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.

Okay. The two main elements that we can precisely identify, even if it's not possible for Crédit du Maroc to give the precise date, is the disposal of Crédit du Maroc, a little bit more probably than 10 BIPs. We'll see exactly the amount when the closing takes place. And then the trim, last layer of trim impact, which is going to take place in the second quarter, and which is going to represent an additional 5 billion RWA at CACIB. Five or six billion, I don't remember exactly. So these are the two main elements that you can have in mind with the precise quantitative impact. Besides, we have moving pieces on which we are not able to give precise amounts. But as a reminder, every year in the second quarter, you remember that we have the dividend payment that is coming from the different subsidiaries of Casa up to Casa. So when it's from a banking subsidiary to the banking mother company, there's no impact. But when it's from the insurance activities to the banking model companies, it has a significant and positive, of course, impact. And so this is going to take place as every year in the second quarter. And of course we have the capacity to fine tune the amount of this dividend up to the end of the quarter. So these are the main pieces that can be identified as, I would say, specific and one-off. For the rest, of course, this is going to be the normal course of business. So, there is going to be the organic evolution of RWAs in the different business lines. And when it comes, for example, to CASIB, what I can tell you is that most of the increase that CASIB is able to do for the full year has been done in the first quarter. And this explains why we've seen such a high level of results and revenues in the financing division at CASIB. And then, of course, there is the retained earnings quarter after quarter that are going to fuel, of course, the capital ratio of CASA and of the group.

Thank you. And just a quick follow-up, a separate point, which is just on the interest rate sensitivity from the annual report that you've put some detail on that on slide 40. You've not given this to us before over kind of a multi-year period, so I just had just a couple of clarifications. I think you used to say the sensitivity to rates of the group was low, but, I mean, this looks like 100 bits is like a quarter of last year's earnings, so maybe you can give some color there, especially because it's strange that your sensitivity doesn't increase over future years like most of your Northern European peers. Thanks.

Well, actually, it increases over the year, over the time, but there is a technical effect, and I think it's explained on this page 40 on the first year because the first year is impacted, and the way you see it can impact the way you see the global impact of this increase. It's the TLTRO premium ending end of H1 and also the Livrea level increase that took place the beginning of this year. So this is why actually you could more look at the plain on the bar chart, 0.4 billion euros on the first year, then 0.7, then 0.8. So there's a progressive increase of the spreading of the impact within the P&L. Thank you. Thank you.

Thank you. The next question comes from the line of Guillaume Thiberguen from Exxon. Please go ahead.

Yes, good afternoon. Thank you very much. Question on capital as well. I understand that your target is 11, but next year we're going to have potentially the IFRS 17, potentially some BAMI insurance joint venture. And so my question is, what would be the flow at which you would accept to operate on, even if I understand the target is 11?

Yes. IFRS 17 is going to be somehow financed by the entrance activities themselves. So what we have in mind is that actually, especially in the context of the increase in rates that we are seeing now, an increase in rates is at the same time producing a significant improvement of the solvency of the insurance activities. It's the solvency to a capital requirement standard that produces this effect. At the same time, it reduces the OCI reserves and reduces the solvency of the banking mother company. We are going to work on the level of leverage that we can inject within our entrance activities in order to more or less offset the IFRS 17 impact in terms of solvency at group level. we consider we can absorb that without having to incur, or at least not significantly, an additional hit on the solvency at Casa. You've mentioned also potential additional bank insurance agreements with third party, for example, in Italy. Again, this would not be performed directly by CASA but by our entrance activities so translated in terms of solvency impact at the level of CASA it would certainly be whatever happens really in terms of those partnerships it wouldn't translate into a significant heat on the solvency of of CASA so This is to answer to your two specific points regarding IFRS 17 and potential new bank insurance partnerships. Then, going back to your more general question about 11%, the target, and so on and so forth, 11% is the target. This is what we are aiming at. So, of course, we like to be at 11%. We like to be possibly at 11%, I would say, comfortably, but there's no need for us to be permanently at or above 11%. And again, when we are at 11% like is the case now, we have 310 bps of margin above the Pillar 2 requirement. We have 300 bps of excess above the minimum distribution amount. So there's absolutely no stress for us when we are at 11%. And if we were to be at 10.9% in the coming quarter, which is not what I foresee, this wouldn't be an issue because, again, 11% is the target. It's not the floor.

But what flow would you accept to fall to?

It's a target. And we have, of course, our internal, I would say, management buffers and so we monitor our activities in order to be and to be able to continue to aim the target but we are not going to disclose a precise figure which would be a flaw we disclose a target we want to be comfortable in terms of our capacity to distribute and this is why we are happy to have this 300 bps of margin above the MDA threshold. And what I can tell you, but of course I'm not going to disclose the figures, is that I regularly, every quarter, update my capital trajectory. And what I can tell you is that in my central scenario, my capital trajectory is going to translate into a slight increase of our solvency over the rest of the year. But again, it's in the central scenario, and 11% is a target, and the target is a target.

Very clear. Thank you.

Thank you.

Thank you. The next question comes from the line of Delphine Lee from JP Morgan. Please go ahead.

Hi. Good afternoon. Thank you for the clarifications on capital.

I just wanted to come back on the interest rate sensitivity that you provided me on your report. Does that, what kind of assumptions are you making on deposits and livrea rate when you provide the sensitivity? Is that like 100% increase in livrea rate? Or I mean, what are you assuming for side deposits and the rest? Just trying to understand what the depositor assumption is for that number. And also on capital, so just on the sensitivity, is there a way to provide like a sensitivity on capital from rates on kind of OCI reserves? How much OCI gains do you still have? Just trying to think about, you know, what the impact would be from rates. Thank you very much.

Okay, on interest rate sensitivity, you know it's an exercise which is very academic because actually the reality is never taking place exactly like the sensitivity scenario are playing. So we have to make certain assumptions. The first assumption is about what we call the pass-through rate, i.e. the capacity of passing to the customers on the asset side the increasing rate. And we've provided two different scenarios assumptions, one with 50% of pass-through rate and another one with 100%. The second assumption, the second strong assumption is that it's based on a constant balance sheet So, it means that there is no specific assumption regarding migration from liabilities to one bucket, from one bucket to another one. And the third assumption is, of course, that the increase in rate is of course, translated to the different categories of assets and liabilities that are rate sensitive. So it means that on the LIVREA side, for example, it's taken into account and actually the increase and this is what I explained rapidly when I answered to Omar a little bit earlier, the increase of the livrea in February is taken in the central scenario, so it's in the base scenario, and then the further increase that may take place in August is taken in the sensitivity. And regarding the OCI, well, to put it in a nutshell, if there is an increase of 100 bps in interest rates and in the yield curve globally, then what we can say is that it would translate in terms of impact on the CET1 of CASA. by around probably 20 bps of impact all in all so of course you need to assess exactly how it's taking place is it going along with a decrease or an increase in in equities and so on and so forth but this is globally the magnitude that we had in the first quarter of this year and so we had an increase of around 100 bps of the interest rates. And there has been an impact linked to the OCI reserve depletion of 20 bps on the CET1 of CASA. And this continues to remain the sensitivity. But again, what I want to mention, because it's not maybe perfectly known by everyone, If there is an increase in rates, it is improving the solvency of Crédit Agricole Assurance under Solvency 2 because you know how the solvency requirement is calculated for the insurance activities. It's based on a series of scenarios. And, of course, every time the scenarios are taking an assumption of increase in rates, is improving globally the solvency going forward of the insurance activity. So this is giving us additional margins of maneuvers in the capacity of upstreaming or downstreaming capital between the insurance activities and CASA.

Understood.

Thank you very much.

Thank you.

Thank you. The next question comes from the line of Jacques-Henri Goulart from Kepler. Please go ahead.

Yes, good afternoon. Two questions. The first one is going back on cost. It's not the first time that basically the company missed a little bit against consensus. And the question for you was how you manage the cost base. Is it the case to say, okay, we are below 60% target, therefore it doesn't matter if the operating leverage is not as good as it could be because the target is 60 and I need to be below 60? Is it the way you're doing it or is there something else? And the second question is on the CDA impact of the Russian counterparty on your CIB business. If you could give us the number, that would be helpful, because I assume that's not going to come back in the forthcoming quarter. Thank you.

Thank you. Well, on the cost base, maybe we can go on page 11 of the document. Again, globally, what is interesting is to analyze a little bit and the the evolution of around 310 million euros of the cost base that we have had, excluding the contribution to the single resolution fund over the quarter. Two main components, scope effect, Lixor and Creval, 130 million round, and the rest of the group, 190 million. Inside the 180 million round, Two categories. Corporate center, around 50 million, mainly explained by technical accounting intra-group restatements. So it's not really an increase in the running cost base. It's technical, 50 million. And the rest for the business lines is 130 million. Maybe we can do an exercise that would consist in taking all business lines and seeing how much Did they increase their cost base? And what is the explanation? The biggest increase is at CACIB, $40 million. $10 million of forex effect and $30 million of IT expenses in connection with different projects and developments. Then you have Crédit Agricole Assurance, $20 million of increase, roughly. It's mainly development, and when you see year after year the development of the business in the insurance activities, it's money that is well invested. Consumer credit, CACF, 20 million again. It's almost only scope effect. The effect in connection with CACF Netherlands, you know that we've been deconsolidated under IFRS 5 and then reconsolidated because we finally chosen to run it off. So this is producing an effect between Q1 21 and Q1 22 and also a second scope effect which is the integration of Soyuz, the Spanish subsidiary. So almost no organic growth at CACF. Then LTL 20 million almost totally explained by the contribution to the French Fonds Garantie des Depots. So no organic growth or almost no organic growth. Then Amundi, 15 million euros outside Ixor. It's mainly driven by Amundi technology and the development of the Alto project. Then you have the leasing and factoring activities. Again, 15 million increase outside of which Olin, which is the new integration, is representing about half of the increase. Then you have the wealth management business, 10 million increase, mainly explained by projects and developments inside ASCOR, which is the subsidiary dedicated to servicing third-party private banks. And then you have CASEIS, around 5 million euros. It's totally explained by the fact that CASEIS is going to move from its present location to a new location, and for two or three quarters, they have to pay two rents, two terms. So, really, when you see exactly where we are, where we've been increasing this quarter, the cost base, it's perfectly explained. It's not slipping, you know, across the board. It's really made of different decisions that are perfectly explained. acceptable from our point of view and compatible with what continues to be a very important priority for us, which is to monitor the overall cost base and to keep it under the 60% ceiling. And clearly, I was saying that 11% is a target. 60% is not a target. It's a ceiling that we want to respect. And we continue to manage this cost base in a decentralized manner, i.e. each head of business is responsible of managing his or her own cost base in accordance with the potential of generating revenues. I don't know if I have been clear. Fantastic, Jérôme. Thank you so much. If this was worth... getting up this morning.

Indeed. And on the CVA, if you can just reply to that.

Yeah, excuse me, on the CVA, yes, we have had around 35 million CVA impact this quarter, whereas in Q1-21, we had, I think, 15 or 20 positive reversal of CVA. So the difference between Q1-21 and Q1-22 is about 50 million, roughly. And I'm not sure that I agree with your opinion that it's not going to be written back someday. If you remember, back in 2020, in the midst of the pandemic crisis, when in the beginning there was an intense tension on the market, we have had up to a much higher amount of CVA that has been progressively written back and is now completely recovered. So the CVA is normally here to be recovered.

Thank you so much.

Thank you.

Thank you. The next question is from the line of Giulia Mioto from Morgan Stanley. Please go ahead.

Yes, hi, good afternoon. Two questions from me, please. The first one on Ukraine, there is a one-off provision of 195 million, which is the same level as the equity. So Is there a scenario where you can lose more than the equity, actually? Or what is the outlook, essentially, for your exposure to Ukraine? And then, secondly, on Russia, could you maybe give us some sense around, so first of all, the maturity of the loan book by when If you just keep it in Iran off, by when will you be free from it? But also, according to your best assessment, what's the worst case scenario in terms of losses? That would be very helpful.

Okay. Ukraine, to start with, actually, it's the combination of the 20 million... loan loss provision taken locally within the books of Credit Agricole Ukraine plus the 195 million that altogether more or less represent the value of the equity. But nevertheless, it's a detail. Can we lose more than that? The only possibility to lose more than that would be a situation where we would decide voluntarily to inject additional equity within our subsidiary before losing all of it because as of today the only possibility if we don't add up any additional capital in Ukraine, would be a complete write-off of this asset, and then there would be almost no additional effect. With one detail, which is that we have a forex reserve in our books that would then be recycled through PNL. It's around 200 million euros. So there's no effect neither in cash nor in solvency because, of course, it's already deducted from our solvency as of now. But if there would be somehow a termination of our activities in Ukraine, we would have to recycle this reserve through PNL. without any effect, again, neither in cash nor in solvency, and of course not also in dividend because of this absence of effect in solvency. So this would be the only additional effect unless, again, we decide voluntarily to inject additional capital in Ukraine. When it comes to Russia, first, the maturity of the different exposures, you have them on this slide, 38. What you can see is that actually when it comes to the unbalanced sheet offshore exposures, two-thirds of the residual maturities are below three years. And when it comes to the off balance sheet portion, be it on and offshore, it's 70% with a remaining maturity of less than one year. So it's a rather, I would say, short to medium-term portfolio. Thank you. And what would be our worst-case assumption? I don't know. What I can tell you is that when we assess each of the counterparts that we have, they are almost all of them in a very good position. economic situation. So in terms of pure credit risk, there is no threat regarding these different exposures. The only threat that we have is a political slash legal slash sanction stress. But economically, the level of credit risk that we feel in these different exposures is and continues to be very low.

Perfect, thank you. And just to follow up on the Ukrainian exposure, by when would you expect to decide whether you put more equity or not in these divisions?

The question is not raised. I was just addressing it, I would say, theoretically, but as of now, the bank locally is perfectly solvent. As I said, it has been able to post a very tiny but positive profit for the first quarter, so there's no reason why these questions should be asked. Okay. Thank you. Thank you.

Thank you. The next question is from the line of Stefan Stallman from Autonomous. Please go ahead.

Yes, good afternoon, Jerome. I have two questions. So the first one regarding your Russian subsidiary, given that you have taken a provision on the equity value of your Ukrainian subsidiary and the prospects in Russia are probably not that much better or maybe worse. Do you expect that you may have to take or want to take provision there as well at some point? And the second question is, maybe I've missed it, but are you disclosing an update of the solvency ratio of the agroecology roles in the first quarter and also the policyholder participation results?

Thank you very much. Okay, so as far as the Russian subsidiary is concerned, the situation is not really the same as in Ukraine. First, there is no war in Russia, contrary to what is the case in Ukraine. Second, it's a much smaller entity with a total asset of around 700 million euros, so it's a half the size of the Ukrainian bank, and more than half of this exposure is simply made of deposits within the Russian Central Bank. So it's only customer money that we have put back at the Russian Central Bank, instead of lending it to local counterparts. So the real credit loan book locally is, I think, between 200 and 300 million euros. So it's a very small portfolio and half of it is related to Russian subsidiary of multinational companies and we have the guarantee of the mother company regarding these exposures. So definitely the situation is not the same. Absolutely not the same and so we have no intention as of now to take the same stance on the Russian entity as the one we've taken on the on the Ukrainian entity. The solvency ratio of the insurance activities stood at 244% end of last year. We haven't had published the figure end of Q1. What I can tell you is that it has increased since this level. Again, because the increase in rate is positive solvency-wise for an insurance company. And when it comes to the participation reserve for the customers, For the policyholders, it is a little bit above 13 billion euros, and it's up close to 500 million euros this quarter as compared to end of last year.

Great, very clear. Jérôme, could you maybe give us a general sensitivity of the solvency ratio here? Let's say for a hypothetical 100 basis point increase in rates, what would that typically do to the solvency ratio?

I don't have that precisely in mind, so it's a good question that we are going to address more formally in the course of the preparation of the communication going forward. All right. Thank you very much. Do note of it. Will do. Thank you. And I fear it's not completely linear.

Thank you. Once again, as a reminder, if you would like to ask a question, you can press star and one on your keypad. Your next question comes from a line of Kiri Vijayaraja from HSBC.

Yes, Kiri. Hi there. Yes, a couple of questions on French retail. Sorry, hold on a second. Just got some noise here in the background. Sorry for that. Yeah, a couple of questions on French retail. So the increase in the delivery hour rate has been helpful in giving us the impact on NII, but my question is more to what extent you're starting to see some sort of impact on customer behavior. You know, for instance, moving back into some of those regulated savings products out of some of the other savings and investment vehicles you guys offer. And then still on French retail, more on the asset side and French mortgages. The volume growth is still pretty robust, but I wondered how the pricing is shaping up at the moment. You know, the funding curve's been moving up. So have you been able to pass that on in terms of the mortgage rates you're offering? And are you sensing the customers are kind of willing to pay up a little bit at the moment to lock in lowish rates in anticipation of the rates increase? Is that kind of helping you put some of that price increases through? So just some kind of there on the pricing dynamic on French mortgages.

First question on the liability side. For the time being, but of course, it's not going to last forever, especially if rates continue to increase, especially in connection with the level of inflation, because as you know, the livrea yield is partially linked to inflation. As inflation continues to increase since the beginning of this year, what we think is that the livrea is going to to increase the rate of the livrea is going to increase in August at the next reset date. And probably it's going to be a significant increase again. So probably at a certain point in time, there is going to be a modification of the behavior of the customers in terms of allocating their cash between a side deposit with a remuneration that is zero and Livrea or whatever. So for the time being, there's been nothing significant, but it can take place going forward. And between Livrea and other products, we have also term deposits. We have also unregulated savings accounts. We have a whole series of products that can be used. And of course, the idea for us is to continue to monitor I would say the weighted average cost of our liabilities in a manner that is as efficient as possible. And then, and I'm going to your second question, the idea is, of course, that progressively the increase in the cost of our liabilities is going to translate into an increase in the yield of our assets. Up to now, the increase has been quite modest in the pricing of new loans for at least two reasons plus one, I would say. The main overall reason is that the competition continues to be quite fierce in France, and of course, nobody wants to lose ground on this market. But besides this element, you have two more technical elements that explain why it's lagging significantly as compared to the evolution of market rates. The first point is that between the moment you set the rate of the home loan and the moment the loan is in place, it can take a certain amount of time and sometimes several months. So what we are now putting in place is loans that were negotiated a few months ago. And so it's only progressively that the rate increase is going to bite and to produce effects on our yield. And then the second point is that in France, you know that we've got regulation regarding usury rates. And so this is also slowing down the evolution of the pricing of new home loans because for different categories of loans, mainly for different buckets of maturity, there is a regulation that imposes not to go above four-thirds of the average rate on the market that was effective in the previous quarter so it means that on a single quarter there is a cap that is set on the possibility of increasing the customer rate okay that's helpful thanks joe okay thanks thank you the next question is from the line of pierre shedfield from cic please go ahead

Pierre, is your line still connected? Can you hear us? Looks like that line's on mute. We'll move to the next question. This is from the line of Matthew Clark from Mediobanker. Please go ahead.

Good afternoon. Can I ask you a couple of questions on Banker BPM, please? So I guess the first question is, can you rule out... ever making an offer for a controlling stake. And the follow-up is, if so, why? So I just really want to get a firmer view on your intentions there. Thank you.

Your question is, do we rule out the idea of launching an offer on BPM? Is that the question? The line was not very good.

Yes, that was.

Okay. we have been quite clear in the communication. We have said that we had not requested the approval that we need to get from the ECB if we want to go above 10%. So it's quite clear.

It's clear in a backward-looking way. It's not clear in a forward-looking way. So I'm asking, can you give a forward-looking commitment rather than a backward-looking one?

And we've also explained that the purpose of this stake was to reinforce our cooperation within the different specialized business lines between Argo and BPM. So we've stated, first, the level of stake that we have taken. Second, the fact that we have not requested the possibility of going above 10%. And the reason why we did that, I think it's self-explanatory and self-supporting. There's no need to provide additional comments on this. It's very clear.

Okay. Thank you.

Thank you.

Thank you. The next question is from the line of Guillaume Tubergian from Exxon. Please go ahead.

Yes, thanks. Just a follow-up on the mortgage margin in France. I understand the lag between the time you commit and the time you actually lend. So let me ask the question differently. The government bond today is 1.5%, the 10-year in France. So you should now commit to lend at roughly 2.5% for your new business. Is that what you're doing, or are you still well below 2%?

You perfectly know the answer Guillaume. The market rate is around for the new loans that we grant and you know that new loans are usually in average close to or even above 20 years of maturity. You perfectly know that we are lending on the basis of a rate that is closer to 120. So definitely, for the time being, it's not matching with the 10-year swap rate or the 10-year OAT. But again, there is going to be a certain amount of time before progressively we are in a more normal situation where, because in terms of duration, a 20-year amortizing loan is more or less in line with a 10-year bullet bond, the reference rates that you have in mind for the home loans is relevant. But it's going to take time before we are able to reach this level.

So why don't you stop lending altogether until the margin is comfortable and buy government bonds instead?

Because we are not a hedge fund. We are simply a bank. We have customers, and we need to keep our customers and to increase our customer base and to entertain a long-term relationship. That's the difference.

But when rates move fast, I understand that the view can be that it's temporary. But right now, it should not be seen as temporary. So you should say to your clients, I'm sorry, but the world has changed. That's normal. And in some countries, we see that. In the Netherlands, banks are lending 100 bits more than at the beginning of the year.

Yes, but the way we do bank in France is not the same as the Dutch banks are behaving. And in France, all banks don't behave exactly the same way. And you know that within our group, we have a DNA that is really built around preserving, developing, enhancing permanently the relationship with our customers. So if we were simply financial investors, we would certainly arbitrate between bonds and loans regarding only the financial conditions, but we are not a pure financial investor. We are a bank and a relationship bank.

Okay, fine.

Thanks.

Thank you. The next question is from the line of Pierre Shedfield from CIC. Please go ahead.

Yes, good afternoon. Can you hear me? Yes, Pierre. Okay, sorry, sorry. I have many problems with my phone. I don't know why. First question, I remember that Philippe Brassac, in an interview, I don't remember exactly, showed quite a real ambition regarding development of P&C insurance toward corporates and particularly SMEs and I wanted to know where you stand here in terms of development regarding this type of products and customers. Second question is regarding LCL. You have quite impressive, very impressive production numbers and I was wondering if it was only the the fact of the catch-up towards 2021 knowing the fact that in 2021 you had the catch-up of 2020 so I was wondering when the catch-up would stop if it's a question of catch-up or if it's a question of marketing campaign on Q1 because when you see such impressive growth in production it raises questions and my subsidiary question is a Why? What is the philosophy behind your financial communication when we can say that you are one of the sole big European banks that is not giving any guidance on the cost of risk? I understand that giving guidance is always something tricky, but when we are in particular times and that we We see that all, as I said, big banks in Europe give such guidance. Why you don't give any guidance on this subject? Thank you very much. Sorry, once again, for the line.

No problem. No problem, Pierre. PNC entrance for businesses, SMEs and corporates, it's been launched already and it's developing, but it takes a long time. And the good news is that we are patient. We've launched, for example, collective group insurance policies for protection businesses about five or six years ago. It now represents a few hundred of millions of premiums on a yearly basis. but it took five or six years to reach this level. So it's going also to take time for the development of PNC insurance for businesses. But clearly it's already live and it's been developed with several regional banks already. LCL, the level, and it has started at the very end of 2020. So we now have a little bit more than a full year of, I would say, test and learn on this business. We don't want to put a break in the development of the customer base of LCL and the equipment of the customers of LCL with different products and services. So we are very happy to see the development of the loan book. We are very happy to see the progression of the equipment in different PNC and protection insurance policies. All that is very positive. Of course, when we grant new loans, we continue to stick to the same credit standards. We don't want to relax the credit standards, of course, but as long as we are inside our standards, we are happy to see the development of the production. And I think that what you see in terms of dynamics is the result of the fact that LCL is a bank that is fully focused and dedicated on its own market, which is to be a retail bank on the whole territory in France. In terms of cost of risk and guidance, I don't know exactly what you mean by guidance. What we say, what we do is that we set assumptions on the medium term, and we say that our financial targets are coherent with those assumptions. So you know that the assumption at Casa is an average cost of risk around 40 bps. told you and what I showed you in my presentation is that including the very specific provisions that we've taken regarding Russia, we are more or less at the target. And in addition to that, what I can say is that the incurred cost of risk, because most of the Russian provisions is not on incurred risk exposures, is purely prudential. So if I take only the incurred cost of risk, it's a very low level. It's around, I don't have the precise figure in mind, but it's much lower than the 40 bps assumption. So for the time being, we don't see any sign of significant deterioration of the asset quality of our exposures. What we say simply is that ahead of us there is a lot of uncertainties and possibly there is a possible deterioration of the situation, but we are not seeing as of now sign of a significant deterioration in the different credit exposures that we have across the board. And maybe the last point, but it's important to keep it in mind, we have very significantly increased our bucket one and bucket two provisions since the beginning of the pandemic back in 2020. And we have now around 2.5 billion euros of bucket one and bucket two provisions at CASA. No, we have increased our bucket one and bucket two provision at group level by 2.5 billion euros, and we have increased our bucket one and bucket two provision at Gaza by 1.3 billion since the beginning of the crisis. So it's a very, very significant level.

Okay, thank you very much. Thank you.

Thank you. The next question comes from a line of Flora Bocco from Jefferies. Please go ahead.

Yes, good afternoon. I wanted to ask you two questions on the financing business in the CIB. The first one is on revenues. You had a very good quarter here in Q1 on the revenue growth, and I think you made a comment earlier on this call that CACIB has already used most of the capital that was allocated for the year. So just wanted to check here whether this could mean that the organic growth in financing for the rest of the year could be constrained by this capital growth that we saw, obviously, in Q1. And the second question is still on financing, but then going to provisions. So you made the point that you actually saw right back this quarter if we exclude the provision on Russia. And I understand because obviously you have a high NPL coverage, but the timing is a bit of a surprise in the sense that I would say the risks have probably increased for large corporates when we look at higher inflation, higher raw material prices, the disruption in the supply chain in some of the sectors. So I wanted to better understand the move here on the provision write-back in financing and any concern or actually lack of concern on the underlying risk there.

Okay. On the financing activities, the development of the revenues is not linked to a permanent increase in the size of the loan book. the development of the revenues is linked to the activity, and the activity is made of granting new loans, but also distributing assets, covering assets, and making room to grant new loans. So it's a permanent move, and what I just said is that in terms of the capacity of expanding the size of the loan book and the size of the RWAs. And this is regularly the case in the first quarter of the year. There is, within the budget, a new assessment of the development capacity. And of course, as the loan book is generating revenues over time, It's generally important to try to take advantage of opportunities in the beginning of the year in order to generate revenues across the full year and not only progressively. But the revenues within the financing activities is not only linked on the carry of the book. It's linked on the transactions and the capacity to undertake new transactions is also connected with the capacity of distributing, making room, and then taking new operations. And CACIB is very agile in this viewpoint. So the capacity of CACIB to continue to develop its business is not, you know, it's, of course, constrained, but it's not nil in the coming quarters. Then when it comes to provisions and writebacks, you know, It's not discretionary. We cannot just say, well, we feel like taking new provisions and we feel like, you know, writing back provisions. It simply is the fact that in the first quarter of this year, if I take out the Russian exposures, the behavior of the credit exposure of Kassib was such that The improvement of the quality was such that the write-back was absolutely relevant and necessary considering all our models and all our provisioning rules internally. So that's the point. And when you have a provision on the loan that was defaulted and that ultimately is repaid, you have nothing to do than writing back the provision. All in all, we've not written back bucket one and bucket two provision at the level of CASA. We've even slightly increased, again, outside the Russian provision, we've even slightly increased the level of bucket one and bucket two provision over the quarter at CASA.

Okay. Thank you.

Thank you.

Thank you. And there are no further questions at this time. So I'll hand back to the speaker for closing remarks.

Excuse me. So there's no other question. Well, thanks a lot to everyone. And we are waiting to meet you on June 22nd. And I think this time it will be in person, I guess. I hope at least for most of us. And so until then, have a good end of the day and see you soon. Bye-bye.