Credit Agricole Sa

Good afternoon. This is the conference operator. Welcome and thank you for joining the Credit Agricole first quarter 2024 results conference call. As a reminder, all participants are in listen-only mode. After the presentation, there will be an opportunity to ask questions by pressing star and one on your telephone. Should anyone need assistance during the conference call, they may signal an operator by pressing star and zero on their telephone. At this time, I would like to turn the conference over to Mr. Jérôme Grive, Deputy Chief Executive Officer of Credit Agricole SA in charge of steering and control. Please go ahead, sir.

Good afternoon, everyone. It's a pleasure for me to present you these results today. Let me go directly with the presentation on page four, where we highlight the main messages of the quarter. The first point, of course, that we all have in mind is that we are posting the highest ever first quarter results. And the second element I also wanted to insist on is the fact that this very high level of results is both the result of, of course, the end of the contribution to the Single Resolution Fund, but also, and this has been the case since now many, many quarters, a further improvement in the operational parameters with an increase of the revenues and a very good cost control. As a result of that, of course, we continue to have a very solid capital and liquidity position, and we've been able to continue to develop our strategic operations over the quarter. There is here a list of different operations that are mentioned on this page. And we've continued to work also, of course, in the energy transition program that we've been launching now two years ago. If I go On page 5, you have the main figures for the group and for Crédit Agricole Essai. I am not going to read all these numbers, of course, but just let me highlight a few of them. When it comes to the group, as a starter, we can see that we have at the same time a high number a significant evolution of the top line, plus 6.7%, a significant improvement of the gross operating income, excluding the contribution to the Single Resolution Fund, plus 8%, and more than 30% if we take into account the Single Resolution Fund contribution last year. And in addition to that, an improvement of the net income group share, 2.4 billion euros, plus 42%, 43% if we do not rule out the contribution to the SRF, and plus 6% excluding this contribution. essay we have also a sharp improvement of those indicators top line gross operating income and net profit both of course excluding and not excluding the contribution to the single resolution fund net profit 1.9 billion euros plus 13.3% and plus 55% and top line plus 11% at 6.8 billion euros Maybe just one or two other figures I wanted to insist on on this page. Cost-income ratio for Crédit Agricole SA is further down, 53.7%. It's minus 40 bps this quarter as compared to Q1 2023. And the return on tangible equity this quarter is above 16%, 16.3%. On the following page, We want to foresee a little bit what is going to happen this year according to the very good results that we are posting for the first quarter of the year and according to the reassessments that we've been doing of our potential development for the rest of the year. And we are pleased to say that we intend to reach all of the targets of the medium-term plan for 2025 as soon as this year. It was already the case for the cost-income ratio and for the return on tangible equity, where we stood below 58% and above 12% last year, and of course we'll continue to do so this year. But it was not fully the case for the net profit, and we now foresee to post a net profit above 6 billion euros for the full year 2024 instead of 2025. This is also the occasion to note that since 2016 we would have close to double the net profit at Crédit Agricole SA over the course of the eight years. Going on the following page, we wanted to take the opportunity of this result presentation to update you on our energy transition program with first a reminder of the three legs of our strategy, which is based first on the permanent acceleration of the development of our financing and investment to renewable and low-carbon energy sources. And here are some figures showing that we continue to accelerate rapidly on this path. Second element, we continue to support the transition of our customers, all categories of customers, corporate, SMEs, and households. And we develop several initiatives in order to help them transition. And third, and this is a consequence of the first two elements, we will continue to reduce our own carbon footprint, I would say, aiming at our net zero trajectory by 2030 in line with the different targets that we've already published. And these targets are reminded on the following page, page eight, where we update the results of the first five trajectories that we had announced back in December 2022. And you can see that on all those trajectories, we are very well on track to reaching the objectives that we had set for 2030. And we have added, as you know, three new trajectories end of last year, which are reminded here on the right-hand side of this page. And for these three additional sectors, we are going to start providing numbers and providing data as soon as beginning of next year in order to check also for these three sectors that we continue to be on track again targeting 2030. In addition to that, we remind that we continue to reduce significantly our hydrocarbon extraction exposure, which is now close to $1 billion, with the end of any financing of new fossil fuel extraction projects. Let me go now on page 10 by giving you some elements regarding the activity that we have had this quarter, I would say again, because this is, of course, a continuation of the same strategy and the same growth engines that we have had since now many, many years. Two elements I wanted to highlight here. The first one is that our universal retail banking model continues to develop with several indicators showing this good development. We continue to have a good momentum in terms of customer capture. We continue to increase the net inflows of customer deposits in our banks. We have had a very strong level of insurance activity, both in life insurance, where we are posting record inflows this quarter, and non-life insurance activities, where we continue to increase the equipment rate of our customers with the different services that we propose to them. We have had also high and balanced asset management inflows at Amundi. And lastly, and this is not something that we should have in mind when assessing the level of activity of our retail banks, it's true that the production of new loans and especially home loans has slowed down. a very direct consequence of the normalization of the monetary policy. I should even say that the normalization of the monetary policy is precisely targeting at this reduction of the production of new loans. But again, this is showing that it's not enough to characterize a reduction of the overall activity in our retail banking. On the contrary, activity is developing well in our retail banks in France and in the rest of Europe. When it comes to the large customer division, we are posting this quarter record level of activity and record level of revenues both for the CIB and for the custody activities with a sharp increase in assets under custody and under administration for CASEI. Let me go now on page 11, where we show some precise indication on the manner this overall financial performance has been generated, starting with the revenues. Revenues are up 11.2% for Casa on this quarter. And you can see on this page that all business divisions contribute to the increase in this overall top line. Asset gathering division benefited at the same time from a good commercial momentum and from positive market effects. In the large customer divisions, both CASE with another record in terms of level of revenues above the record that we posted in Q1 2023, and CASE, which is benefiting from the integration of the European activities from RBC, both those entities are posting a sharp increase in their top line. When it comes to the Specialized Financial Services Division, we also have here the benefit of the full integration of Crédit Agricole Autobank that was performed only in the second quarter last year and which was not present in our scope of activities at 100% back in Q1 2023. In retail banking activities, we have an increase in the top line both for LCL, French retail, and for the international retail banking activities. And lastly, in the corporate center, we have an increase in the top line, which is mainly driven by the valuation of the shares of Banco BPM that we've purchased back in 2022. So all in all, a sharp increase in the top line. And if you look at the right hand side of this page, you can see that this increase in the top line has been developing permanently since at least 2017, very regularly and seemingly accelerating in the last period of time with the combination of organic growth and inorganic growth. Maybe one last element on this page. There is, of course, the benefit of the scope effect on this quarter, but the integration of the acquisitions that we've done last year represent less than half, actually 40%, of the increase of the top line. Going on the following page on the cost, you can see that the overall cost basis increases less rapidly than the top line, plus 10.2%, so there's a positive Jaws effect for the quarter. And when we assess where this cost increase was located, you can see that it's mainly driven by the scope effect, because it's mainly in the large customer divisions And in the SFS division, that you are seeing the biggest part of the increase of the cost basis. In the large customer division, it's, of course, the integration of RBC. And in the SFS business division, it's the full consolidation of Crédit Agricole Autobank. Excluding the scope effect, the overall increase of the cost base would have been limited to around 5%, triggered mainly by HR costs, with the full year effect of the general salary increases that were granted middle of 2023, plus the individual salary increases that have been granted beginning of this year, as we do regularly. Coming on page 13 with an overall assessment of the cost of risk, this quarter it's more or less stable as compared to the first quarter of 2023, and it's declining a little bit as compared to the average of the fourth quarter of 2023. It's a little bit down as compared especially to Q4 2023. The cost of risk is concentrated as was the case last year on the Specialized Financial Services Division, so consumer credit mainly, plus retail banking activities. We have even a loan loss provision reversal at the level of CASIB in the large customers division. And when it comes to CACF, so the consumer credit business, of course, there is also a scope effect because back in Q123, we hadn't any cost of risk coming from a credit recall autobank. which is now the case. When we look at the evolution of the cost of risk division by division on a quarterly basis, what we can see is that it's more or less stable or even slightly declining, which is notably the case for precisely the consumer credit division. Going now on page 14, where we have an overall look of the evolution of the global P&L of Credit Agricole SA. First point on the left-hand side of the page, you can see that all business divisions contributed positively to the overall increase of the bottom line, and this increase of the bottom line is plus 55%, including, of course, the benefits of the ending of the contribution to the Single Resolution Fund, but again, plus 13.3% if we take out the benefit of the ending of this contribution. Indeed, what we can see on the right-hand side of the page is that the gross operating income, excluding the contribution to the single resolution fund, benefited from the sharp increase in the top line, close to €700 million of additional revenues. taking into account another element that we've forgotten, but last year we continued in Q1 to benefit from the remuneration of the mandatory reserves at the ECB, which is no longer the case now, and facing this increase of close to 700 million euros of revenues, less than 350 million euros of additional costs, so a significant increase in the gross operating income, excluding single resolution fund, plus 12.3%. The other elements are more minor, and this is leading to this sharp increase in the net income group share, plus 13.3%, excluding a single resolution fund. Solvency on page 15 for Crédit Agricole SA to start with. There is apparently stability of the solvency, 11.8% end of the quarter, as was the case end of last year. It's the combination of a significant level of retained earnings, plus quite high increase in the organic growth of the RWAs of the business lines, but I wanted to stress two points regarding this evolution. The first one is that like every quarter when Crédit Agricole Assurance is not distributing its results to Crédit Agricole Essai, the equity accounted value, the carrying value of Crédit Agricole Assurance increases, thus increasing the RWA consumption. plus 1.7 billion additional RWA. And so, of course, every time we are going to upstream a dividend, this is going to reduce. And the second point is that at CASEIS, for many technical reasons, we are having a peak in RWA consumption, which is going to be largely reverted over the coming quarters. And then we have different bits and pieces amongst which we have the Last, or not the last, we still have another one back next year, but we have another layer of IFRS 9 phasing in for a cost of five BIPs, and we have some other technical elements. stability of the solvency at CASA at a level which is very comfortably above the target of 11%. When it comes to the group, also stability with the same elements leading to this stable level of 17.5% of CET1 ratio, a high level of return earnings, significant organic growth of RWAs, including the elements I've just mentioned regarding CASA, and some bits and pieces which are much more minor. In addition to this very high level of core Tier 1 solvency, which is above requirement by 780 BIPs, we have a leverage ratio, a TLAC ratio, and an MREL ratio, which are very significantly above all requirements. Lastly, on liquidity, we continue to have a very solid liquidity position with LCR ratios very significantly above 100%, and even very significantly above our target of 110%. We have had a new and further increase of the level of liquidity reserves, despite the fact that we've repaid this quarter 21 billion of TLTRO. It's almost the end of the TLTRO. We still have less than six additional billion to go. And all the elements regarding the stability of our customer deposits and the solidity of our liquidity positions continue to behave very positively. I will stop here in order to leave you enough time to ask your questions. But as a wrap-up of all these elements, I just wanted to summarize that by saying again that we are posting an excellent quarter in terms of results. with the same trends as the ones we've been seeing in the last quarters and even in the last year. A steady growth, both organic and inorganic, a strong operational efficiency, a very good quality of assets. And so this is leading us, despite all the uncertainties of the environment, to foresee that we are going to reach by 2024 all the targets that we had initially set for 2025. So I'm going to stop here and leave you now the floor for your questions.

This is the conference operator. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. To remove yourself from the question queue, please press star and two. Please pick up the receiver when asking questions. Anyone who has a question may press star and one at this time. The first question is from Azura Guelphi with Citi. Please go ahead.