Credit Agricole Sa

Good afternoon, ladies and gentlemen. This is the conference operator. Welcome and thank you for joining the Credit Agricole Third 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 1 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 Ms. Clotilde Langevin, Deputy General Manager of Credit Agricole SA in charge of Finance and Steering Division. Please go ahead, madam.

Thank you very much. Hello, everybody. Welcome. So a few comments on these Q3 results, which are very strong. So we have very high net income this quarter at 1.8 billion euros, an increase by 10.2% over the quarter. Part of this increase is linked to the completion of the acquisition of Santander's 30.5% stake in Caissez this quarter, with a retroactive cancellation of the minority interest already paid over the years for 79 million euros. But if you exclude this impact, net income grew by 3.3%, thanks in particular to sustained activity in all of the business lines. And this reflects the continued strength of our business model. We have integration processes, by the way, which are still well underway. If we look at figures, the revenues continue to increase strongly and regularly by 5.6% this quarter. Costs are under control, with a cost to income at the competitive level of 54.6% over nine months. And all of this allows us to post a very strong ROTE ratio of 15.4%. And finally, solvency is high at the CAVA level at 11.7%, and of course, as you know, very high at the group level at 17.6%. Now, if you turn to the main figures... We have, for the group Crédit Agricole, net income, which was up 11.4% this quarter, to 2.3 billion euros, and up 9.7% these first nine months, to 7.1 billion euros. Our capital position is very strong, as I just said, and the cost of risk is very low. The liquidity reserves are high, at 488 billion euros. For Casa, As I was saying, the net income increased this quarter, thanks to a strong increase in gross operating income, 7.7%. And as you can see, over nine months, net income increased 12.1% to 6 billion euros, which you recall was our 2025 MTP target that we had set in 2022 for the full year. Now, how do we explain this strong performance? We have activity that was very sustained this quarter. Customer capture was strong, 522,000 new customers in the third quarter, which brings a total for the first nine months of the year to more than 1.5 million new customers. And activity was strong in all of the business lines. In retail banking, loan production was dynamic. In France, it was driven by home loans in regional banks and by corporate loans in LCL and regional banks. In Italy, loan production was driven by corporates because we preserved our margins in a highly competitive market in home loans. And the loan outstandings grew in other international retail networks in all geographies, with in particular strong commercial activity in Egypt. The on-balance sheet deposits were high, and the off-balance sheet resources were also up. And this translates into the performance of insurance. We have strong net inflows this quarter, plus 3.8 billion euros in particular in France. Premium income is very high at 11.8 billion. It's up 21% Q3 over Q3, thanks of course to savings and retirement in the context of increasing precautionary savings, but also thanks to PNC activity in France and internationally. And we now have 17.2 million contracts in our portfolio. But also we have an average premium that grew And as you can see on the right, the equipment of our customers continues to increase in all the retail networks. And we also have strong activity in individual death and disability insurance and in group insurance. In asset management, the AUMs reached $2,317 billion thanks to strong inflows and a positive market effect. The net inflows reached $15 billion this quarter thanks to medium to long-term assets and thanks to JVs. In wealth management, we had strong commercial activity this quarter, and we had an increase in AUM in particular with the first contribution this quarter from Banque Talaire in Switzerland. We also had high production in personal finance and mobility, 12 billion this quarter. It was balanced between traditional consumer finance and automobile activity. And we had production and leasing that was up this quarter thanks to renewable energy. And finally, the CIB continues to conform the performance with a record level of Q3 and nine-month revenues, thanks both to the market activities with an increase in FIC revenues by 8.3, excluding foreign effects effects, and structured finance and acquisition financing. And we, of course, maintain our leading positions on syndicated loans and bond issuances. And finally, in asset servicing, we have an increase in assets under custody and under management, thanks to positive market conditions and thanks to the acquisition of new customers. And as I was saying, we completed the acquisition of Santander's minority stake this quarter. Now, activity translates and will continue to translate into revenue growth, which is strong this quarter, 5.6% growth. This increase in particular comes from the revaluation of Banco BPM shares with a 245 million impact in a context where the share prices increased this quarter by 28%. And revenue growth was also driven by the growth in business lines, which was 135 million if you exclude the scope effect linked to the deconsolidation of Amundi US for 85 million. So if you exclude these two effects, Revenue growth was 3.2%. Now, if we look in a little bit more detail, revenues increased in asset gathering thanks to savings and retirement revenues and insurance. P&C claims rose due to weather effects, but we had strong increase in management fees, performance-free fees, and technology revenues in asset management. and of course an increase in fees and commissions income in wealth management. Wealth management was impacted by the integration of the group Petercrumb with the takeover of custodian banking activities by Cassez and with the hedging of market activities by Cassez. The revenues increased in CIB despite the negative foreign exchange impact, 5.8% excluding this impact, and remained high in asset servicing. And in FFS, we had the revenues benefit from a favorable price effect, thanks to an increase in the production margin, but we were penalized by the decrease in margins on factoring. And finally, in retail banking, fees and commissions income are strong in France and Italy. In LCL, net interest income was penalized by a negative base effect due to the revaluation of equity investments last year, but it increased, excluding this. thanks to the gradual repricing of loans and the decrease in the cost of resources. It's the same thing as what we saw last quarter. And in Italy, of course, we have still a very competitive market in the context of decreased rates, but strong fees and commissions. So all in all, we have strong and growing revenues, and as you can see with the graph on the right, we continue the dynamics that we observed over the past 10 years. Now, if we move to expenses... The cost-to-income ratio is low at 54.6% over these nine months. And if we break down the expense increase this quarter, we have $18 million restructuring costs at Amundi in a context of an optimization plan for France, Italy, Germany, and Australia that will generate about $40 million annual savings from 2026 onward. We also have a couple of scope effects and integration costs that more or less cancel out between CASEIS and Indosuel. We expect, of course, revenue and cost synergies going forward following these two operations, CASEIS and Indosuel. And we have expenses in retail banking that are stable due to an acceleration of IT investment in LCL with the transformation of the distribution strategy. And in Italy, we have some reversals of provisions regarding operational expenses ahead of the Q4 when we are planning to establish a solidarity fund for the 2026-2027 period, pending an agreement, of course, with the trade unions for a net impact of around $65 million in the Q4. Now, if we move to cost of risk, it increased this quarter significantly. but incurred proven risk decreased compared to the Q2. We have about half of this proven risk, which is explained by SFS, where we have had an S3 risk that has been relatively stable for several quarters with a slight deterioration in particular in international subsidies. The rest is very stable. It's explained by self-employed professionals on the LCL market, a few large corporates, slight increase in Italy. Cost of risk remains very low in CIB. And we have no significant change this quarter in stage one and two cost of risk because there's no update in the economic scenario. We have a slight reversal of loan loss provisions in CIB due to a transfer to incurred risk. But overall, the main asset quality remains very solid. The cost of risk is low, both for CASA and GROUP. The loan loss reserves are very high and very stable. They allow us to absorb any surge in the Stage 3 cost of risk. We have among the best coverage ratios in Europe, both for the group and CASA. So there's no significant evolution this quarter. And if we look on the detailed business line by business line, I gave you a few elements on the previous slide. I just wanted to outline the fact that for CAPFM, we have a slight increase... After a few exceptional elements that we had posted in the Q4 of 2022, this quarter we added legal provisions, about $20 million for a legal risk in the UK due to motor finance litigation. Elsewhere, everything is very stable with very strong coverage ratios. Now, if I move on to the next slide for the results, we have a very high level of net income group share and of pre-tax income. If we look at the pre-tax income, it increased by 6.2%. In asset gathering, we have the impact of the restructuring costs in Amundi, but we have strong activity in asset management and insurance and integration costs in Indosuez for the group. We had solid income in large customers. In SFS, we have a positive revenue momentum, thanks to improved production market margin. This was compensated this quarter by a short-term impact on equity-accounted entities, 30 million, namely LISIS, about two-thirds, where we have observed a decline in remarketing activities and the impact of a competitive market in Italy. And China, for about a third, where business deteriorated in 2024 and the first half of 2025, but has been picking up since the Q2. So very cyclical short-term effect. In retail banking, we had buoyant activities and a couple of one-offs. And of course, this strong positive impact in the corporate center due to a 245 positive impact of the revaluation of Bank of BPM on revenue. This, of course, creates volatility, which will be strongly reduced once we equity account our participation. And we asked the authorization of ECB to have this equity accounting. Hopefully, it's going to be in the Q4. Just to insist upon the fact that this revaluation effect is, in fact, not virtual, because if you were to replace it, as we will be doing once we equity account with the 100 million around ECB, increase in equity accounting every quarter thanks to our participation in Banco BPM, you'll see that despite excluding this impact, you have an increase in results this quarter. So if you look at these net income group shares, we have a strong increase in gross operating income by 7.7%, and all in all, a strong increase in net income, 10.2%. Now, solvency. So I remind you that the target is still 11%, but we still have a high level this quarter of CET1 at 11.7%. The retained results are the consequence of what we said before, plus 20 basis points. Then we have the organic growth of business lines for 21 basis points. And then we have an M&A impact. We already referred to the buyback of CACI's minority interest for 24 basis points. We have a very limited impact of the banque salaire acquisition. And then we have the others box, which is a sum of many items. I just wanted to flag one, which is the impact this quarter of the capital increase for employees for seven basis points. This will be compensated next quarter by a share buyback, which is currently underway, to neutralize the dilutive impact, and which should cost us about nine basis points. And the impact of Banco BPM is very limited this quarter because we have a slight positive impact in the retained earnings, but we have a negative impact in the other part, nine basis points, which is the sum of the impact of the fair value through OCI, positive, and a negative impact linked to, as you remember, the significant participation exemption threshold that I told you about last quarter. Now, when we consolidate through the equity accounted method, normally in the Q4, when we will have received the authorization of the ECB, I just wanted to flag the fact that there will be a significant negative impact on P&L. After the positive impact on net income that we have posted over the past nine months, a little bit more than $700 million, including the $180 million dividends that we have earned, The impact that we will see in the fourth quarter normally will have no cash effect and will not have a significant impact on solvency, but there will be a significant negative impact on P&L. And so if I come back to the Q3, we have provisions 93 cents per share of dividends, considering no restatements made whatsoever. Now, if I move on to the group, we have the same type of evolution, just there's a slightly higher increase in RWAs because, you know, the exemption threshold is not saturated at the level of the group. We have CT1, which is very high, 7.7 percentage points above the requirements. And as you can see, a very high leverage ratio, high TLAC, high MRELA. Liquidity, we still have a very comfortable liquidity position, very high level of liquidity reserves at $488 billion. LCR and NSFR ratios are excellent, and as you know, the group mobilizes all these various levers to diversify the sources of liquidity. One are customer deposits that are abundant, stable, diversified, and granular, and we have a high NSFR ratio. On the next slide, I want to insist upon the fact that we have our transition plan that continues to be rolled out with the acceleration of the development of financing to development of renewables, low carbon energy financing and investment. We have a strong financing of the environmental transition. We help our customers in their own transition. by providing financing in particular for new-built real estate, but also for SMEs and large corporates. This increased this quarter to 114 billion euros. And then lastly, we continue to decrease our financing to carbon-based energy sources. We're down to very low levels compared to the starting point of 2020. And then the last slide, I'm going to comment on this sum up of figures. Quarterly net income is very high, 1.8 billion, thanks to sustained activity in all of the business lines, thanks to a very competitive cost-to-income ratio, and thanks to low cost of risk. We continue to post very strong profitability with an ROTE of 15.4%, with a strong capital and liquidity position. And we can discuss the strengths of remodel in length during our Capital Markets Day, which, as you recall, is scheduled for the 18th of November. And to help you concentrate on the 18th on strategy, we're soon going to provide you with a few elements on the reporting principles we will adopt in the medium-term plan pertaining to regulatory capital and pro forma 2024. And you can call Cécile and the team to have all of the necessary clarifications on this point. And for now, I'm going to open the floor to any questions that you may have. Thank you. Thank you very much.

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 N1 when they're touched on telephone. To remove yourself from the question queue, please press star N2. Please pick up the receiver when asking questions. Anyone who has a question may press star N1 at this time. First question is from Tariq El-Majad, Bank of America.