Credit Agricole Sa

Good afternoon, this is the conference operator. Welcome and thank you for joining the Credi Agricole first quarter 2025 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 Grévé, Deputy Chief Executive Officer of Credi Agricole SA in charge of steering and control. Please go ahead, sir.

Good morning or good afternoon, I don't know, depending on the time zone in which each of you is located. I'm happy to present these results today. We can go directly to page four of the presentation. I know the day is quite busy for analysts and I don't want to make it too long. So start directly with the key messages on these results where we can see that Credi Agricole SA and the group are posting this quarter record level in terms of revenue. Credi Agricole SA in addition is posting a very high return on tangible equity. The cost income ratios are stable or slightly increasing but at a very competitive level in both cases. And the cost of risk is also stable at a moderate level. Last point on this page, solvency ratios are very significantly improving on both perimeters and we are going to explain a little bit more in detail the reason why we see this significant improvement of the CET1 ratios. Last point on this page, we've continued as in every quarter to develop our activities with the conclusion of the progress of different strategic operation be it the creation of the joint venture with GAC in China for car leasing, be it the conclusion of the partnership between Amundi and Victory Capital in the USA or be it the completion of our investment in Banco BPM which is now an investment of .8% of the capital in Banco BPM. On the following page you have more precise figures on all these elements. As I've said, revenues are sharply up plus .5% for the group globally above 10 billion euros and plus .6% on Cradiolical SA, 7.3 billion euros. Gross operating income is also up on both perimeters plus 3% above 4 billion euros on the group and plus 4%, 3.3 billion euros on Cradiolical SA. Last point, free tax incomes are up quite significantly. .6% for the group and .6% for Cradiolical SA and there is this quarter a very specific effect which is the effect of a French taxation increase, punctual increase that has been imposed by the French legislator and that is impacting quite significantly the group and Cradiolical SA. It's going to continue to impact us for the rest of the year but for the first quarter only we are taking more than half, actually 5 eighths of the total estimate of the tax and this represents more than 200 million euros for the group and more than 120 million euros for Cradiolical SA and this explains why with a pre-tax income that is up, we finally end up with a net income after tax which is down on both perimeters. If I go now on page seven of the slideshow, some elements regarding the level of activity on all businesses within the group, what we can see is that we are posting a new record in terms of revenues in the CID activities. There is also a very high level of net inflows at Amundi with the record level of assets under management, 2.25 trillion assets under management. There is also a record level of premium income at Cradiolical SA, close to 15 billion euros this quarter, up 20% as compared to Q1 24. The loan production in France in the retail networks is continuing to recover as compared to the first quarter of 2024, is slightly down as compared to Q4 24 but there is a seasonality effect and actually what we are seeing on the ground now in March and also in April is that the rebound continues as compared to the same period of last year. In the consumer finance business, we've seen a slight decrease in the production of new loans but the level in absolute terms continues to be high and it's mainly triggered by a certain decline in the level of car financing activities. Lastly, in international banking activities, we continue to see a good level of new loan production. If I go on the following page, this translates into a record level of revenues as I've said in my introduction. On the right-hand side of this page, you can see the trajectory we've been following in the last eight years for Cradiolical SA. We have had a steady and regular growth of the top line plus .6% in average over the last eight years and if we analyze a little bit the evolution of the top line amongst the different business division on this quarter, what you can see is that we've had a very sharp increase in the level of revenues for the asset gathering business division which is partially linked of course to the scope effect and the integration of the group Peter Cam but the organic growth has also been very significant. It's also the case in the large customers division with a record level of revenues at Casib as I've mentioned and a good dynamic also at CASEIS. In the specialized financial services division, revenues are also up with the continuation of the trend that we had seen already in the fourth quarter of last year or excuse me at CAPFM and it's only in the retail banking business division that we see a slight decline in the level of revenues that is mostly due to a specific base effect in international retail banking activities especially in Egypt where we had seen back in Q1 24 a very high level of revenues in connection with very strong rate movements and a high level of activity in Forex businesses. Lastly, in the corporate center, the revenues are also up benefiting amongst the other elements from the impact of the valuation of our shares in the capital of Banco BPM. On the following page, we have some indication regarding the evolution of the cost base and I know that you have asked already a significant number of questions to the team regarding the evolution of our cost basis so I want to spend some minutes on this point and on this page actually. If we stop on the right hand side bar chart of the page, what you can see is that actually we start with an increase of 322 million euros of the cost basis but 138 million comes from scope effects and from integration costs so non-recurring and then 72 million come from the IFRIC impact so all the taxes that we have to account for in the first quarter of the year and they are quite significantly up this quarter actually it happens that in 2024, some adjustment had to be made in the second quarter which is not going to be the case this year and so there is also to say so a base effect and this is triggering this sharp increase in IFRIC costs this quarter and so this leaves us with only 130 million of, I would say, economic growth of the cost base, 105 million for staff costs including an adjustment of the provision for variable compensation in connection with the very high level of activity at Kassib and at Amundi and a close to 40 million increase in IT investment costs. So all in all, an economic evolution of .2% which would compare to an evolution of the top line of around 4%, .1% to be precise if we restate the top line from the scope effect. So still, if we try to assess economically the evolution of the cost basis as compared to the top line evolution, a Jaws effect which would be positive. On the following page, we have some elements regarding the cost of risk. To put it in a nutshell, the cost of risk is stable at a moderate level. On the perimeter of Crédit Récal SA, 413 million of costs of risks in the first quarter of 25 which compares to 400 million in the first quarter of 24. So a very limited evolution plus 3.4%. And what you can see is that in terms of cost of risk of BIPs as compared to the outstanding, we are also very stable. And it's also more or less the case on the global perimeter of the group, 27 BIPs of cost of risk as compared to the outstanding. Again, very, very stable, no significant evolution. The NPL ratios are also stable, 2.3 on the perimeter of Crédit Récal SA and .1% on the perimeter of the group. And the coverage of this NPL by our different categories of provisions continue to be high and even increases on the perimeter of Crédit Récal SA. By business division, what you can see is that we have a slight increase in the consumer credit business, CAPFM, which is mainly triggered by some international subsidiaries outside Italy. The cost of risk actually at AGOES does not deteriorate this quarter. And all in all, it's the moderate cost of risk according to the standards of the consumer credit business. What you can see also is that the cost of risk continues to decline in Crédit Récal Italia and also at LCL. It increases a little bit for the regional banks, but it's mostly due to technical effects triggering an increase in the IFRS 9 provisions. So no deterioration in the incurred cost of risk. And it continues to be very low at CASIB for the financing activities of CASIB. And actually we even have a net reversal of provision this quarter, mainly due to some synthetic securitization. This is leading to the evolution of the net profit that is illustrated on page 12. If we start again with the right hand side of the page in terms of net profit, it is, as I've said, slightly down minus 4% between Q124 and Q125. But again, this is more than explained by the evolution of the corporate tax level, including 123 million euros of this specific tax surcharge that we have to pay in France. When you look at the gross operating income, it's indeed up plus 4% plus 129 million euros. And on the left hand side of the page, this is the evolution of the net profit before tax, net income before tax. And what you can see is that it's up .6% plus 127 million euros, and this improvement is mainly driven by the asset gathering and large customers division. Net profit is more or less stable for the specialized financial services division and retail banking activities, and also at the level of the corporate center. On the following page, some indication regarding the evolution of the solvency ratio at CASA. I remind you that the target continues to be 11%, and we indeed have a sharp increase of the C-T1 ratio this quarter, plus 40 bips from .7% to 12.1%. And there is of course a technical element that is explained in this situation. It's the first application of CRR3. So you could consider that at the end of the day, Basel IV ends up being a positive for us, which is not the case, I want to be clear on that. But we started to feel the negative impact of Basel IV already some times ago with the trim exercises that were up front loading part of the Basel IV implementation. Then you remember that in Q4-24, we had the credential consolidation of leasing activities that represented a significant hit also on our solvency. And ahead of us at CASA, there is also going to be the application of the fundamental review of the trading book, possibly in 26 or maybe later. So this positive impact in Q125 must be read, I would say assessed in the global landscape in which we have had already some negative impact and we possibly will have also some additional negative impacts going forward. Besides this element, we have retained earnings that represents 21 bips of additional ratio. The consumption of solvency by the organic development of the business line represents nine bips of ratio. And then some technical elements including the phasing, the last phase of phasing in of IFRS 9 plus also some bits and pieces of regulatory effects, M&A, and different things represents an additional hit of 10 bips. So we end up this quarter at 12.1%, but I want you to be aware of the fact that as soon as beginning of April, some elements are going to consume around 30 bips. So I would say the starting point for this second quarter is more .8% than 12.1%. These elements that are going to impact the second quarter are the conclusion of the victory capital transaction, which is translating for the group into a significant holding in a financial company that has to be deducted above the franchise, which is going to be the case. And it's the same situation for our investment in Banco BPM because beginning of April, we've transformed our derivative into actual shares. And again, this is also partially exceeding the franchise. So this is also going to be partially deducted from our CET1 ratio. So the pro forma figure is closer to 11.8%. And lastly, but this is not included in the 11.8%, we will conclude and close possibly end of Q2 or maybe beginning of Q3, the closing of the transaction with Santander in order to buy back their 30% in the capital of Casseiz that would also represent an impact of possibly close to 30 bips of CET1 ratio. But again, this is not an issue considering the fact that we continue to have a target at 11%. Lastly, we've already provisioned 28 cents a share of dividend at the end of the first quarter of the year. On the following page, you have the same evolutions regarding the group globally. And again, we have the same elements explaining an evolution which goes into the same direction from .2% end of last year up to .6% end of March. The pro forma figure beginning of Q2 is not as much impacted as for Crédia Ecol Essay because the threshold, the franchise are much higher at group level than at a CASA level. So we can consider that we are also beginning of Q2 close to .6% for the group. Lastly, on the liquidity position of the group, nothing much to mention. Of course, we are talking about the end of Q1. So it was before all the turmoil on the market that were triggered by some threats on the tariff regime globally. But nevertheless, this hasn't changed a lot the situation of our liquidity which continues to be inside the second quarter very strong and without any threat. But nevertheless, at the end of the first quarter, we've had an improvement of our reserves. We've had an improvement of our different ratios, LCR and NSFR. And we continue to have a customer deposit basis which is ample and which is very diversified and very secure. Lastly, we provide here on page 16, excuse me, some updates on our transition plan which continues to be organized around the same three pillars which is the acceleration of the development of our financing to the development of renewable and low carbon energy sources. And we continue to very significantly increase our financing to these sectors. You have the figures provided on this page with very sharp increases as compared to the basis of comparison of 2020. We continue to help our different categories of customer in their own transition. And we are providing to our customers a lot of financing dedicated to help them transition be it for individual SMEs or large corporates. And lastly, we continue to decrease but it's only the conclusion of the first two elements. We continue to decrease our financing to carbon-based energy sources. And indeed, we are now reaching very low levels as compared to the starting point of 2020. So let me conclude simply by reassessing that we are publishing very positive results this quarter with revenues again up and reaching record levels with a cost income ratio which continues to be very competitive and very significantly below the target of or the ceiling of 58% that we are committed to respect in the course of this medium term plan. We continue to have a cost of risk which is very moderate. And we, despite the fact that we have a net profit that is impacted by the surcharge that has been put in place in France regarding the corporate taxes, we publish a return on tangible equity which is close to the highest level ever, close to 16%. And I'm happy to say that next time you'll have the pleasure to have this presentation by Clotilde whom you know very well. Thanks for listening. And I'm ready now to take your questions.

Thank you. This is the conference operator and we will now begin the question and answer session. Anyone who wishes to ask a question may press star and one under touchtone telephone. To remove your staff from the question queue, please press star and two. Anyone who has a question may press star and one at this time. The first question is from Tariq Al-Majad, Bank of America. Please go ahead.