Credit Agricole Sa

Good afternoon, everyone. Happy to present those results for the second quarter and the first half of 2022, which are indeed very good results. So I'll try to speed in the presentation itself and to leave time for your questions afterwards. And we start on page four with the results of CASA. What you can see for CASA is that the top line is very dynamic, plus 6.2% this quarter and close to 7% up for the first half of the year. There is a positive Jaws effect. The cost of risk is down this quarter, minus 20%. And all in all, this is leading to a net profit underlying of 1.9 billion euro, up 18% as compared to to 2021 and the solvency is up by 30 bps at 11.3%. If I go now on page five for the figures for the group globally, what we can see is that also we have a very high levels of profit. close to 2.5 billion euros of net profit for the quarter underlying, and close to 2.8 billion stated, and for the first half, around 4 billion euros of net profit, both stated and underlying. What you may note this quarter is that the cost of risk at group level is up quite significantly, actually, plus 38%. We will see that more in detail when we will look at the P&L of the regional banks, but it's clear that the regional banks have taken advantage this quarter of the booking of a very important dividend coming from Casa's results last year to further increase quite significantly their bucket one and bucket two provision. It's a figure of around 300 million euros, so it represents around half the 615 million euros of cost of risk this quarter. The solvency at group level is now 17.5%, so it's up 50 bps for the quarter. Let me go now on page seven where you can see that actually this very good result, very good level of result is indeed triggered by a very dynamic activity, both commercially in terms of new customers capture and also in terms of the development of the different businesses. More details on page eight. where you can see that in this quarter, we've managed to capture close to half a million of new customers in France, Italy, and Poland, and 1 million customers for the first half of the year. It represents an increase of the overall level of customers net figure of around 240,000 for the semester, which is perfectly and even more than perfectly on track with the target of attracting net 1 million new customers up to 2025. Production of new loans is significantly up. You have several examples here. For the regional banks and LCL, it's up 8.5%. Maybe interestingly, we can note that the production of new loans is differentiated whether you consider home loans, consumer credit loans, or corporate loans. And indeed, in France, it's up 2% for home loans, 9% for consumer credit loans, and 20% for businesses and corporate loans. In addition to that, we can see that we continue to gain market share in P&C activities, and the consumer credit and leasing business is also rebounding sharply. On page nine, some elements on the evolution of the top line. We have a very strong increase in the revenues in Q2 as compared both to Q2-21 and even more Q2-20. And it's also the case for the semester. This significant increase is driven both by organic growth and also by the effects of the acquisition of Creval middle of last year and Lixor end of last year that are now included in our perimeter. So the total increase in revenues is more or less two-thirds driven by organic growth. and one-third by the effect of these acquisitions. And last point, maybe on this page, on the semester, all business lines have posted an increase in the level of their revenues. Going now on page 10 for the analysis of the cost basis, the cost basis up 5.2%. So there's a positive Jaws effect between the 6.2% increase for the revenues and 5.2% for the cost base. What is interesting to note is that outside the Creval and Lixor scope effect, the increase in costs is reduced down to 2.7%. And restated also from the forex effect, you know that CACIB and industrialized wealth management have a significant part of their costs that is denominated in dollars or other currencies that appreciated against euro this quarter. So, restated from this forex effect, the overall increase in the cost base is only 1.8% on the quarter. So, it's only 58 million euros. So the Jaws is positive whether you consider the figures on a growth basis or outside the scope effect or outside the scope and the forex effect. Last point, we point here the fact that we've accepted to hike the salaries in France beginning this quarter, the third quarter. So it means that we will have a further increase in the cost base in Q3 and Q4 this year ahead of the normal schedule, which is an increase in salaries beginning of the year. Let me now look at the gross operating income on page 11. You can see that this quarter, all in all, the net profit increased by 300 million. It's triggered by an increase in the gross operating income of close to 200 million. Cost income ratio for the first half of the year stands now at 56.8%. So it's a further decrease as compared to the figure we've posted for the full year 21. On page 12, some elements on the cost of risk. So as I said, on the perimeter of CASA, you can see that the cost of risk is indeed declining by around 20%. So it's a decrease by 50 million. On the quarter and on the perimeter of the group globally, there is an increase quite significant, plus 38%, but it's, of course, triggered by this very strong and prudential effort of the regional banks. As I already explained, if you just look at the level of the stage three provisioning, we have a level that is normalized both at group and CASA level, normalized at rather low levels, and overall, The cost of risk stands at 17 BIPs for CASA and 23 BIPs for the group, which is definitely significantly below the assumptions that we've made for the medium-term plan. Maybe a last point on this page. You remember that we have disclosed and given details on our exposure on Russian counterparts. which were declining since the beginning of the war up to the end of the first quarter. So the reduction has continued in the second quarter by around 400 million euros. So between end of March and end of June. On page 13, some elements on the quality of the loan book, you can see that the level of non-performing loans continues to be very, very low and more or less stable around the very low levels that we have already reached since several quarters, so 2.5% on the perimeter of Gaza, 1.6% at the level of the regional banks, and in average, 2% for the group. The coverage ratio continues to be very high. And the level of the overall loan loss reserves is high, but what is interesting to note, and it's illustrated on the left-hand side chart of this page, is that the breakdown of these loan loss reserves has significantly shifted since 2019. The proportion of bucket one and bucket two provision has very significantly increased as compared to the decrease of the state's three provisionings linked, of course, to the better quality of the loan book. On page 14, just simply the analysis of which were the drivers of the improvement of the net profit. The net profit improved by around 300 million euros on the quarter, plus 18%, as I already said. This is triggered by the improvement of the Gross operating income by around 200 million euros. The cost of risk decline accounts for another 50 million euros. And then the last element, taxes, equity account identity, and other specific items account for the last 50 million euros. What is interesting also to note is that on the first half of the year, we managed to post an increase also in the net profitability. So it means that overall, the effect of the specific provisions that we had to book in the first quarter regarding the Russian exposure is now completely absorbed in terms of profitability. On page 15, this traditional view of the return on tangible equity at Casa as compared to the sample of the more or less 10 European peers for which we have the information, we continue to be significantly above the average of this sample. 13.9% return on tangible equity for CASA and 10.3% return on tangible equity for the sample. So it's really part of our DNA to be able to post a very high level of profitability. And then on page 16, just as a reminder in the middle of the page, the figures for the first half of 2022 that compares to the targets that we had initially set for 2022 globally in the previous medium-term plan and to the targets that we have reset for 2025 in the new medium-term plan published a few weeks ago. All in all, what we can say is that we are on track. And just also a last point to mention, we have already accrued 38 cents a share of dividend end of June. Let me go now to page 18, excuse me, and we will start to look a little bit more in detail on the performances and the activity of the different business lines and business divisions. Starting with the asset gathering and insurance division, maybe just on this page a few messages. The first message is, of course, that the market effect has been significantly negative this quarter, but nevertheless, and this is important from a commercial standpoint, dynamic point of view, all the three components of this business division managed to post positive net inflows. It's the case for Amundi, for the life insurance activities, and also for the wealth management activities. And all in all, the net profit of the division for the first half of the year is more or less stable to what it was last year, which is a very good performance considering the markets in which we've been navigating since the beginning of the year. If we zoom now a little bit on the insurance activities on page 19, what we can say commercially is that in life insurance activities, the growth inflows were slightly down as compared to Q2 2021. But nevertheless, we have had, as I said, positive net inflows of a respectable amount of 1.3 billion euros, which were more than completely explained by In P&C and protection businesses, the premium income continues to be very rapidly progressing, plus 10% for P&C and plus close to 8% for protection businesses. And then the net profit of the quarter, which appears to be slightly down minus 3% apparently, would have been indeed a positive plus 3.4% if we restate the figure from a specific tax component that is linked to the fact that Crédit Agricole Assurance has upstreamed 2 billion euros of extra dividend to CASA during the quarter. On page 20, some figures regarding Amundi. You know perfectly the performances of Amundi that published its results end of last week. As I said, net inflows have been slightly positive this quarter, thanks to the good performances that we have had in the joint ventures in India and China. Of course, the market effect is negative. There has been a slight increase in the level of management fees, but, of course, in these market circumstances, performance fees were significantly down. Actually, it's a division by six between the $150 million posted in Q2 2021 and the more or less $25 million that we have had in Q2 2022. But despite this very sharp decrease in the level of performance fees, which is a normalization, completely understandable and predictable, we've managed to continue to monitor the cost-income ratio at a very decent level, 58.7% for the quarter and 55.4% for the first half of the year. the overall performance of the business has been indeed very resilient. Taking a look at the large customer division and starting with CIB, of course, it's been a very, very good quarter for CACIB in Q2 2022 with a performance that was positive across the board. It's been the case for the financing activities as well as for the capital market activities. And the total revenues is up 22% on the quarter. There is a slight increase in the cost base, but much more moderate. And the cost income ratio for the quarter and for the first half of the year is now below 50%, which is far better than the target that we have for CACIB. Last point for CACIB, this quarter there is a reversal of loan loss reserves by around 75 million euros. It's due to the fact that the The loan book continues to behave very positively. And all in all, the very good performance of the second quarter is leading to an overall performance for the first half, which is now close to what we had in H1-21. despite the fact that all in all, there is a much higher cost of risk due to the 300 million euros of Russian provisions that we had booked in the first quarter. So it's a very good performance. CASEIS, it's also a very good quarter, a sharp increase in the level of revenues, which is obviously helped by the better yield of the excess of liquidity generated by the business. The cost base is very stable, and the net profit at CASEIS is up 50% this quarter. Specialized Financial Services Division, starting with CACF, At CACF, there is a very strong commercial dynamic across the board, both in France and internationally, both for the traditional consumer loan business and also for the car financing business, despite all the difficulties in the car market in Europe. So there has been a record prediction of new loans in June and for the whole quarter, all in all, and the outstandings are up. There is in France a certain pressure on the margin, especially due to the that applied in France to all these consumer loans. But all in all, the performance at CACF is good. The cost of risk is slightly declining. And the cost base is restated from the CACF Netherlands and also the inclusion of the Spanish activities middle of last year, the cost base will have been more or less stable as compared to Q2 21. For the leasing and factoring activity, a good commercial activity in factoring, a little bit more subdued in leasing, but all in all revenues are sharply up, the cost of risk is down, and so the profitability is strongly up for CALF. Going now to the retail banking activities and starting with LCL, it's been a very good quarter across the board for LCL. with good customer captures, strong loan production, a good level of customer savings inflows, good increase in the equipment of our customers with different insurance products, and all in all, a good level of revenues, close to a 6% increase in the top line, which is splits even very, very evenly between fees and commissions on the one hand and net interest income on the other hand. The cost of risk is more or less stable. And so this is leading, of course, to a sharp increase in the net profit, both for the quarter and the first half. In Italy, the market is a little bit less dynamic, and so some of the activities of Credereco Italia were a little bit impacted, as is the case for all Italian banks. It's the case for savings collection and also for the development of the home loan business. But nevertheless, consumer credit and corporate credit, corporate loans are well-oriented. And, of course, this quarter we fully benefit from the complete inclusion of Creval within the scope of Crédit Agricole Italia. The legal merger is completed. The migration of the IT platform on ours is completed. And the cost of risk of the quarter is increased. is down thanks to all the efforts of improvement of the credit quality that we did last year. So all in all, this is leading to a sharp increase in the level of the net profit at Federico Italia. On the following page, page 25, you have some additional information of the global scope of our activities in Italy. Well, what we can see is that the net profits we generated in the first half of the year in Italy is close to 450 million euros. It's up 15% as compared to H121. And it represents a little bit more than 15%, actually 16% of our net profit. And of course, the quality of the assets that we have there continues to improve regularly. International retail banking activities, excluding Italy, It's a little bit complicated to synthesize. I would say that in Poland and Egypt, everything went well in the quarter and the first half. The dynamic of the development of the business are good. The yield curve is positive for us and so the net profit is increasing and the cost of risk is declining. In Ukraine, what we did, we had a good level of gross operating income, but to remain prudent regarding Ukraine, we've booked provisions corresponding exactly to the level of gross operating income generated by the current activity. And I remind you that we continue to have, at the level of Gaza, a provision that is covering all the value of the equity that we have invested in Ukraine. Economic risk that we have there continues to be nil. And then Morocco is now accounted for under IFRS 5. So it means that it's the element that you have on the line for net income from discontinued or held to sale operations. And the Serbian activity has been indeed sold definitely on April the 1st. Corporate center, nothing much to say. The volatility is very low, and the level of total impact has continued to reduce quite significantly, so nothing much to say. And we will go now to the regional banks on page 29, where you can see more or less the same trends as the one I have mentioned regarding LTL, with maybe an evolution of the production of new home loans, which is a little bit less buoyant at LCL, but it's mainly due to the fact that in Q2 2021, we have had a very strong base effect. So all in all, the production of new loans continues to be well-oriented at the level of the regional banks. The top line apparently is down minus 1.5%, but actually it is completely and more than completely explained by the fact that their portfolio revenues are negative this quarter. The revenues linked to strictly the banking activity is up 3.5%. I already talked about this strong effort in additional provisioning, bucket one and bucket two provisioning, in connection with the fact that the regional banks have booked 1.3 billion euros of dividend coming from CASA in Q2. And so this is leading, of course, to this decline in the contribution of the regional banks to the net profit of the group globally, but it's only, I would say, accounting-wise, Economically, they have had a very good quarter only. Going now to page 31, where we have the figures related to the solvency. You can see that both for the group and for CASA, the solvency ratio, CET1 ratio is up, 50 bps for the group, 30 bps for CASA. The explanation is clearly linked to three main elements. First element, good level of results and good level of retention of the results. Second element, a very moderate RWA consumption by the different business lines. Third element, which apparently is different from the group and for CASA, it's the effect of the insurance activities. Actually, if we split this insurance activities component between two parts, you will see to rapidly understand the explanation. The first part is that we have upstreamed a dividend that is simply reducing the overall RWA consumption linked to the insurance activities and that is having the same effect both on the group and on CASA, but at the same time, we have had a further and quite significant decrease in the annualized capital gains on the asset portfolio of the insurance activities. And this is more than offsetting the benefits of the capital dividend upstream for CASA when for the group the effect is much smaller. And so this leaves a net positive. And then we have different bits and pieces that are this quarter positive. You have different elements in this bits and pieces category. You have the disposal of Crédit Agricole Serbia. You have the fact that after the merger of Créval within Crédit Agricole Italia, we have now no longer to deduct the deferred tax assets of Créval from the Solvency. We have also the fact that the increase in interest rates is reducing the provision for the post-employment commitments, retirement commitments, and so on and so forth. In terms of liquidity, nothing much to say. End of tune, the situation is very, very comfortable. Of course, we continue to prepare to a situation where liquidity is going to get tougher because of the normalization of monetary policies in all geographies, And we are preparing all the levers that will make it possible for us to continue to post these very good levels of liquidity ratios and excess of stable resources as compared to our stable assets. And as an example of that, you can see on page 33 that we have completed our market funding plan by 93% end of Q2. So we've been very aggressive, which has had two benefits for us. We've been able to take advantage of market windows where the spreads were not so wide as they are now. And secondly, of course, this is fueling our overall liquidity. I think I am done with the presentation now and we can start with the question.

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