Credit Agricole Sa

Good afternoon, or should I say hello? It's more simple considering the time at which we're talking. Hello, everyone. Happy to present these results for the second quarter and for the first half of 2024 for Crédit Agricole SA. Just to put it in a nutshell, and we are going to start directly on page four, we are posting indeed for the quarter and for the first half of the year very good results. For the first half, you see the figure here, 3.7 billion euros of net profit and 1.8 billion euros for the quarter, which is apparently down 10% as compared to Q2-23. And of course, we'll dig a little bit into these numbers later on, but if you restate the basis for 2023 from exceptional elements. And if you read across the numbers of 2024, which includes some also exceptional elements, all in all, it's the stability of the net profit at Crédit Agricole SA for the quarter at the high level of 1.8 billion euros. Therefore, as we did already in the last quarter, fully and confidently confirm our capacity to reach and to exceed 6 billion euros of net profit for the full year, which is, again, the result that we've initially forecast for 2025 and that we now intend to meet one year ahead of schedule. Maybe two or three additional elements on this page. This high result for the quarter is again reached thanks to a high level of revenues, and we will, of course, analyze a little bit the origin of these revenues. We continue to post a very efficient cost-income ratio, 53.4% for the first half of the year and even 53.2% for the quarter. And maybe two last points. The return on tangible equity is above 15%, 15.5% to be clear. So for the first half of the year, it's a very high return on tangible equity and significantly above the target of 12% we had for the medium-term plan. And lastly... The CET1 ratio at 11.6% is down 20 pips as compared to end of March, and we will explain the reasons why, but definitely it's above and far above the target we had for the plan, which was and which is 11%. If I go to the next page, the following page, you have all the figures for the first half and for the quarter for the group and for Crédit Agricole Essay. At group level, clearly we are having a very good first half of the year with a net profit which is up 4.4 billion euros. It's up 6.5% almost. Revenues up and gross operating income up. If we dig a little bit into Casa's numbers, as I've said, a very high level of profit for the first half, 3.7 billion euros. It's up plus 14%, and 1.8 billion euros for the quarter. Again, apparently down 10%, but restated from the different exceptional elements I was referring to, it's more or less stable as compared to Q2-23. Revenues are up, both for the first half and for the quarter, and the gross operating income is up for the first half, and and we will show it a little bit later on, is also up on a comparable basis for the quarter. And liquidity and solvency are at very high levels. I've already mentioned the solvency for CASA. At group level, it's 17.3%, also down 20 bps for the same reasons. And the liquidity is very high, has even improved over the last quarter. If I go on the following page, some indications regarding the activity of the group and its different businesses over the course of the last quarter and the first half of the year. All in all, we are having a very good level of activity in retail banking businesses with a good level of customer acquisition, customer capture. both in France and in the other retail banks of the group in Europe. We continue to see an increase in the customer deposits this quarter in France and Italy. There is, to a certain extent, a stabilization of the home loan activity in France. It's clearly a level that is much lower than the one we've had before the rate started to increase, but it is stabilizing, which is a good signal. And we are having a slight increase in the production of new corporate loans in France. When it comes to other retail businesses abroad, the production of new loans is up quite significantly. And lastly, for consumer finance loans, especially for the financing of cars, we continue to have a production of new loans at a very high level, around 12 billion euros over the quarter. When we come to the other activities, starting with insurance, we are having a very good quarter in the insurance activities with significant growth inflows in life activities, and we continue to see a steady growth in premium income in P&C and personal insurance protection businesses over the quarter with penetration rate or equipment rates of our customer basis continuing to grow in all our retail banks in France and Italy. For the asset management activity, you've seen Amundi's numbers last week, which were very good. And indeed, it's been a good quarter in terms of inflows and in terms of the level of assets under management, which have reached a record level. Lastly, but not leastly, I would say, CIB activities were very good again this quarter, with a record half year for CASIB. And you have a series of figures on the right-hand side of this page that illustrate this very good level of activity across the board. If I go now to page 8, we are going to dig a little bit in the evolution of the revenues at Casa. So the stated level of revenues is up 1.8% Q2 24 over Q2 23, plus 120 million euros of increase. But definitely, we have to restate Q2-23 figures from exceptional elements of revenues, mostly revenues in connection with the reshuffling of our agreements with Stellantis, which generated a positive one-off of close to €300 million of revenues. And you may remember also that we had booked in Q2-23 some exceptional revenues in connection with the final settlement of a litigation which was called Exchange Image Check, Check Image Exchange. And so we've been able to recoup close to 60 million euros of revenues, 40 million in the corporate center, and also, if I remember correctly, around 20 million at the LCL. So, restated from these elements, a Q2 24 increase is closer to 6.7%, so it's a little bit more than 400 million euros of revenue increase in this quarter as compared to Q2 23. And you see on the right-hand side of this page the steady increase that we've been able to post quarter over quarter since at least 2017. And since 2017, it's indeed an increase of 50% of the top line at CASA for the second quarter of the year, despite the fact that we've transitioned to IFRS 17 in 23, which, of course, generated as you know, one of decrease of the level of revenues overall. On page nine, some elements regarding the evolution of the cost base. So obviously, if you take only the stated figure The increase is quite significant, plus 400 million euros, plus 12.5%, around 12.5%. But of course, you have to dig a little bit into this number in order to understand where it comes from. The first element is that more than 150 million euros of additional costs come from the scope effect, because this quarter Compared to Q2-23, we have a full quarter of RBC activities, and we have one month of the GROUP FETERCAM activities, the month of June. So all in all, this represents around 150 plus 156 million euros of costs, which has to be restated if you want to assess the organic underlying evolution of the cost basis. The second element is that in Italy, we had to book this quarter the yearly contribution to the local deposit guarantee fund, the DGS, for an amount of 58 million euros. Previously, we booked this contribution in the fourth quarter of the year, so it's not Exceptional in the sense that it takes place every year, but it's exceptionally booked in the second quarter, whereas previously it was booked in the fourth quarter of the year. So restated from these two elements, the increase of the cost base Q2 on Q2 is limited to 180 million euros, which is an increase of 5.7%. And again, if we dig a little bit into this 180 million euros of increase, you end up by acknowledging that we have around 130 million euros of increase of the staff cost and around 50 million euros of increase of the IT investment cost. When it comes to IT investments, it's clearly linked to the development of our activities and also to a certain extent to the development of the different requirements from the regulatory framework. across the board, I would say, that requires us to continue to develop some tools in order to better report some information to the different supervisors. But if we zoom a little bit on the staff costs, out of the €130 million of increase, you have around €40 million of additional provision for variable compensation, both at CASIB and at Amundi. So it's An increase of this amount as compared to what it was in Q2-23, and it's clearly linked to the very good financial and commercial performances of those two businesses. So definitely, it's not an amount that has already been spent. It's reserved, and it's going to be used or not at the end of the year, depending on the final yearly performance of those two businesses. And the last point, comes on the fixed remuneration basis, so the remainder of the 130 million euros, so around 90 million euros. And you may remember that last year, in this inflation context that we had in Europe, we accepted to grant general salary increases in the middle of the year, with an effect beginning of July, which is adding up to what we normally do, which is a series of individual salary increases that take place in the beginning of the year, so in January. So it means that if you compare Q2 on Q2, you have the effect of both increases salary increases even, the one that took place in July and the one that took place in January. Of course, as soon as we will assess Q3 numbers, we will be left only with the effect of the January salary increases, so a much more modest evolution to foresee for the third quarter of the year on this element of the cost basis. So all in all, a perfectly understandable evolution of the cost basis, leading to a cost-income ratio slightly above 53%, so very, very significantly below the ceiling of 58 that we had set for the medium-term plan. On the following page, some elements regarding the cost of risk. To put it in a nutshell, it's very stable as compared to the previous quarters, be it as compared to Q23, even to the average of the last four quarters. So definitely a situation which is not showing any kind of significant deterioration of the quality of our loan books. And this is illustrated also by the fact that the level of NPL is also very stable at 2.2%, whereas the coverage ratio continues to be very high. I was mentioning the 2.2% excuse me for the group and 2.5 slightly down for Crédit Agricole Essai and the coverage ratios both for the Essai and for the group continue to be very high and even slightly up this quarter as compared to Q1. So definitely Even though we have to monitor closely the risk situation everywhere, no sign of deterioration and a cost of risk, which for the perimeter of critical assay continues to be below the assumption that we had made for the medium-term plan. On page 11, you have the wrap-up of all these elements regarding the P&L. So what you can see on the right-hand side of this page is that on an underlying basis and excluding the contribution to the deposit guarantee fund in Italy, we are posting this quarter an increase of the gross operating income. modest increase at this stage, but an increase. And of course, if you look back at the acquisitions that we've made, we are not yet there in terms of extracting all the benefits of those acquisitions. So the marginal cost income ratio of those acquisitions is not yet where we want it to be when the integration is going to be fully completed. The other elements are not significant, even though the tax level is above the one we had back one year ago. And all in all, this is leading to this stability of the net profit of Crédit Agricole SA between Q2 23 and Q2 24. If I go to the next page and if I give you some comments on the solvency at Crédit Agricole SA, I've mentioned the ratio, CET1 ratio, 11.6%. It's slightly down, minus 20 bps as compared to the end of Q1-24. It's, of course, very significantly above our strep requirement, 300 bps. Actually, what you can see on the bar chart on the left-hand side of the page is that post-distribution or post-reserving of the dividend, we've generated 22 bps of capital, but we've consumed 35 bps of capital due to the effective closing of two M&A transactions this quarter, the DeGroove-Petercam acquisition for 28 BIPs, and the Alpha Associates acquisition by Amundi for an additional 5 BIPs. So, definitely, this is why we are posting a slight decrease of the CET1 ratio, but the nothing worrying in terms of capacity of generating organically significant level of additional solvency every quarter above what we need to fuel the organic growth of the business lines. This is more or less the same story at the level of the group globally, where you have also a slight decrease of 20 bps of the CET1 ratio, 17.3%. obviously very, very significantly above any regulatory requirement, 760 bps over the strep level, a leverage ratio which is stable at 5.5%, and the other ratios also very significantly above any requirement. finish with simply providing you some additional information of the liquidity situation of the group, which obviously continues to be very satisfying. Liquidity reserves have even slightly increased over the quarter, close to 480 billion euros of different categories of reserves. LCR and NSFR ratios far above the requirements and for the LCR ratio 146% with only 700 million euros of TLTRO to finally repay before year end. We've repaid 5 billion of TLTRO in June and a stable resources position which is close to 200 billion euros which is thus far above our, I would say, target in terms of steering. Lastly, customer deposits continue to be high and actually grew a little bit over the course of the quarter, with, as always, a significant proportion, around two-thirds of these deposits coming from individual and SMEs. And maybe one additional comment I can make on the breakdown of the customer deposit is that when it comes to retail banking activities in France, we've started to see this quarter a slight increase of a slight rebound of site deposits. You know that in the last two years we've seen a strong decrease of site deposits with switches onto regulated savings accounts or term deposits and now we see again site deposits slightly increasing. So we'll have to check in the coming quarters if this is the confirmation that the breakdown of customer deposits is now fully stabilized. I think I will stick here simply by summarizing again the numbers I've just commented by the fact that with 3.7 billion euros of net profit over the first half of the year, we are well on track to meeting our targets for the full year. Thanks very much and ready to take your question now.

Thank you. 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 touch-tone 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 Tariq El-Majad with Bank of America. Please go ahead.

Hi, good morning, Jerome. This is Tarek from Bank of America. Just a couple of quick questions, actually. The first one, maybe it's not fair to ask you that soon, but there were some headlines or some news in the Repubblica about potentially new solidarity levy for Italian banks and actually insurance as well this time. Do you have any comments on that? Is there any... Anything that has been discussed before? It looks like this time it will be more kind of consultation with banks before coming with proposals on how that will be calculated. Any views? And second question, you commented on some, on CREACOL being willing to be active on consultation in Europe. Were you referring mostly to the, you know, the kind of deals you've done so far within the wealth management and another smaller bolt-on, or you're thinking something bigger? And maybe I'll add a quick one on the Groove Petercam, and if you can give us some updates on potential impacts on post-full integration, if you have any updated ones from the ones that you gave us pre-consolidation. Thank you.