Goldman Sachs.
I just wanted to ask maybe -- I guess you said it yourself: the cost of risk is going to be the main swing factor for the P&L this year. And I guess you were there also in CACIB in 2008 and '09. And I just wanted to understand what you think. Even though you won't necessarily want to share a baseline scenario, where do you think you could floor the loan losses are -- on the profitability of Crédit Agricole S.A.? If there is any lever that you think below that, I just can't see it happen. Or at least share us -- share with some sensitivity with regards to, in particular, the degree of corporate guarantees you plan to issue and this type of measures.And secondly, I just wanted to ask on dividends. So you said that you accrued, as BNP said yesterday, and I felt at least when I read the ECB press release with regards to the suspension of the 2019 dividend, that there was also a recommendation not necessarily to start being too optimistic about the 2020 dividend, but obviously, I must have read this wrong. And what is your level of certainty that if you make money in 2020, you'll be able to pay your 50% payout? And maybe beyond that, depending what your capital level is, whether you can pay your 2019 dividend as a special or an exceptional in some shape or form at least part of it?
Thanks, Jean-François. I think that the present situation has nothing to do with the 2008, 2009 situation. So trying to assess what would be the bottom in the term of cost of risk, comparing to the situation we had in 2008, 2009 is not really helpful. In 2008, 2009, the banks were the heart of the problem. They were weak, at least weaker globally than what they are now. And the uncertainties, the risks were starting within the banks' balance sheet. So we are absolutely not in this situation. We know exactly what we have in our balance sheet. We know the risks that we've been taking, and we are helping our customers to overcome, I would say, the gap of activity that they have been facing due to sanitary reasons. And we are here to help. So this is going to be -- clearly, this is going to generate some additional risks. That's for sure. The public authorities are clearly helping us to take those risks by providing their guarantee, which is clearly a key element and a key component of our assessments as of now. The monetary authorities are also providing their help in order to provide to the banking systems all the liquidity that is needed in order to fund the financing needs of our customers. And so we are not -- absolutely not in the same situation. So I'm not going to make math in order to give you the level of risk at which this or that will happen. You have all the elements to do so, and you can perfectly identify the level of cost of risk, which is leading to the -- to what level of revenues of net profit with all the assumptions that you may want to make. But what I can tell you is that our global assessment of the environment is not naive, but it takes into account a strategy to which we contribute and that we think is going to -- with a timetable that we complete -- we do not completely master but that is going to transfer all our customers, corporates, SMEs, self-employed professionals and individuals on the other side of this output gap. And so this is, of course, integrated in the assumption that we make in terms of cost of risk.In terms of dividend, the recommendation of the ECB doesn't preclude us from accruing a dividend provision. It just says that we cannot take an irrevocable decision of paying the dividend before end of Q3 this year. We are not taking an irrevocable decision of paying a dividend because we are accruing the dividend. We are just prudent, and we are just confident in our capacity to continue at a certain point in time to continue to remunerate our shareholders. That's all. And I think that it's respectful to our shareholders and respectful to the ECB at the same time to do so.
With regards to '19?
With regard to '19, we said it when we published our press release: we are going to review the situation beginning of Q4.
But so if I understand well, you haven't signed off the accrual before or have foreseen that it's all going to be all okay and so on. I think it's important to -- for investors...
I didn't understand you. The line is not very good, Jean-François, and I didn't clearly understood your last question.
The question is whether you have had any sort of even informal conversation about the payout and, at least...
To be frank, we have had conversation with the ECB before the recommendation was issued. We have had some very quick conversation just after the issuance in order to better understand how it should be implemented. And now it's no longer an issue. We discussed with the ECB. We understand fully that both on our side and on the side of the ECB, this question now must be reopened after the summer.
Your next question comes from the line of Jon Peace from Crédit Suisse.
Can I just ask for a clarification on the 2019 special dividend question? I mean when we come to the fourth quarter, is it as simple as looking at your CET1 at that stage versus your 11% target and paying out the difference? Or are you looking at a sort of forward assessment of cost of risk development and where your capital might go? And you might want to maintain a buffer for additional uncertainty.And the second question, just a clarification on the cost of risk. Are you using the GDP scenario that you gave in Slide 37 to base your provisioning on this quarter?And then if I may squeeze in a third one. Just in the insurance business and the drop in the flows in unit-linked products, do you see that as a start of a trend given more uncertain markets? Or do you expect that to stabilize?
Let me start with your last question, if you want, because, clearly, what we've seen in the first quarter of this year is that, actually, there has been a very high level of inflows in unit-linked products. And actually, this is a trend that we've seen more globally amongst French household in March and in April. Again, they were a little bit more interested in equities than they used to be. So probably, it's an effect of the free time that some of them had staying at home, but it's also an effect probably of some, I would say, financial education regarding the fact that it's better to get interested in equities when stock markets are very low rather than when they are very high. So clearly, we haven't seen any behavior of trying to escape from equities, trying to escape from unit-linked products in the last period of time. I would even say on the contrary.Going back to the dividend question, I think I can only repeat what I just said: we are going to fully reassess the situation in the beginning of the fourth quarter. And it's going to be something completely new because, actually, there is not going to be a 2019 dividend. That's not technically possible now because, simply, the French law imposes us to pay it before the end of September and the ECB doesn't want to hear about any dividend payment before the beginning of October. So this happens to be now an impossibility. So we are going to reassess the question of dividend later on. And I think it's only prudent from our viewpoint to continue to accrue the dividend on the 2020 results in order to be well placed whatsoever and whatever the decision we want to take at that time.Then your last question was on the cost of risk and the type of hypothesis that we take. To be frank, especially in the present circumstances, where even if we've been able to produce these accounts and to produce this presentation in due time, it's a little bit less fluent. So of course, we had to book the provisioning of Q1 a little bit earlier on. And I'm not -- and I cannot say that we have taken fully into account our latest economic assumptions in the level of provisioning. So we are going, as I said, to do a complete rehearsal of our assumption in June in order to be able to completely update the inventory of Bucket 1 and Bucket 2 provision into account.
We have another question from the line of Tarik El Mejjad from BoA.
Just a couple of questions, please. First, on costs. I know you are more efficient than your French peers, and you are constantly working on efforts on your cost efficiency. But should we expect any natural decrease in costs given the environment in 2020? And are you working actively on finding some new sources of cost efficiency to offset the potential increase in provisions?And then second question, Jérôme is just on your comment on the revenues not being really -- I mean I agree cost of risk is the main swing factor, but revenues should be impacted somehow and somewhat. So I was surprised by your commenting that, that's not really a concern. Especially -- without going through all divisions, obviously, but I would imagine in French retail, the trends you had last year should slow down. And while the negative interest rates continue to bite, I mean, same from some financing businesses and so on. So -- and just to come back on the accrual of dividends. I mean the ECB -- spirit of the letter was you guys should accumulate as much capital before paying dividend. Yes, you put value 60 bps, but the idea was not to accrue as well so you can build capital faster in case things get worse than expected. So yes, you are within the spirit of the letter. At the same time, you will probably have 30, 40 bps of capital accrued for dividend that you could actually -- would have preserved to sustain more stronger shocks.
Thank you. Well, let me start with your last question. Clearly, our solvency is not a constraint in our lending efforts. So it's not by keeping an additional bps of capital this quarter that we would enhance to whatever extent our capacity to help our customers and to continue to lend. We are not constrained. We are doing what needs to be done, and this is not a constraint. So of course, you imagine that before making this assumption of accruing the dividend, we've been simply telling the ECB that this was our intention. We have had absolutely no reaction -- no negative reaction to this intention. Again, I deem it prudent to do so. And this is not preventing us from doing our business.Going to the revenues and to the costs because actually these 2 issues are linked. This is our philosophy. We are not working on the -- on Crédit Agricole S.A. and even less on the group globally when it comes to cost efficiency and cost-to-income ratios. We are working on the basis of businesses because, clearly, it's at the level of each business that this cost efficiency must be addressed. And what you have seen in the first quarter of this year is that in retail banking activities, we've continued to improve the cost efficiency and the cost-to-income ratio at LCL, and we've managed to keep them stable at Crédit Agricole Italia. We've been able also to improve the cost efficiency at CACIB, i.e., to generate additional revenues without engaging additional costs. It's been also the case at CACEIS, significantly. And CACEIS is working now on the full integration of its new acquisitions. And this is going to lead to some additional cost-efficiency improvements. And then we have -- in the specialized financial services division and in the asset gathering division, we clearly have this quarter a deterioration of the cost-to-income ratio. And we are working in these 2 divisions on reassessing the type of revenues that we could reasonably envisage and the type of cost basis that it allows. So this is going to be done on a business-by-business basis. We think it's the most efficient way to do it. So we are not, I would say, indifferent to the cost issue, but we are not, on the other hand, in a situation where we think it would be useful to announce a big cost-cutting effort across the board in order to face the present situation. Of course, the present situation is going to lead to some mechanical cost savings, but we are not really counting on those cost reduction on travel and expenses to -- I would say, to complete the exercise.
Your next question came from the line of Omar Fall from Barclays.
Just 2 questions for me. So the first one, I just want to go back to Sofinco, i.e., the consumer credit. And could you walk us through how you see the cost of risk at the Q in a bit more detail? Because I guess there's less direct government protection and moratoriums compared to other businesses, so this EUR 37 million stage 1 and 2 provision maybe looks a bit low. One of your peers flagged this as a key area of concern to them. And they've got maybe 3x the size of your consolidated loan book, but they've taken much more than 3x the provision. So I know you mentioned individual protections in France, but I guess if my salary used to be 100% and now it's 84% on the chômage partiel [ partial unemployment ] line, and I might pay my mortgage, but not my car loan or credit cards. So some color would be really appreciated. And then the second one is just in insurance. I know it's volatile. I know it will revert. But why was there so much of a market effect? Because the -- you've had in the past violent market moves and not seeing these kind of fair value impacts compared to some others like in Q4 '18, for instance. And I guess, generally, there's the assumption in the market that this business will see a limited impact in this crisis, if I look at consensus estimates at least. So ex these market adjustments, is that a fair assumption? And what are the specificities of the crisis that would stop you from making that pretty consistent EUR 1.3 billion-ish of net income?
Okay. On the consumer credit business, just keep in mind that we have a breakdown of our activities, which are either consolidated or under the form of JVs. And actually, probably one of the riskiest parts of the business, which is the corporate financing part of the car financing business, is not consolidated. It's in the JVs. And actually, we have only, I think, a few -- 2%, 3%, 4% of the loan book -- the direct loan book of our consolidated car financing activities, which are corporate lending. The very big, very vast majority of the direct lending of Sofinco on -- in the car financing business, which is around 40% of its business, is direct lending to household with the guarantee of the car and with all the mechanisms that you fully know. And clearly, on this part of the business, the individual protection that we have in France linked to the interest of -- for the household to keep his car is clearly leading us to be, I would say not overoptimistic, but to -- this is a key element of the analysis that we've done when assessing the risk. And clearly, at FCA Bank, we have been booking provisions with the idea that around 1/3 of the business of FCA Bank is corporate driven, again, contrary to what we have in direct consolidated home loans. So I think that the differences with some of our peers that you were mentioning can be explained by this different treatment of the car financing business between both of us.In insurance, don't forget that Crédit Agricole Assurance, and we've said it when we have had this dedicated workshop on the insurance activities, is now operating under IFRS 9 with an overlay approach, which is covering, I would say, 2/3 of its assets. But for some technical or regulatory reasons, 1/3 of the assets are not covered by the overlay approach, so half under IFRS 9. And this is leading to some swings in the level of the P&L since the implementation of IFRS 9. That's an element that we had pointed out at that time. And this is clearly something we cannot avoid simply. Again, this is largely reversible. And this is something which is absolutely not jeopardizing our intrinsic, I would say, profitability in the insurance business. And clearly, the profitability of the insurance business continues to be very high, be it in P&C, protection and life activities.
Your next question came from the line of Kiri Vijayarajah from HSBC.
A couple of questions. Firstly, can I come back to Switch 2? I mean do you sense it's now got a little bit harder to get approval for the next tranche of the Switch unwinds given all of the pressure to preserve capital levels that you're seeing from the regulators?And then secondly, turning to the loan hedges you have in the large corporate book. Just curious, have you been ramping up your use of hedging there? And can we have a bit more color on which actual subsectors within the large corporate loan book you've actually put the hedges on, which sectors you're getting the protection in? And maybe also a sense of what the notionals are on -- and maybe on some of the CDS levels just to sort of get a feel for how big of a hedge you have in place there on the corporate side.
On Switch, I think that there's absolutely no constraints and no, I would say, regulatory pressure that would lead us to delay or postpone or cancel the further dismantling that we have in mind. Actually, as you know, this upstreams capital from CASA to the regional banks, but it does not destroy any euro -- single euro of capital at group level. So seen from a regulatory viewpoint, there's no capital disruption by the dismantling of the switch. There is only a shift in the location of the capital between CASA and the regional banks. But at group level, the capital still remains at the same level. And so I don't expect any difficulty coming from the supervisor to continue the Switch dismantling, as long as at CASA we continue to operate with a level of capital, which is satisfactory considering the fact that CASA belongs to Crédit Agricole Group and benefit from the solvency of the group.When it comes to the CDS that are hedging the credit book of CACIB, actually, it's a book that is here mainly to help us manage our RWA consumption. It's nominal, which is, I think, a little bit above EUR 5 billion, if I remember correctly, and actually, the reason why we do not take it into account within the underlying figures is that our intention -- because it's here to help us manage the level of RWAs, the intention is to keep it -- to keep the CDS so not to crystallize the gain. And so we can have ups and downs in the market value of this portfolio, but the portfolio in itself is a permanent one.
Your next question came from the line of Guillaume Tiberghien from Exane.
My questions relate to RWA, 3 questions, actually. Number one, can you explain why the RWA of the corporate center increased by EUR 2.5 billion? I wanted to know what it is and whether we should expect more. I know it's small, but still, it consume most of your retained earnings in terms of capital consumption. The second question relates to the RWA in asset gathering ex the impact of switch and ex the impact of the equity accounting to insurance, there is EUR 1 billion increase, which seems also quite high. So I wanted to know what it is and whether we should expect more.And finally, with regard scheme on the French guarantee, if I'm not mistaken, there is a sort of 2 months gap between the time you write the loan and the time the RWA falls to 0 for the guarantee portion. And so whether you could maybe give us a flavor of what RWA impact should we have in Q2 as a result of the loans that are guaranteed but not -- that won't benefit from the 0% weighting in Q2 given your run rate.
Yes, exactly, exactly. So clearly, the production of new loans -- of new state-guaranteed loans in April was very high, and this -- considering this 2-month delay that you were mentioning, these loans are going to benefit fully from the state guarantee end of June. And so we will not have any RWA impact. I don't know at which pace the production of new state-guaranteed loans is going to continue in May and June. But what is for sure is that those loans are going to weigh on our capital ratios end of June before being unwounded, I would say, thanks to the entry into force of the state guarantee in the course of the third quarter. So clearly, we may have a peak, I don't know what would be the amount, but we may have a peak in RWAs end of June before the state guarantee enters into force. Considering the breakdown of state-guaranteed loans that we are producing nowadays, the biggest part of this peak is going to be seen within the regional banks because they are the largest producer of state-guaranteed loans within the group. But I'm not able to tell you as of now what is going to be the production of new loan in May and June and so what is going to be the RWA impact end of June. But it's going to exist, clearly.Second question, it was the increase in RWAs within the asset gathering division besides insurance and private banking activities. So within Amundi, we have had some, I think, collateral increases -- collateral demand increases linked to different products that are manufactured and sold by Amundi to its customers. And so the collateral calls that Amundi had to apply by the end of March is clearly leading to an increase in RWAs.Within the corporate centers, I think that we have different bits and pieces of elements. But to be frank, I don't have the global explanation in mind so maybe we will go back to you with a more precise explanation.
Jérôme, maybe just on the last point, do you think that these bits and pieces will recur or it would be a one-off? Because they consumed roughly 300 -- sorry...
It's clearly mainly one-offs and not only -- it's not going to be repeated, but I expect this to progressively unwind.
Your next question came from the line of Anke Reingen from Royal Bank of Canada.
Firstly, just on your -- a number of times, you mentioned that the business environment significantly slowed down in March versus January, February and probably in Italy, was a quite hard comment. So would you say that as a back -- on the back of this, your Q1 was obviously -- we should not see as a run rate and rather look at March in a number of areas, but then I realized you're not talking about intra-quarter comments. But a number of banks have talked about quite strong April and fixed income, and given your Q1 strength, I was wondering if there's anything you could add as well?And then secondly on -- just on insurance. Just I was wondering, conceptually, is there a risk that a few of your customers basically ask not to pay the insurance premiums? And would that be a risk to your top line? Or would you still account for these premiums coming in, in case you have to get, like, a moratorium? Or would it basically hit the top line?
On your first question, well, I think it's going to vary from one business line to another one. Clearly, the first weeks of confinement led in retail banking activities to more or less a complete halt in the development of the traditional business, no new home loans inception, no significant flows of insurance policies sales and so on and so forth. This is going to progressively recover. This has started already to progressively recover to a certain extent, simply because people need to -- need certain products and services. So for the first week, everything was put on hold. But after a certain period of time, the initial needs come back. So of course, it's going to be slower for home loans because the whole process has to start again, the process which starts with visits by the household of different properties and then negotiation and then discussion with the bank in order to be granted a loan and so on and so forth. So the process can be long. When it comes to simply getting a new home insurance or car insurance, it can be quicker. So clearly, in those activities, March was very significantly down. April is not going to be massively up. But just let me take an example. In China, we have seen between January and February a decrease by around 90% of the production of new car loans and then between February and March a multiplication by 3. So of course, you're not back to where you were in January, but the pickup was already there.In the CIB activities and especially in the fixed income activities, the end of March was very, very active. Beginning of April and the whole month of April has been very active and CACIB clearly has been one of the leaders of the bond issuance markets, especially in euros, and participated in a very large number of new issuances in end of March up to -- across April. So clearly, this is going to generate direct and indirect revenues for CACIB. So it's going to vary from one business line to another one.When it comes to insurance, I mentioned that we had decided to allocate to our customers -- professional customers, which are significantly -- very significantly impacted by the shutdown process, we have decided to give them a fixed amount of partial indemnification of their operating losses when they had an insurance with us, covering operational losses, but not covering, as I said, because nobody covers really, in this case, a pandemia. So this is an amount that is going to be integrated globally in our technical results. We are going to have in our technical results positive and negative elements. This is going to be a hit, but I'm not saying that this is going to directly and fully flow into the -- down to the bottom of the P&L. So it's going to be mitigated by many, many other elements and some positive elements that we can have on some other technical results within the accounts of the P&C insurance activities.
Your next question came from the line of Matthew Clark from Mediobanca.
Two questions from me. Firstly, could you let us know the level of the PPE reserve this quarter, please? I couldn't find anywhere. Apologies if it is disclosed. And then secondly, on risk weights, do you expect any material impact from credit rating migrations as the year progresses? And perhaps give us your thoughts about any headwinds there.
Well, credit migration, we are going to recognize the credit migration as they appear. Up to now, it's not been very significant. And again, you have to really have in mind what is happening with all these mechanisms of state-guaranteed help -- aids. Because as long as the state offer is guaranteed to corporate customer, the quality of the risk does not deteriorate even if the customer is losing a significant part of its turnover. So clearly, the migration effect, of course, some corporates are going to face negative migrations. But as of now, it's not been very massive. And this has to be read across, keeping in mind the very specific context in which we are and keeping in mind all the public tools that have been put in place in order to help the situation. So this is going probably to help significantly on this aspect of risk migration.Your first question was on which issue exactly?
The policyholder reserve in the insurance business. It was about EUR 10.8 billion or something. Has that changed…
Yes. I think this quarter, it increased by around EUR 100 million. So it's almost nothing. It's purely, I would say, even a rounding effect because it's simply a movement of flows between the provisional level of profit sharing that we integrate in our quarterly accounts, and what is left for the customers -- the policyholders and not taken by the insurer is put in the CPE (sic) [ PPE ]. So EUR 100 million increase but really not significant on a first quarter basis.
Your next question comes from the line of Jean-Pierre Lambert from KBW.
I would like to come back to the public support because it seems to be quite an important element you mentioned. How did you integrate the public support, technically? Is it in loss given default? Is it in probability of GDP scenarios or in better GDP expectation?And then related to that, if we look at the EUR 223 million in Bucket 1 and 2, what would have been that level without public support just to have an idea of the sensitivity?And the second question is a sensitivity question. We know from Banque de France that any extra amount of confinement would cost about 3% of GDP in 2020. What kind of sensitivity has it on your bank's earnings or revenues or cost of risk, if you could give some kind of quantification or indication?
Jean-Pierre, I fear I'm going to disappoint you a little bit because we are not as technically, I would say, experts, as you deem we are. We don't have any tool that is really connecting -- directly connecting a GDP hypothesis to a level of Bucket 1 and Bucket 2 provisions and so on and so forth. Of course, we have a process that is leading from the GDP assumptions to a level of provisioning, but we don't have -- we are not efficient enough to have the capacity of running different scenarios every day and making sensitivity analysis of that type. Clearly, if the global confinement is extended to 1 additional month, it's going to be a significant change in our macroeconomic assumption. But this is not the hypothesis on which we are now. We think that actually, as everybody stated, May 11 is not a precise day which separates a complete shutdown of the economy and a complete restart of the economy. The economy has started to work again in certain areas before May 11, and some industries have started to work again before May 11. So there's going to be a progressive acceleration after that. And it's not a hypothesis on which we could say 1 additional week is going to represent X million of additional Bucket 1 and Bucket 2 provision.When it comes to the public sector guarantee, well, I think it plays 2 roles, actually. The first role is that when we have the state guarantee on a specific loan, this is preventing us from having to risk weight this loan, with the exception of the first 2 months for the reasons we've just talked about a little bit earlier. Then when a corporate which is facing difficulties because of this shutdown of the economy benefits from a state-guaranteed loan, this is globally improving its solvency. So this is going to help its capacity to resist to this shutdown of the economy. Technically, is it taking place? Is it improving rather the probability of default or the loss given default? Frankly, I'm not able to answer precisely to this question, but we are going to check with the risk guys, the specialists of the model, and we are going to revert to you.
We don't have any questions. Sir?
Okay. I think we have one question that was sent to us by mail. So Clotilde is going to ask the question.
It's a question from Pierre Chedeville from CM-CIC. Two questions on P&C insurance. First of all, what is your view on the combined ratio that is still very low at 95%? And how do you see that evolving? And then the second question on the cooperative support mechanism from insurance. Can you give us a little bit more information as to what are the figures behind that?
Okay. The 2 questions are actually interconnected. The first question is that the combined ratio of our traditional P&C insurance activities is a key element of our DNA in our insurance business. So we see no reason why this should deviate from the very good levels that we regularly reach. And of course, we are going to continue to stick to that because this is through this very good combined ratio that we continue to offer a very wide coverage of our insurance policies to our customers.With regards to these special mechanisms that we've decided to provide to our customers. To put it in a nutshell, this is going to apply to around 50,000 customers, and we are going to give them an indemnification which is going to be, depending on their size and depending on their type of activity, between EUR 1,500 and EUR 10,000. So this is leading to a global gross cost of a little bit above EUR 210 million, which, of course, is going then to be integrated in the global costs -- claim indemnification cost that we cover for all our insurance customers.And I think, Clotilde, this was the last question that we had. So I want to thank you all for having attended this meeting in a very specific and special period of time. And again, I apologize for the difficulties that you had to connect for some of you, and I'm looking forward to talk to you again, at the latest, beginning of August and probably before that for some specific meeting, road shows or whatever. Have a good afternoon, and take care. Bye-bye.
This concludes the conference for today. Thank you for participating. You may all disconnect.