Credit Agricole Sa

Good afternoon, everyone. I'm happy to present this Q1 results for Credit Agricole SA and the group. Let me start directly with page four on the presentation, where you can see that the net profit that we published for the group globally comes in at 1.3 billion in the stated, I would say, format. and the underlying net income group share is at 1.5 billion euros. Difference this year between stated and underlying figure is mainly explained by a specific provision that we've taken on Ukraine, but I'll go back on this later on. On the following page for CASAS figures, what you can see is that we have a good revenue dynamic. Revenues are up 7.5%. We have also an increase in the gross operating income, close to 5% increase Q1 on Q1. We have then a cost of incurred risk, which is very low, and it's indeed reducing as compared to Q1 2021. And then playing in the other direction, we have a significant increase in our contribution to the Single Resolution Fund, plus 25%, and we have some specific provisions that we take in relation with the Russia-Ukraine crisis, but we'll detail that a little bit later on. If I go now on page 7, we have specific information provided on this precisely Ukraine and Russia situation. We remain what we did just after the outbreak of the crisis end of February. In Ukraine, we've started to support materially and financially our employees and their families. And those employees, I want to really thank them for this, made since that date a wonderful job in continuing to support their own customers. And as a matter of fact, even as of now, on a daily basis, almost two-thirds of our branches remain open regularly. In Russia, we've stopped, since the beginning of the crisis, all new financing to Russian counterparts, and we've stopped also all commercial activity in our Russian entity. In terms of risks, the proven risk on Russian and Ukrainian counterparts is very low. Actually, this quarter, we've passed 43 million euros of provisioning, bucket three, I would say, provisioning on Russian counterparts, and 20 million directly within our Ukrainian subsidiary books. But we've been much more conservative in taking additional provisions. On Ukraine, we've booked 195 million euros of additional provision in Kazakh books, which is leading actually to full write-off of the value of the equity that we have in our Ukrainian subsidiary. So we can say that after the booking of this provision, all our potential risk regarding Ukraine is now fully covered. As far as Russian counterparts are concerned, we've added close to 350 million euros bucket one and bucket two provision on Russian performing exposures. When it comes to the management of the book, a credit exposure book that we have regarding Russian counterparts, The overall size of this book, including all different compartments, I would say, of exposures that we may have, has declined by around 600 million euros since end of last year. When we published our press release beginning of March, we gave end of December figures. And actually, the decrease since the outbreak of the crisis is even higher. higher it's minus 1.1 billion euro of reduction of the of the global size of the book on page Eight, just a few additional comments on what happened during this quarter, besides, I would say, what I just commented regarding Russia and Ukraine. We have had a very good momentum commercially with a net customer capture, which was significant, and the continuation of an increase in all activities, be it credit, be it savings inflows, be it insurance equipment and so on and so forth. So this is leading to the financial figures I already gave and which I will detail a little bit later on. Page nine, again, this high level of customer capture, more than 500,000 new customers this quarter for our retail banks in France, Italy and Poland. And since the inception of the medium term plan that we are going to finish this year, it's around 6 million new customers that we've managed to attract in our different retail banks. This is of course leading or explaining that all I would say quantity or magnitude indicators are up also significantly. It's the case for the production of new loans in our retail banks. It's the case for the premium income coming from PNC insurance activities. It's also the case for the development of the production of consumer and leasing in the quarter. Let me go now to the revenues on page 10. What you can see is that first, the top line is increasing quite significantly, 7.5% over the quarter, plus 421 million euros of additional revenues. Second point, it is spread across all business divisions. Third point, this revenue increase is triggered both by organic growth and by inorganic growth, because pro forma, the acquisition of Creval and Lyxor that took place in the middle or in the end of last year, the revenue increase continued to be significant, plus 4.1%, and even excluding the corporate center, which is more volatile and it's not really a business center by definition, the increase pro forma the acquisition is at 4.3%. And last point on this page, this revenue increase is not new for us. It really comes within a series of regular increases in at least five years, quarter after quarter, as illustrated on the right-hand side of this page. Let me go now to the cost evolution. So there has been a significant cost evolution this quarter, plus 9.5%, plus 300 million euros. But excluding the acquisition and the integration of Creval and Lyxor, the increase is much more muted, 5.4%. And outside the corporate center, it's even lower, plus 4.2%. So the overall increase of the cost base by 300 million euros is explained for 130 million euros by the increase linked to Lyxor and Creval. By 180 million euros, it's an organic growth, out of which 50 million is explained by the corporate center, mainly due to technical, I would say, intra-group restatement effect. Let me go now to the gross operating income. What you can see on page 12 is that the gross operating income is improving again across all business lines. So the increase is plus €115 million over the quarter, plus 4.9%, and excluding the corporate center, it's even plus 7%. The cost income ratio that we published this quarter at 59% continues to be comfortably below the ceiling of 60% that we had set as a target for the present medium term plan. Let me go now to the risk side. What you can see on page 13 is two elements. First element, the incurred effective proven risk is very low and actually even decreasing both as compared to Q1 21 and to Q4 21. And it's indeed at a very, very low level. And the second element is that, of course, we've been increasing quite significantly this cost of risk because of our very conservative approach on Russia. outside Ukraine which is restated and so which is not included in those figures because of its very specific characteristics. Nevertheless, If I take into account this provisioning on Russia, we continue to have a cost of risk on the basis of the last four rolling quarters, which remain in line and even a little bit lower than the assumption that we had made for the present medium-term plan, which were, as you remember, 40 basis points for Casa and 25 basis points for the group globally. In terms of asset quality, we continue to have very good figures. The NPL ratio at CASA level stands at 2.4% and at group level at 2%. And considering the significant new provisions that we've booked this quarter, the coverage ratio continued to increase significantly, 77.5% for CASA and close to 90% for the group globally. You may see that we've decreased a little bit the volume of the loan loss reserves that we have in our balance sheet, but it's strictly technical. It's due to the fact that we have declassified our entity in Morocco because of the signature of a sale agreement in the last days of April. Let me go now on page 15, where you have the explanation of the evolution of the underlying net profit between Q1 21 and Q1 22. And what you can see again, it's another way of putting things together, is that the evolution is explained by two positive elements and two negative elements. The two positive elements is the increase in the level of the gross operating income plus 114 million euros and the decrease in the, I would say, incurred cost of risk or effective cost of risk, a reduction of 227 million euros. And then two negative elements, the increase in the contribution to the single resolution fund plus 126 million euros, and a significant increase in the cost of risk linked to russia plus 389 million euros so all in all this is leading to this decrease in the underlying net profit from 932 million down to 756 minus 176 million euros so minus around 19 percent but Nevertheless, if you compare the Q1 22 figure, it is above the Q1 20 figures by around 12%. On page 16, you have the return on tangible equity, which comes in this quarter above 11.5%, which is a high level for Q1, which is as always earmarked by the IFRIC 21 accounting constraints. And we can go now a little bit more in depth into the different business lines, starting with the asset gathering and insurance division globally for this business division on page 18. Two elements which are important to have in mind. There has been a very good commercial momentum in all activities across the board. And actually, assets under management globally are significantly above what they were one year ago. Over the quarter, the decrease is explained only by the market and Forex effect. And the net profit of this business division is significantly up plus 11.5%. Specifically, the insurance activities have had a very good commercial quarter in all businesses, life, P&C, and protection. Revenues are sharply up, and the net profit of the business division is also sharply up, plus 17%. Amundi and the Asset Management Business Division, positive net inflows in medium and long-term assets that offset more or less the outflows in treasury funds, money market funds, and a good level of revenues and a good level of profit, which is increasing as compared to Q1 2021, which was already very significant. In addition to that, the integration of Lixor is going on very well, and we continue to develop the business of Amundi technology. Large customer divisions, starting with CIB. A good level of revenues overall for CASIP this quarter, which is probably the highest level for a first quarter since 2016, thanks to a very good performance in the financing activities. A little bit more muted in the fixed income activities, but nevertheless almost compensated by a very strong performance in investment banking and equities market. On the cost base, a quarter of the increase is explained by forex effect. And the cost of risk outside the Russian provision is very low. And indeed, we had a reversal of loan loss provision outside the 389 million euros of provision regarding Russian counterparts. RWA increased quite significantly this quarter at CASEIB, more than half of the increase being in connection with the very strong increase in the risk weighting of the Russian exposure. When it comes to CASEIS, we have had a very good level of activity at CASEIS, a sharp increase in the in the revenues and a sharp increase also in the contribution to the single resolution fund for CASEIS as well as was the case for CASIB this quarter. Going now to the Specialized Financial Services Division and the consumer credit business. It's been a high level of production of new loan in Q1 2022 at CACF. especially driven by AGOS and by the rest of the international activities. When it comes to car financing, it's a little bit more muted in Europe, but very dynamic in China. The managed loan book is increasing. And if you assess the P&L outside the effect in connection with the CACF Netherlands, which is, as you know, in a runoff mode, we are almost flat in terms of revenues, in terms of cost, and in terms of cost of risk. And in terms of revenues, actually, what we see is that we have had an increase in the refinancing cost, which is not yet fully passed through to the customers. Regarding leasing and factoring activities, again, a very good commercial dynamic. We are presently integrating OLIN, which was purchased at the end of last year, and this is, for the time being, adding up marginally a 100% cost-income ratio to CALF, but of course, we are working on the cost base of OLIN. And nevertheless, revenues are significantly up, cost of risk is significantly down, and the profit at the CALF is sharply up. LCL on page 23 has had also a very good quarter, very good from a commercial point of view with the development of the customer base, the development of the loan book. strong inflows in customer savings and an increase in the equipment in the different insurance products of the customer base. And financially, revenues are sharply up, partially led by the development of the business and the development of the balance sheet, and marginally by some one-offs, positive one-offs, especially in the net interest margin. Operating costs are almost flat outside the contribution to the Single Resolution Fund and the French Guarantee Fund, and the cost of risk is down, so all in all, this is leading to a very sharp increase in the net profit at LCL. Italy is working on the integration of Creval and indeed the merger, legal merger between Creval and Credia Ecolitalia took place end of April, so just a few weeks ago. The market globally is a little bit more muted in Italy. It's been the case also for Credia Ecolitalia, but nevertheless, Thanks to the integration of Creval, we have a sharp increase in the level of revenues, a sharp decrease in the cost of risk, thanks to all the decisions that we've taken last year, and all in all, a very significant improvement in the net profit of Crédit Agricole Italia. The rest of the international retail banking activities, it's a little bit more difficult to read across this quarter. So let me just divide it between the different entities. In Poland and Egypt, a good quarter with a good evolution of the revenues and a decrease in the cost of risk. So a significant improvement in the profitability. In Ukraine, of course, the financial figures for the bank are penalized, but nevertheless, the Ukrainian subsidiary is posting a slight net profit this quarter. We've sold the Serbian entity, and the closing was made on April the 1st this year, so no consequences in terms of RWA in the figures of the first quarter. You'll see that in the second quarter. And we've signed on April the 27th the sale of our subsidiary in Maroc, Crédit du Maroc. So the closing is expected to take place before the end of this year. And we've declassified Crédit du Maroc, which is now accounted for under IFRS 5. Corporate center, nothing much to say. There is always a little bit of volatility in the corporate center. But nevertheless, if I assess All in all, the net impact is close to what it was last year. Let me go now on the solvency, excuse me, on the regional banks of Crédit Agricole on page 28. You will see more or less the same trends as the one I've just commented regarding LCL, a good level of customer capture, a good evolution of the loan book, which is sharply up, plus 6%. customer assets as well. And revenues are up a little bit less significantly than at LCL because the portfolio revenues within the regional banks were a little bit weaker in Q1 2022 than what they were in Q1 2021. But nevertheless, the revenues are up close to 2%. So cost of risk is slightly down, but actually the biggest part of the cost of risk is made of bucket one and bucket two provisioning again within the regional banks. So the incurred cost of risk is indeed very low, and the net profit is up globally 10%. Let me go now on page 30 in terms of solvency at group level first and then at CASA. At group level, we have a decrease of 50 bps of the solvency ratio, which comes in at 17%, 810 bps of margin above the Pillar 2 requirement. This 50% decrease is the combination of, of course, a significant level of profit after distribution, but a significant impact of the RWA evolution in connection with the Russian crisis. Again, as I said, at CASIB, we have had an increase of close to 6 billion RWA simply by the increase in the risk weighting of our Russian exposures. Significant also organic growth of RWAs at group level. And the OCI impact within the entrance activities linked to first a significant decrease in equities markets, but also, and more importantly, a significant increase in the level of rates that is decreasing the unrealized capital gains at the level of credit agriculture assurance. And then we have the regulatory effect, which is mostly due to the fact that despite we challenge that, the ECB has requested the French banks to Again, deduct from their solvency the commitment that they provided to the single resolution fund to pay some contributions. So this is leading to an impact of 17 BIPs at the level of the group. Translated at the level of CASA, the overall evolution is more important. It represents globally 90 BIPs, but the explanations are exactly the same. And we end up at 11%, which is, again, and I remind it because it seems that sometimes it's a little bit difficult to accept, but it's exactly our target. And it is more than 300 BIPs above our Pillar 2 requirements. In terms of liquidity, I think nothing much to say on page 31. The liquidity reserves are very ample. They are boosted by the TLTO drawings. But even if we restate it from the TLTO drawing, we continue to have a very comfortable liquidity position. And this has been also fueled on page 32 by the fact that our market funding program is well on its way. 84% at the level of Casa end of April and at the level of the group globally we've raised close to 18 billion euros end of March. So a very significant effort which is paying off because actually since that the credit spreads have quite significantly increased on the market. I think I can stop now and we can go to the question if you wish.

Thank you. As a reminder, if you would like to ask a question, please press star and one on your keypad. And if you want to cancel, you can press the hash key. So that's star and one to ask a question. Your first question today comes from the line of Omar Fol from Barclays. Please go ahead.

Hello, Omar. Hi, Jean. Thanks for taking my questions. The first one is just if you could highlight what remaining impacts on capital, whatever they might be, we should anticipate for the rest of the year, you know, whether there's anything left on trim or IRB repair. I think on the disposal side, can you do mark is like 10 bps. and then Serbia was announced last year, but that's pretty immaterial. So just any of the other moving parts aside from earnings, we should expect.