Credit Agricole Sa

Good afternoon, everyone. Happy to share this hour and a half with you for the presentation of our Q2 and H1 results, which, as you have seen, are very good results. And I should say that these results are good. It's not a surprise because, as Philippe Brassac explained it several times yesterday in front of the board, in the context of this very specific crisis, where public authorities have put in place several measures in order to protect the economy, it's not a surprise that banks have good results. Nevertheless, I think that our results are specifically good with a net profit, and you can see it on page four for the group, which is not only up, around 85 to 90% as compared to last year, but also significantly up as compared to 2019 for the same period, both for the quarter and for the first half of the year. it's the case for the stated figures. And as far as the underlying net income is concerned, the improvement is also very significant, plus one-third on the quarter, plus close to 45% on the first half of the year, but also a significant improvement as compared to the underlying figures in 2019, plus 28% for the quarter and plus 21% for the half of the year. On the following page, you will see the figures for Crédit Agricole SA. So for the quarter, close to 2 billion euros in terms of stated net income and close to 3 billion euros for the half of the year. And restated from some specific items that I will comment later on, we still have 1.6 billion euro of net profit for the quarter and 2.5 billion euro for the half year. And it's up around 45% in both cases as compared to last year, and also up 25 to 30% as compared to 2019. This very good performance has been reached by a very, I would say, virtuous combination of a high growth in terms of revenues, plus 12% for the quarter and plus 10% for half year, which is much steeper than the increase in the cost base, plus 8% and 4%. So the gross operating income is sharply up, around 20%. And then the cost of risk is very significantly down, minus 70% for the quarter and minus 60% for the first half of the year. The underlying cost income ratio for the quarter stands around 55%, which is a further and significant improvement as compared to Q2 last year. And the solvency is at a high level, 12.6% for Gaza end of June. On the following page, you have the main messages that we want to insist on in this quarter. But I think I can summarize that in saying that the economy is recovering very rapidly after the different phases of lockdowns that we have had. In this context, the level of activity that we have had in all business lines has been very booming, very buoyant. And this is leading to this very sharp improvement in our profitability, both through an increase in the top line and a significant decrease in the cost of risk line, thus preserving and improving and strengthening further the capital position of the group and of Crédit Agricole SA. If I go now to page 8, you will see an illustration of what I was just saying regarding the economic situation in France, where you can see that seen through our own prism, which is the number of payments that we process, we have seen indeed in the different lockdown periods, a significant decrease in the level of activity. But the two comments I can make is that every time after these lockdowns, we have seen a sharp rebound and then lockdown after lockdown, the decrease is smaller each time. proving that the economy is progressively integrating in its behavior the consequences of the different lockdowns. So this is leading to the indicators that you have on the bottom part of the page, which illustrates the level of confidence of both the households and the business leaders, as well as the PMI. On page 9, some elements illustrating the fact that this very, I would say, fast rebound of the economy is translating into a very good level of activity for our different businesses. This is illustrated by the customer capture, which was significantly up in H121 as compared to H120. And indeed, we are now close to the number of new customers that we've had attracted customers back in 2019. It's also illustrated by the volume of new loans that we've put in place in Q221, up 15% on Q219. And it's also the case for some additional product lines, like the volume of new consumer loans that we put in place, up 62% in Q221 as compared to Q220. And in the insurance area, it's the example of the number of new policies that we've underwritten in PNC activities up also 62, close to 63% between Q2 2020 and Q2 2021. So this is leading to this very sharp increase in the top line. And you can see on page 10 that this increase is not only the case as compared to Q2 20, but also as compared to Q2 19. And indeed, both for the quarter and for the semester, the increase is a double-digit increase or close to a double-digit increase, even if we exclude the scope effect. Interestingly also, this increase is very well spread across all business lines with the exception of the large customers division, which you remember had a very, very buoyant quarter in Q2 2020, and is now at a more normalized, I would say, level of activity, but nevertheless, a good level of activity. What I wanted to explain on the following page is that actually this good performance in terms of revenue generation that we've posted in Q2 and H1-21, both compared to 20 and to 19, is actually part of a much wider achievement, which is the fact that in the last five years, quarter after quarter, both for Q1, for Q2, for Q3 and Q4, we will see later on this year, but both for Q1 and Q2, we've managed to improve the top line year after year after year. And this is the result of a very balanced breakdown of our revenues at CASA level, first between fees, net interest margin, interest revenues, and other revenues. And also, this very good resilience is the consequence of a revenue generation which is made by three quarters of revenues in connection with stocks of contracts and stocks of products that we have in our balance sheet. So only a quarter of the revenues are linked to transactions that we have regularly to rebuild year after year. So a very good resilience and a very good revenue generation capacity illustrated on this page 11. When it comes to the evolution of the cost base, indeed, when we first look at the evolution of the cost base between Q220 and Q221 at 8.3%, it may seem a little bit too dynamic, even though it's still well below the evolution of the top line. But if we take into account three elements, which are the base effect, Q220 was a very low base in terms of costs, considering the fact that Q220 was earmarked by a lockdown, the most severe lockdown for the biggest part of it. Second element, the scope effect. And third element, an effect linked to the increase this quarter of the provisions that we booked for future variable compensations. Actually, the evolution is very moderate. And actually, if we compare Q221 to Q219 excluding scope effect, so in two years' time, the increase in the cost base is only 3.6%, which is very moderate. And if you assess those figures for the full quarter, you will see evolution which are in the same region around 4 to 4.5% if you compare to 20 or to 19. So all in all, we continue to have a very strict monitoring of the cost base in this period of time. And this is illustrated indeed by the following page. which is page 13, where you see two interesting elements. The first one is the fact that in the last five years, in Q2, we've managed to post a positive Joe between the evolution of the top line and the evolution of the cost line. And indeed, in five years' time, we've managed to generate a total of close to 10 percentage points of positive Joe's effects. And this is leading to what you see on the right-hand side of this page, which is a decrease by close to five percentage points in five years of the cost-to-income ratio of the second quarter since 2017. And indeed, if we had looked back a little bit earlier in time, the decrease would even have been sharper. Let's go now on page 14 to the topic of the asset quality. Well, nothing much to say indeed because the asset quality remains very, very good across the board for Credit Agricole SA and for the group globally. You can see that the NPL ratios are stable as compared to March 21. And you may recall that in March 21, they were decreasing slightly as compared to end of last year. So indeed, we continue to have a very good quality of our credit portfolio. Considering the provisioning that we've did this quarter, this is indeed leading to a slight increase in the coverage ratios that we post. It's close to 75% at the level of Credit Agricole SA. and close and even a little bit above 85% at the level of the group globally, considering the very high 102% within the regional banks. All in all, we have more than 10 billion euros of reserves in Casa's balance sheet and 20 billion altogether for the group, in which at Casa we have around 27% of this amount which is facing sound loans, so performing loans. And at the level of the group globally, the proportion of provisions covering performing loans is even above one-third. So a very prudent provisioning approach. Despite this prudent provisioning approach, what you will see on page 15 is that the cost of risk this quarter declined significantly. At CASA, it's minus 72% Q2 on Q2 and minus 34% Q2 on Q1. And this decrease is explained both by a very sharp decrease in the evolution of S1 and S2 cost of risk, but no write-backs on S1 and S2 provisioning, simply a slight increase, and also a sharp decrease in the S3 provisioning because of the evolution of the quality of the loan book, which again was very good. At the level of the group, you will find the same kind of evolutions, a decrease of 63% of the total cost of risk Q2 on Q2 and minus 17% Q2 on Q1. with more or less the same trends, a very sharp decrease in S3 provisioning because there is a fewer number of defaulting loans, and an effort of S1 and S2 provisioning, which is maintained at a rather high level, especially within the regional banks of Crédit Agricole. and it is not linked to a change or a significant change in the macroeconomic scenario, but much more to the continuous effort of sectorial provisioning within the regional banks. Let's go now to page 16, where you see the global evolution of the P&L of CASA. What you can see in a nutshell on this page is that both on the quarter and on the semester, the evolution is very positive. It's plus 45% around in terms of underlying profit as compared to Q220 and H120. And it is still plus 30% and plus 25% if you take the 2019 reference. What is interesting is to analyze the way this evolution is made. And if we take the example of the quarter, you can see that the net profit is increasing by around 500 million euros as compared to last year. There is an increase in the gross operating income of around 450 million euros. There is a decrease in the cost of risk of around 650 million euros. And then you have, of course, a very sharp increase in the level of taxes plus 400 million euros and an increase in the other items amongst which you have the minority interest plus 200 million euros negative impact. So this explains how this improvement of 500 million euros has been obtained. But what is interesting really to keep in mind is a balanced combination of the improvement of the gross operating income and the decrease in the cost of risk. And lastly, on this page, you can see that this improvement is also very well balanced across the different business lines. On page 17, again, a look back in the past at the appreciation of our return on tangible equity across the last four and a half years, so 18 quarters. we've managed to post a return on tangible equity across those 18 quarters, which was permanently at least 2.5 percentage points above the average of the 10 biggest European banks posting a return on tangible equity. And again, this quarter and this semester, at 13 and 13.6%, the return on tangible equity that we publish is very significantly above the average of this sample of European banks. Last point on this page, we will, as we've said in February, we will, once the ECB authorization will be granted to us, we will conduct the second share buyback operation that we had announced beginning of this year. The first one being well on its way, it's completed at around three quarters for the time being. On page... following page, I don't have the number here, 18, some highlights regarding our contribution to the transitions of the society. We have decided to join the net zero banking alliance, the net zero asset managers alliance, and also we will join later on this year the net zero insurance alliance in order to fully comply to our commitment to be best in class in terms of accompanying the transition of the economy globally. But at the same time, we also want to deploy our effort in terms of social inclusivity, and we will have dedicated initiatives regarding the integration of young people amongst the labor world in France going forward. And lastly, on this page, we will continue to integrate as much as possible climate changes opportunities in our business models and the different businesses of the group, retail banking, asset management, insurance, CIB, and consumer finance. On page 19, an illustration on which we regularly insist, but I think it's very important to again explain it, is the growth engines that we have for the future. As you know, our model of universal banking is playing on three different growth engines. The first one is the scope of the services and businesses that we are able to develop. and we regularly extend the scope of our offers to our clients. The second element is the equipment. Once we have a client, and considering the scope of activities that we are able to propose to those clients, we try as much as possible to develop their equipment rates, and the difference between the gray and the blue bar illustrates the improvements that we've managed to to obtain in this regard in the last period of time. And then the third axis is the improvement and the increase of the customer base itself by the acceleration of our customer capture, be it the customers that directly sit within Casa's balance sheet, i.e. within LCL or within Crédit Agricole Italia, or also, of course, within the regional banks of Crédit Agricole. And you have here some indication regarding the improvement of the different equipment rates in 2021. Let me go now on page 21, precisely, in order to give you some highlights regarding the different business lines of the group, different business divisions, starting with the asset gathering and insurance business division. On page 21, maybe just one key element, which is the further development of the assets under management within this business division, 2.3 trillion euros of assets under management. And indeed, there's been an improvement both in asset management, life insurance, and wealth management activities. And the P&L of this business division continues to improve significantly as compared to last year. On page 22, insurance activities. It's been a very good quarter in terms of commercial activity for the insurance business division, both in savings and retirements, where we have net inflows of 1.6 billion euros. And what is interesting is that... Unit link products represent 40% of the growth inflows, around 100% of the net inflows, because what you can see is that actually we've been a slight negative flow, net outflow for euro products. And they now represent more than 25% of the outstanding, which is, as you know, a key target that we have for this business division. In P&C, the premium income is up 10% Q2 on Q2, so it's a very sharp improvement. Generally, we have between 7% and 8% increase over time, so 10% shows a very, very sharp acceleration. And in protection businesses, personal insurance, revenues are up even more sharply, plus 23%. It's mainly driven by the lending business, both for home loans and for consumer credit loans. So in this context, the net income group share of the business division is up and reaches a record level above 400 million for the quarter and 700 million euros for the half year. It's including positive market effect, but also it's also the consequence of this very good level of commercial activity. On the following page, page 23, Amundi has already published its results, so you perfectly know all the figures, but I think that it can be summarized with a few ideas. The first one is that this quarter was earmarked by strong inflows in medium to long-term assets. There was some outflows in money market funds, but in medium and long-term assets, we have had significant inflows. The second highlight is that Amundi is reaching a new high in terms of assets under management, close to 1.8 trillion. Revenues are very sharply up, and both management fees and performance fees are very significantly up. And actually, Amundi has reached a record in terms of performance fees this quarter. And the gross operating income is very significantly up, despite the fact that the provisions for variable compensation were, by definition, up in this context. So Amundi is posting also a record level of underlying profit. If we go now to the large customer division, So, CASIB plus CASEIST. Globally, there's been a good level of activity, probably less buoyant than the one we have had in Q2-20, but nevertheless, a good level of activity, and which was definitely above the Q2 that we've had in the past in 17, 18, and 19. In terms of custody activities, revenues were slightly impacted by a very ample liquidity position, which is costly, despite the fact that Cassez is billing the biggest part of the cash it receives from its customers. There is nevertheless the remaining part that is supporting the negative interest rate conditions that we have now. But when it comes to the fee part of the revenues of CASEIS, it is up significantly in line with the evolution of assets under custody and assets under administrations, which are up around 12% this quarter. Let me go now to CASEIS, to CASEIB, excuse me, on page 25. It's a mixed set of figures in terms of revenues, as you know, because, again, Q220 was so high in terms of activity in the world of both syndicated loans and bond insurances that it was difficult to replicate the same performance. And actually, what I have seen is that most banks are in the same situation this quarter, but nevertheless, Globally, the activities of CACIB were good, with good performances in structured finance, in trade finance, in transaction banking, and also in investment banking activities and equities. In this context, the gross operating income is down, but considering the fact that the cost of risk was very benign this quarter, and actually, CACIB is even posting a right back on loan loss provisions, by 40 million, the net income of CASIB is up 15% above 450 million euros for the quarter and above 700 million euros for the half year. In the specialized financial services division, both in consumer finance and also in leasing and factoring activities, the quarter was earmarked by a very high level of production of new contracts and new loans and new leasing put in place this quarter. So this is leading to an improvement and an increase in the outstandings. An increase also in the top line, a very good cost control, and a decrease in the cost of risk. So all in all, again, an improvement of the contribution of those activities to the net profit of Crédit Agricole SA. I'll finish with the retail banking activities, starting with LCL, where again, and I'm sorry to repeat the same words permanently, but we've seen a very high level of activity with a good level of production of new loans, leading to an increase in loans outstanding, a good level also of customer assets. a good level of customer acquisition with close to 90,000 new customers attracted in Q2, and an increase in the equipment rate of these customers with the different additional products that LCL is selling to them. LCL also launched its new project, LCL New Generation Network, which is going to lead to the regrouping of 250 branches in a network of 1,600 branches in order to better meet the customer request in terms of advice and quality. In this context, the top line is up significantly, plus 8%. The cost line continues to be very well monitored, plus only 2.2%. So the gross operating income is up 21%. Cost of risk declines significantly, minus 63%. And so the net income group share is up 78%. Italy. In Italy, of course, there is the integration of Creval this quarter, and I will come back on this issue later on, but let's start with Credia Ecole Italia, the original perimeter of Credia Ecole Italia, because it's a quarter on which, on this perimeter, the activity was very, very intense, with a strong increase in the production of new loans, a very strong increase in the management of customer savings, and a very good development of the level of revenues, which are up 12% if I exclude the Creval scope effect. And at the same time, expenses, again, excluding Creval, are decreasing a little bit, minus 1.5%, and the cost of risk is down close to 60% on the permanent perimeter of Crédit Agricole Italia. In addition to that, Creval is adding up some revenues, some costs, and all in all, a net contribution of 7 million euros for the last two months of the quarter, because the acquisition of Creval was completed beginning of May. But the integration of Creval is not only leading to this contribution of 7 million euros of net profit for the quarter. It's also, of course, the integration of Creval's balance sheet in Crédit Agricole Italia balance sheet with the first consolidation. This is leading to an increase of our RWAs. I'll come back on this point later on, but it's an increase of 8.5 billion euros of additional RWAs. And there's also the recognition of a net padwheel, which is a provisory, but which represents for 100% of companies Crédit Agricole Italia, 378 million euros. When translated to CASA, considering the minority interest within Crédit Agricole Italia, this is 285 million euros of net badwill. So the difference between the gross badwill and a first appreciation of the provisions that we will book in face of this amount of badwill. Let me note also that this bad will is not for the time being prudentially recognized. It's going to be the case only end of this year when we will have the definitive PPA performed. Let me take the opportunity of this page just to comment globally the group's presence and performance in Italy. We've managed to post the net profit in Italy globally of 385 million euros this semester. And it's very well balanced between the four main business divisions of the group, 35% for the retail banking activities, but also 36% for the specialized financial services business division. 19% for the asset gathering business division and 10% for the large customers division. So again, as we've already mentioned, a comprehensive set of activities generating a high level of profit in Italy. International retail banking activities excluding Italy. You know that we've had several difficult quarters after the start of the breakout of the pandemic because the political answer in those countries was, amongst other elements, to decrease significantly the interest rates, which is putting a very high level of pressure on our top line. And at the same time, we had, of course, to book some additional provisions. So the situation is now stabilizing and actually revenues this quarter are up close to 5% and cost of risk is declining significantly. So this business division is getting back to a more normal level of profitability, close to 40 million euros this quarter, and it's back to a more normal level of return, around 15% of return on tangible equity. It's much more normal for this business division. Corporate center, nothing much to say, despite the fact that for the stable components of the corporate center, we continue to have these progressive improvements. We have some relatively volatile elements, one negative one, which is the fact that the The net tax profit is reducing for technical reasons this quarter. And at the same time, the private equity business, which sits within this business division, is posting better revenues than in Q220. So these elements are compensating each other. Let me go now to the regional banks of Crédit Agricole on page 33. You will see more or less the same trends as the one we have noted regarding LCL with a very good level of activity, very good level also of customer capture with close to 650,000 new customers attracted in the first half of the year. Loans, outstandings, and customer assets are up quite significantly. Revenues are rebounding, plus 4%. Costs are very significantly up. You may notice that, but it's really in connection with the fact that last year, the regional banks posted a very sharp right back on the variable compensation reserve because of the dividend of Casa that was not paid in Q2 2020. And if you compare the cost base of the regional banks in Q2 2021 to the one they've posted in Q2 2019, actually the evolution is very moderate, around 1%. So the contribution of the regional banks to the net profit of the group, 740 million euros, it's up 12% as compared to last year. Let me go now to the solvency on page 35. The CT1 ratio at CASA to start with, 12.6%. All in all, it's a decrease of 10 bps as compared to end of March. Actually, you can see on the right-hand side that the total RWA increased by around 9 billion euros, out of which 8.5 are explained by the consolidation of Creval. So it's really this one-off effect and nothing more. And on the right-hand side of the page, you can see that this explains also and more than explains actually the slight decrease of 10 BIPs of the CET1 ratio because the retained earnings represent around 20 BIPs of additional solvency, but these 8.5 billion euros of RWA consume around 30 bps of solvency, so the difference is minus 10 bps on the ratio. The other ratios continue to be at very good levels, and of course, the 12.6% CT1 ratio at CASA is far above any requirement and far above the 11% target, We've already commented that. On the following page 36, the CET1 ratio of the group globally stands at 17.3%. It's stable as compared to end of March. It's 840 bps above SREP requirement. And again, the evolution of the RWAs is almost completely explained by the integration of the 8.5 billion euros of RWAs coming from Creval. And again, this also explains the biggest part of the consumption of the retained earnings that we have this quarter at the level of the group. In terms of liquidity, nothing much to say. We continue to have very ample liquidity reserves above €460 billion. Maybe just one point I can mention on this page, which is that our total outstanding CLCRO outstandings have increased a little bit by 10 billion this quarter. It's the result of first an additional drawing of 5 billion euros that we did on our own, I would say, plus also 5 billion euros that we found in the balance sheet of Creval. Market funding program is well on its way. 72% of the program of Credit Agricole SA has been completed as of now. And at group level, it's close to 18 billion euros that we have raised end of June since the beginning of the year. So it's really not an issue as usual. I think I can really stop here and try to answer now to your questions.

Thank you. As a reminder, to ask questions, you will need to press star and 1 on your telephone. To withdraw your question, press the hash key. Please stand by while we compile the Q&A roster. And the first question comes from the line of Jack Henry Golar from Kepler Chevrolet. Please ask your question. Your line is now open.

Yes. Good afternoon, Jerome. Two quick questions. The first one, when I look at your large corporate and investment banking, it really is really good when you compare to the objectives you had in 19. If I analyze your cost base, which was supposed to be 2.8, you're there. And your revenue objective, if you annualize them, again, you're at 5.3, you were at 5. So I was wondering to which extent even the targets you have, and then you have the level of provision, which is virtually zero, whereby you're not actually completely too conservative on your CIB forecast for 2022, which leads me to another question, which is I'm surprised you haven't actually confirmed the $5 billion net income. So I was wondering what drove you to be cautious. And the second question is also linked to CIB. If we could have from the ground maybe a little bit of color about how the ESG transitioning is going on with your clients with the whole Fit for 55. Do you find them well organized? Do you find them a bit in a panic? Any color you can actually give would be helpful. Thank you very much.