Credit Agricole Sa

Good morning, this is the conference operator. Welcome and thank you for joining the Credit Agri-Call third quarter and first nine months of 2024 results presentation. 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. At this time, I would like to turn the conference over to Mr. Jérôme Gluvet, Deputy Chief Executive Officer. Please go ahead, sir.

Thank you very much. Good morning, everyone, and I'm happy to share with you the results that we are publishing this morning. Again, we are publishing very good results from the third quarter of 2024, and to put it in a nutshell, they are very close to the results we've posted for the second quarter of the same year. The net profit at Credit Agri-Call SA for the first nine months of the year stands at 5.4 billion euros, and it's 1.7 billion euros for the third quarter only. It's apparently down around 4.7 percent, Q3 on Q3, but we stated from a reversal of home purchase savings plan provisions that we had booked and commented last year, actually the net profit of Credit Agri-Call SA this quarter is up 8.2 percent. In addition to that, we can mention the fact that for the first nine months of the year, we continue to have a very, very good cost-income ratio, 54.4 percent, a return on tangible equity, which continues to be comfortably above the target of 12 percent at 14.5, and the last point on this first page, we have a CET1 ratio, which is up 10 bips at 11.7 percent. On the following page, page five, you have the main figures both for the group and for Credit Agri-Call SA. Maybe just a few comments simply on the first nine months of the year for the group. Net profit is stable for the first nine months of the year, but actually again, we stated from this specific reversal of provision that we had booked last year, the net profit is up 4 percent, around 4 percent for the group on the first nine months of the year. And when it comes to Credit Agri-Call SA, again, we stated from the same element, the net profit on the first nine months would have been up 12.2 percent. Maybe just two additional elements on this page, the cost of risk, and we will comment it a little bit more in detail later in the presentation, but it's more or less stable at a moderate level, both for the group and for Credit Agri-Call SA. And then last point, the CET1 ratio for the group is also up 10 bips on the quarter at 17.4 percent. On page six, some elements regarding the activity of the quarter. To again summarize very shortly what happened in the quarter, we can say that we continue to demonstrate the efficiency of our model. We are, the development of the customer basis of all the regional banks and all the retail banks of the group is fueling and continues to fuel the growth of the business lines, and the growth and the development of the business line is also fueling the attractivity of the retail banks of the group, thus enhancing further the customer capture. And this quarter, again, we've managed to attract close to 500,000 new customers in the different retail banks of the group in Europe, with a net increase of the customer base by more than 100,000 customers. The development of the retail related activities was quite solid on the quarter, and maybe we can mention the fact that home loans start to rebound in France, with a significant increase both for the regional banks and for LCL in Q3 as compared to Q2. And when it comes to the large customer activities, CID, asset management, and also insurance, it's been a very strong quarter of activity in the third quarter of this year. And amongst the different elements I can name, we can mention the fact that Amundi is reaching again a record level of assets under management. There's been also a record level of revenues at Kaseeb, and the assets administered by Kaseis continues to be up this quarter. If I dig a little bit on the revenues on page 8, let me start with the left-hand side bar chart of the page. The underlying revenues are up 7% on the quarter, plus 425 million euros. And if we analyze a little bit the way it's been performed by the different business lines, we can mention that on the asset gathering activities, it's sharply up, plus 214 million euros. Of course, it benefits from the integration of the group Peter Cam within Andos Wells, but nevertheless, you've seen that Amundi is posting a strong increase in its revenues. You've seen the publication of Amundi last week. It's only the insurance activities, and maybe we will answer questions on this point, that have more or less stable revenues on this quarter, despite the fact that Crédia Récor L'Assurance is posting a sharp increase in its bottom line, for some technical reasons we can detail. On the large customers' activities, both Casib and Casseiz are posting a sharp increase in their revenues. No scope effect this quarter, and so the increase of 166 million euros in the top line is only organic. In the Specialized Financial Services division, it's more or less stable for the quarter. It's linked to the fact that within Crédia Récor personal finance and mobility, we continue to lag a little bit in terms of margin after the sharp increase in rates back last year and also end of 2022. You know that it's been a little bit long before we were able to pass to the customers this increase in refinancing rates. So the margin for the new loans continue to improve, but it's not completely the case for the margin on globally the whole outstanding. In retail banking activities, apparently a small decrease in the level of revenues, minus 36 million euros, but actually restated from the reversal of home purchase savings plan provision at LCL of 52 million euros. It's globally slightly up for the division, which is a combination of revenues up at LCL, revenues up at the international retail banking entities outside Italia, and a slight decrease within Crédia Récor Italia in connection with the decrease in market rates. And then lastly, the corporate center, apparently a sharp decrease in the level of revenues, minus 187 million euros. But actually also here we have this base effect in connection with the home purchase savings plan provision reversal, which was 230 million euros back last year. So it means that we stated from this element, revenues at the corporate center are significantly up on the right hand side of this page. You can see that we continue to post sharp increase in revenues Q3 after Q3. And over the course of the last seven years, it's an increase by around 40 percent that we've been able to post. On the following page, a little zoom on the cost line. If we look at the evolution of the underlying cost line on the bar chart on the left hand side of the page, you see a significant increase, plus 8.2 percent. But what you see on the analysis provided on the right hand side of the page is that you have to deduct three significant elements from this increase in order to assess the recurring evolution of the cost line. The first element is clearly the scope effect in connection with the integration of De Groupe Pétter Cam. It's an additional cost base of 112 million euros that is sitting within in Andosuez this quarter. The second element is that both at Andosuez and also at Casseiz, we have some integration costs that are specific to this period of integration and that are not going to to stand forever within our cost base around 30 million euros. And then the last point is that last year we had also a one off in the cost line, a positive one off in the cost line, which was a reversal of bank levy in the UK for 30 million euros. So outside these three elements, the evolution of the recurring cost base is only 141 million euros over the quarter. It's an increase of 4.1 percent. And interestingly, it's a significant deceleration as compared to the same recurring increase that we've posted in the second quarter of this year, which was at 5.7 percent. On page 10, some elements on the cost of risk for Crédia Ecole SA. The level, the overall level of the cost of risk is very stable, both compared to Q3 23 and also to Q2 24, even slightly down as compared to Q2 24. This is, of course, the combination of different evolutions and different levels of cost of risk in the different business lines to really summarize. What we can say is that at Casseiz, the cost of risk continues to be stable at a very, very low level, around 15 million euros of net cost of risk at Casseiz. The cost of risk is also stable at a higher level, of course, within the specialized financial services division, especially in the consumer credit business line. But in terms of BIPs compared to the outstanding, it continues to slightly decrease. The cost of risk is a little bit up at LCL, both in absolute numbers and also in terms of BIPs as compared to the outstandings. And you would see the same type of evolution within the regional banks. So it means that in retail banking activities in France, especially for self-employed professionals and SMEs, we are continuing to see a slight increase in the cost of risk with an overall level, which continues to be, again, moderate compared to what we could have had back several years ago. And then in the international retail banking activities, the cost of risk is down quite significantly this quarter again. It's the case, very much the case in Italy, and it's also the case in the other international retail banking entities with, amongst other elements, a reversal of provision at Crédit Agricole Ukraine. In terms of NPL ratios, we continue to have a stable and low NPL ratio at Gaza, .5% and even more at group level, 2.2%. Coverage ratios continue to be very high, above 70% at Gaza and above 80% at group level. Overall, and you will see that on page 11, we are posting again very good results on this quarter. Net profit is up .9% on an underlying basis. This is what you can see on the left-hand side of the page with a net profit up in most business lines, especially we stated from the home purchase saving 10 provision reversal of last year. It's the case for the asset gathering division quite significantly. It's also the case for the large customer division. Net profit is more or less stable in the specialized financial services division and retail banking activities. If you restate from the home purchase saving plan provision reversal plus a specific element at Crédit Agricole Ukraine, which is the fact that the corporate tax rate has been increased in this country, and we are one of this quarter complementing the corporate tax provision since the beginning of the year for an amount of 40 million euros. This explains most of the apparent decrease of the net profit of the retail banking division. So all in all, significant increase in the net profit, underlying net profit and spread amongst most of the business lines. On the right-hand side of the page, what you can see is that excluding the home purchase saving plan provision reversal from 2023, we are posting a return, a gross operating income, which is up a little bit more than 100 million euros. And again, this net profit up 126 million euros plus 8.2 percent, again, excluding this element. So all in all, good level of profitability, and we continue to grow this level of profitability. On page 12, some elements regarding the solvency, starting with Gaza. So as I told you, the solvency ratio, CQM ratio is up 10 bips this quarter. Actually, it's a little bit more than 10 bips, close to 15 bips. But the rounding effect is leading to this 10 bips indication. Retained result is high, 19 bips of retained results, solvency effect. Despite an additional reserve for the distribution of dividend of 25 cents this quarter. So we have now 83 cents of dividend accrued in our books at the end of the third quarter. The organic growth of the business line generate consumption of solvency of 14 bips. But amongst that, I have to mention that there is an increase of five bips in connection to the increase in the carrying value of the insurance activities, which did not upstream any dividend or dividend elements this quarter. So, of course, you know that every time the insurance activities are upstreaming a dividend, it's reducing the carrying value and it's generating a significant reduction in the RWA consumption. And then we have this quarter some positive elements regarding OCI and other methodological elements. So this is leading to this 11.7 percent CET1 ratio at Gaza level plus 3.1 percentage points above the regulatory requirements. And at group level, we have on the following page a CET1 ratio, which stands at 17.4 percent. Again, up 10 bips and we have more or less the same elements explaining this improvement with a high level of retained results. A quite high level of organic growth of the RWA consumption by the business line. Also, this element regarding the insurance activities plus the fact that both at the level of the regional banks and LCL, we have an increase in the corporate segment of the RWA consumption in connection with some down ratings of some counterparts, which is, of course, perfectly correlated with what I said about the cost of risk. The other solvent ratios, be it the leverage ratio, TILAC or MREL are comfortably also above the requirements. On the following page, page 14, we have some elements regarding the liquidity position of the group. The liquidity reserves continue to be very high and there is a non-significant reduction of 12 billion euros, but the level of 466 million euros of liquidity reserves is definitely significantly above our target of steering of this liquidity position. And the different ratios that we publish, both LCR and NSFR at both levels of CASA and the group continues to be very significantly above our targets. We still have a tiny 700 million euros of TLTRO to repay, but it's absolutely non-significant. And when it comes to customer deposits on the right hand side of this page, the same comment that I did on the last quarter can be also made, which is that we are seeing a stabilization of the overall level of customer deposits and also, which is even better for the average cost of our customer liabilities, we are seeing a stabilization also of the breakdown of the different customer deposits between the different categories. On the following page, page 15, you have the more detailed income statement for Créi-École SA. I think I will not comment this detailed P&L in the initial presentation, but of course, I'm happy to answer questions if any. And maybe before concluding this introduction, some elements regarding our continuous support of the energy transition with new climate commitments that have been announced by Créi-École SA, with an interesting element, which we comment today, which is the fact that we've entered into an agreement with the Caisse des Depots in France. You know that we have to centralize the Caisse des Depots, a significant part of the regulatory savings accounts that we collect to the Caisse des Depots. And the Caisse des Depots has agreed to transfer back to us some liquidity collected on our regulated savings accounts with the condition, of course, that we finance green loans, green projects with these amounts. So we've entered this agreement and the Caisse des Depots is committed to upstream to us a little bit more than five billion euros of liquidity in this scheme in the course of this year and next year. And then we provide also an update on the different key PIs that we follow in terms of the increase of the financing that we provide to the energy transition. So I will conclude this initial presentation simply by reiterating the fact that we confirm, helped by these good results of the third quarter of this year, that we are going to reach as soon as the end of this year, all the financial targets that we were initially pursuing for 2025. So amongst other elements, the target of being above six billion euros of net profit in 2024, as soon as 2024. Thank you again. And I think we can now go to your questions.

Thank you, sir. This is a conference operator. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on the touchtone telephone. To remove your question, please press star and two. Please pick up the receiver when asking questions. The first question comes from Julia Aurora Miotto of Morgan Stanley.