Credit Agricole Sa

Good day and thank you for standing by. Welcome to the Credit Agricole Q1 Results 2021 conference call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. And to ask a question during the session, you will need to press star and one on your telephone. And if you require any further assistance, please press star zero. Please be advised that today's conference is being recorded. I would like the conference over to your CFO, Jerome Grive. Thank you. Please go ahead.

Good afternoon to every one of you. I'm happy to present to you the results of the group and of Credit Agricole SA for this first quarter of 2021. Let me go to the slideshow quite as rapidly as possible in order to leave you time for your questions. So we can start on page four. You can see that the group is posting a net profit report of 1.75 billion euros, which is almost a double as compared to Q1 2020. When restated from the traditional specific items, and I'll go back on this one just afterwards, the underlying net income group share stands at 1.6 billion euros, and it is still an increase of 63%. What is the main element that we restate this quarter? It's the fact that we've received from the Single Resolution Board an approval to a posteriori restate our contribution for the last five years, from 2016 to 2020. And this represents a positive one-off for the quote that we book on this quarter that represents €185 million for the group and €130 million for Credit Agricole Essay. This element being, of course, non-recurring, it's restated and it's not integrated in our underlying figures. If I go a little bit down on the P&L of the group globally, what you can see is that these results are not only very high and solid, but they are also of a good quality. Revenues are very significantly up, plus 8.5%. Cost base excluding the normal contribution to the single resolution fund are stable. And the cost of risk is down 42%. So this is leading to this 1.6 billion net profit at group level and to a solvency ratio, CET1 ratio, at 17.3%. If you go on the next page with CASAS figures, the same trends can be identified. net income group share stated above $1 billion for this first quarter. It's up 63%, 64%, this specific item that is restated. And the underlying net income group share stands at $932 million. It's up 43% Q1 on Q1. And again, we have the same tendencies inside the P&L. with revenues up 7.2% as compared to Q1-20. It's also up 4% compared to Q4-20. The cost base excluding the contribution to the single resolution fund is flat, and it's even slightly down as compared to Q4 last year, minus 0.5%. And the cost of risk is down 38% compared to Q1, and also minus 23% compared to Q4-20. I can go directly maybe on page eight, and I just give you some elements on what happened during this first quarter of 2021. I think what is important to keep in mind is that back in 2020, the first quarter was still, for the biggest part of it, a quarter of normal activity and all the restrictions to the economic activities started only end of March. This first quarter of 2021 has been indeed earmarked with growth. the continuation of some significant restrictions measures. And despite that, we've managed to continue to develop our activities across the board. And you can see that we've succeeded in attracting new customers this quarter, significant number of new customers, 469,000 new retail banking customers in France and Italy. And we've managed also to increase the main activity indicators, loans outstandings, customer assets, consumer credit outstandings, and also the number of non-life insurance policies. So it means that we've learned how to continue to operate under restrictions and we've been quite active from this viewpoint. If I go now on page nine, just to take a look on the way the revenue line has been built at Casa in this first quarter of 2021, you can see that all business lines contributed to this increase in the top line of our P&L. It's been very much the case for the asset gathering division and also for the large customers business division. But you can see that also in the retail banking business division, we've managed to post an increase in the top line. It's only with the specialized financial services that we have had a top line that remain flat quarter in Q1 as compared to Q1 20. But it's interesting also to note on the right hand bottom top part of the page, is this series of net revenues that we've posted in the last five years for the first quarter of the year. And you can see that steadily, year after year, we've managed to increase the level of revenues. It's been also the case for the next quarters of the year, in Q2, Q3, and Q4. We'll see if we manage to continue this trend for the rest of this year. If I take a look at the evolution of the cost base, so I told you that the cost base was globally flat, Q1 on Q1, if you exclude the contribution to the single resolution fund, it's been... more or less the case in every business division, with a slight increase in the asset gathering and large customers business divisions, which were the ones that posted the highest increase in the evolution of their revenues, when the cost base continued to decline in the specialized financial service division and in the retail banking division. You can see that, of course, the cost-to-income ratio continues to significantly decline. It's now at 58% excluding the contribution to the Single Resolution Fund. Maybe one last point on this issue of the Single Resolution Fund I wanted to raise. This quarter, as I said, we've booked one positive element which is restated and not included in the underlying figures. And we've booked the traditional contribution, yearly contribution of 510 million euros this year. This figure compares to a published and underlying figure of 360 million in Q1 2020. But actually, in 2020, we have had to book a complement to this contribution in Q2 of 79 million euros. So actually, the 510 million euros that we booked This quarter, which is going to represent the whole of the contribution for the full year, no complement is expected in Q2, has to be compared with actually a level for last year, which was globally €439 million, but it was booked over Q1 and Q2. If I go now on page 11, talking about the asset quality, I think that the main messages are very straightforward. The asset quality remains very, very good with the level of non-performing loans compared to the total outstanding, which is stable, both for Credit Agricole SA and for the group globally. And the coverage ratios continue to slightly improve 72% for Crédit Agricole SA and 84.4% for the group globally. So the quality of the loan books remains very, very solid. When it comes to the cost of risk itself on this quarter, what you can see is that both for the group and for the SA, the cost of risk globally declined. You know that the cost of risk is made of two different factors. elements. The first one is the additional provisions that we book regarding stage one and stage two loans. And this quarter, you can see that this component of the cost of risk has decreased as compared to last year, be it Q1, be it Q4, or be it the average across the full year. It's simply because We've made a significant effort of provisioning performing loans last year, but this quarter, we don't see any reason to strengthen or to make more severe our macroeconomic scenario. And so the additional stage one and stage two provisioning that we've booked are only related either to the natural evolution of our credit portfolios or to some potential additional prudential approaches on certain specific sectors. And it's the same at the level of the group and at the level of Credit Agricole SA. The second element of the cost of risk is made of the provisioning of non-performing loans. And what you can see is that, again, both for the group and for Credit Agricole SA, the S3 provisioning is significantly below what we booked in Q1-20 and more or less stable as compared to Q4-20. So no sign of deterioration of the credit quality of our loan book again. This is leading to a very positive evolution of the net income group share globally on page 13. It's the case business division by business division, where you can see that in each business division, we've managed to increase the bottom line quite significantly. The only exception being the corporate center, but it's mainly and it's only due to a base effect in 2020. And when you look differently across the PNL globally, what you can see is that the net profit increases by around 280 million euros. It's fueled by a very significant increase in revenues, plus 370 million euros. and a significant decrease in the cost of risk, minus 240 million euros, and the two negative elements are the increase in the contribution to the single resolution fund, plus 150 million euros, and the increase in corporate taxes and other elements, plus around 180 million euros. On page 14, maybe rapidly some elements on two events of the quarter. The first event is Amundi entering into exclusive negotiation to acquire Lyxor. So this is going obviously to make, not only to reinforce globally Amundi's positioning in the field of asset management in Europe, but it's also leading to a very strong improvement of its positioning in the European ETF market. And the second element is the success of the tender offer that we have launched in Italy on Creval. It's been a success because we've managed to get more than 90% of the capital of Creval through this tender offer. So this is going to enable us to delist Creval and we have just reopened the offer in order to squeeze out the remaining shareholders and in order to own 100% of the capital of Creval to facilitate the integration process later on. Let me go now on page 16, just some elements regarding the mobilization of the group to support and to protect the economy during the crisis. I'm not going to comment in depth the process of state-guaranteed loans because you're now quite familiar with that. But just to mention that it continued this quarter. We have granted an additional close to €1 billion of additional state-guaranteed loans this quarter. When it comes to payment holidays, it's now coming to an end. And in most cases, in 98% of the cases, to a positive end because the payment are resuming completely normally. And we've been also, we remind here that we've been also active in protecting vulnerable customers. On page 17, what is important is what is now ahead of us. What is ahead of us is that the economy is picking up. It's picking up in France, in Italy, in Europe, in the rest of the world. And we absolutely must take part in that because all our competitors are active. And so we are working now on the next steps of this picking up of the economy, and we're ready to participate massively in the PPR initiative in France, Très Participatif Relance. With our life insurance company being the biggest contributor to the fund that is put in place, to finance these laws. Last point on page 18, during this period of time, we've continued to accelerate on the societal transformation contribution of the group. We've acknowledged that this crisis is clearly confirming the relevance of our group project and the relevance of integrating environmental and societal preoccupation in our group project, and we are accelerating on those elements. Let me now go rapidly through the different businesses, starting with the asset gathering and insurance business division. Just to mention on page 20 that we've managed to grow quite significantly the volume of assets that we manage and that the profit of this business division has significantly rebounded this quarter, plus 43.7%. When it comes to strictly insurance activities on page 21, what we can say is that we have had a very positive commercial activity in this beginning of the year and with an acceleration in March. We've seen that especially in the inflows in life insurance policies. The leadership positioning of Crédit Agricole Assurance has been strengthened further this year, last year on the French market, and it continues to be the case with the continuation of market share gains in the non-life insurance activity. The net profit of this business increases by 45% this quarter as compared to Q1 2020. On page 22, Amundi. Amundi has published last week its results, so you know them perfectly. I think two elements are worth mentioning. The first element is that, again, Amundi is reaching a record level of assets under management, 1,755 billion euros. And the second element is that Amundi is posting this quarter a record level of profit in an increase of 54.4% for the contribution of Amundi to our own P&L. On page 23, large customers division, so CASIB plus CASEIS. I think that what we can mention on page 23 is that globally the activity was very dynamic. It's been notably the case at CASEIS where we've seen a significant increase in assets under custody and assets under administration and a significant increase in the contribution of CASEIS outside the single resolution fund contribution. When it comes to CASIB on page 24, simply to illustrate the situation, this quarter, the first quarter of 21, has been the second best quarter in five years in terms of revenues for CASIB. And this performance has been reached both for capital market activities where we see a significant increase, plus 13 percent, and for financing activities with a good level of the credit demand coming from customers. The cost base remains very, very much under control, excluding, again, an increase in the contribution to the single resolution fund. significantly decreases, and thus the net income group share of CASIB is growing by 37.6% this quarter. Specialized financial services division with the consumer credit business. We have had a good level of production of new loans this quarter. It's an increase of more than 4% Q1 on Q1. So this is protecting more or less the level of loan outstandings at CACF end of March as compared to end of March 2020. The NBI is more or less a stable excluding scope effect. The scope effect being the deconsolidation of CACF NL, which is under the process of being sold. And the cost of risk at CACF is declining quite significantly, leading to a strong improvement of the contribution to CACF to the profit of the group. It's more or less the same story for the leasing and factoring activities with a good level of commercial activity in the quarter, a good level of revenues too, a significant decrease in the cost of risk, and a doubling of the contribution to our profit. Retail banking activities, starting with LCL. LCL, despite the restrictions, managed to grow its customer base and grow its loans and deposits outstanding. The revenues is quite resilient with an increase of close to 2%. The cost base continues to decline by around 2%, and the cost of risk is also significantly declining. It is spread more or less evenly between S1 and S2 provision and S3 provision. So in this context, the net profit of LCL is up 12% this quarter. Going now to international retail banking activity and starting with Italy. You remember that Italy has had an earlier triggering of the lockdowns in 2020, and so the comparison in terms of activity between Q1 2021 and Q1 2020 shows a very significant increase in the level of activity and in the number and the amount of products sold to our customers. So in this context, the top line is increasing quite significantly, the cost line is stable, and the cost of risk declined by around 14%. So the net contribution of Crédit Agricole Italia is up quite significantly, plus 76.6%. For the rest of the international retail banking activities, The lowest point in terms of revenues was reached in Q2 last year, so it means that the comparison Q1 and Q1 is still challenging. Nevertheless, as we've managed to control the cost base and also to decrease a little bit the cost of risk, the evolution of the net profit is only slightly down, minus 13%, and would have been stable without a forex effect. So it's a resilient quarter for this activity. I'll finish with the corporate center. The structural improvement of the costs of the corporate center continues to operate. There is a base effect which is quite challenging because you remember that in Q1 2020, we have had very significant intra-group restatements that generated within the corporate center 175 million euros of revenues, which we don't have any longer this quarter, but restated from this element. The improvement is very solid. Just maybe one additional comment. In the corporate center, since the beginning of this year, we are now booking the contribution of B4Bank, which is now held with a stake of 50% plus one share by Credit Agricole SA. And so it's equity accounted and it's generating a loss this quarter of 5 million euros. And we expect this to continue in the coming quarters and probably for some years before we reach the break-even. So you'll have now to take that into account. On page 31, the regional banks of Credit Agricole, they have had a very good beginning of the year with good levels of activity, good customer attraction too, and a net level of revenues that was also boosted by the effect of the improvement in the market on their portfolio of assets. the cost base is stable, the cost of risk declines significantly, and so the contribution of the regional banks to the net profit of the group is doubled as compared to Q1 2020, which was much more difficult. Let me go now to the solvency, starting with the level of Credit Agricole Essay. There is a significant increase in the level of RWAs this quarter, plus around 12 billion euros, but actually 5 billion is explained by the dismantling of an additional 15% of the switch mechanism on the quarter. And then we have had around 5 or 6 billion euros of increase in the level of RWAs that are due either to forex effects or rating migration or trim. So the real organic increase in RWAs is much more moderate. The CT1 ratio of Credit Agricole Essay stands at 12.7%, which is, of course, very significantly above any requirement. At the level of the group, The ratio stands at 17.3%. It's above the SREP level by 8.4 percentage points, and it's up 10 bps this quarter. Nothing much more to mention. Liquidity is definitely not an issue. On page 35, what is important maybe to note is that we've further increased a little bit the level of TLTO drawings that we've taken at the TLTO window. We have now, end of March, 152 billion euros of TLTO, which are allocated to the different businesses of the group, and the liquidity reserves are at their highest level. Last point regarding the financial management of the group, the advancement of the market funding program is completely on track. Maybe just one other element we can mention is that we've announced just two days ago The call of an 81, which is going to take place in June and which is going to produce its effect in terms of 81 coupons starting in Q3 this year. I think I can stop here in order now to try to answer to your questions.

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