Credit Agricole Sa

Good afternoon. This is the conference operator. Welcome and thank you for joining the Credit Agricole's first quarter 2026 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 Ms. Clotilde Langevin, Deputy General Manager of Crédit Agricole. Please go ahead, Madam.

Thank you. Thank you very much. Hello, everybody. I'm conscious that this is a very busy day for you, so I'm going to try to be short. And so starting on page four, to tell you that we have solid results this quarter for Trinidad-Cortez, 1.7 billion, despite the turbulent environment. All of the Q1 2025 figures here are presented in pro forma. So for the Q1 2026, we don't change anything, but to compare it with the past, we consider that in the past, Banco BPM had been equity accounted at 20.1%. Now, net income therefore increased by 1.8% pro forma, thanks to an increase in revenues to $7 billion supported by sustained activity ongoing digitalization, and strong client capture. We also have strong operational efficiency. The cost-to-income ratio improved by 0.6 percentage points quarter-on-quarter in CASA. We have well-controlled risks with cautious provisioning on this quarter in the context of the conflicts in the Middle East. And all of this leads to a strong profitability, and we're posting a high ROTE at 13.7%. TG1 ratio is at 11.4%, well above the 11% target, which is impacted notably by M&A operations. We increased our position this quarter in Banco BPM Capital, now reaching 22.9% since we decided to seize the opportunity of a dip in the share price in March to continue to build up our stake, but no change in our strategy. The group continues to develop. We announced this quarter the acquisition of a small Ukrainian bank, Lviv, in the west of the country, that will allow Crédit Agricole Ukraine to strengthen its positions with SMEs and with corporates in the agri-sector. And we launched a couple weeks ago the European Digital Platform Crédit Agricole Savings in Germany, only five months after it was announced in our Medium-Term Plan Act 2028. On the next slide, you see the key figures. We have a good performance of the group, Crédit Agricole, with a strong increase in net income, 5.5%, driven by revenues, 2.8%, which reached this quarter the record level of 10 billion euros. In particular, this is thanks to the strong performance of regional bank revenues, 7.8%, which benefited from a spectacular upturn in net interest income by 34%. There's a cautious provisioning in all of the business lines in the context of geopolitical uncertainty, which leads to an increase in cost of risk on outstandings over four rolling quarters this quarter, but it remains under control. And, of course, we maintain a strong position in terms of solvency and liquidity. So I talked to you about the impact of Bank of BPM. We also have unfavorable market effects on insurance OCI's and on market RWAs for the C21S TASA. And we also have a front-loading of the consumption of Castig's RWAs in order to accompany their customers. We can come to that a little bit later on when we talk about solvency. Now, moving to slide seven, activity. Activity was sustained across all of the business lines this quarter. This supported, in fact, the revenues. So what we can note this quarter is, A strong customer capture, 600,000 new customers this quarter, 450,000 in France in retail banking. And what's important is that it also benefited from increased digital acquisition in France and in Italy. So we had client capture that was boosted by digital acquisition, in particular for LCL with the launch of L by LCL Pro, which expands. explains the increase in customer capture for the professionals. 20% of capture on professionals was digital. Digital acquisition also explains 40% of client capture for Crédit Agricole Italia. And we're launching several 100% self-care digital solutions in France, in home loans, in savings, with the launch of full self-care securities accounts and share savings plans. and with a new life insurance contract, OVNANCE. And in the regional banks, we're going to launch a full digital onboarding in a couple days. Now, if I move business by business to activity, in retail banking in France, credit production was strong, even though this performance was mainly driven by regional banks' production in a very competitive market. Corporate and professional loan growth was 7%, and in Italy, we had a very dynamic loan production for the corporates times two quarter-on-quarter in the context of a competitive market. And production is very dynamic in Poland, in particular for individuals, and in Egypt. The loans outstanding in the on-balance sheet assets continued to grow in France and in Italy, also the off-balance sheet assets, and so therefore asset-gathering divisions posted a very dynamic quarter. Thanks to insurance, where we have an increase in premium income on all of the activities, savings and retirement, personal insurance, P&C. We had a record net inflows of $5.7 billion, of which $1.5 billion thanks to the Obiang solution, and we reached 18 million contracts in P&C this quarter. We have a weather-related effect impact, but activity is still very strong. For Amundit, We have very strong net inflows and growing AUMs. The medium to long-term inflows are strong, in particular thanks to ETFs and index-based solutions, and activity is dynamic in the third-party distributions and retirement solutions. And finally, in wealth management, the AUMs are increasing, and you can note the fact that we finalized the acquisition of the wealth management customers of BNP in Monaco this quarter. For personal finance and mobility, Production increased year on year, despite the unfavorable conditions in the car market that weighed on our mobility activity, and in particular on remarketing, we had an increase in the stock of used cars this quarter. But production increased year on year for personal finance and mobility. And finally, in large customers' division, the CID posted its second-best quarter after the record level that it had reached in the first quarter last year. And so, excluding FX of past impact, CID is stable at this level, thanks to an excellent performance of investment banking, and despite the wait-and-see attitude of our corporate customers in financing activities, and the fact that FIC was impacted by a lower activity on primary markets. And finally, for Cafe Easton. We had a high level of settlements and delivery volumes. It was boosted by market volatility. Of course, we continue to transform our business after the integration of the European activities of RBC. Now, this feeds into revenues on the next slide that increased by 0.9% this quarter. If we reason on a like-for-like basis, i.e., if we exclude the revenues Amundi U.S. deconsolidation for $90 million in the first quarter of last year. And the impact of the first consolidation of ITG shares this quarter, for $68 million this quarter, revenues increased by 3.2% Q1-Q1. Like the light, all of the business lines contributed positively to the growth in revenues, except for the large customers division, which is impacted by a $69 million FX effect. Asset gathering revenues decreased due to the scope effects, but excluding these two scope effects, we have an increase of 59 million. It's mainly thanks to higher management fees and performance fees at Amundi, which more than offset a slight decline in insurance revenues impacted by the weather-related events that I talked to you about, storms and floods in PNC, and impacted by a deterioration of market conditions in savings and retirement that was mostly absorbed by the CSM, but we have a residual revenue impact. For large customers, I was telling you that we have a very high quarter, second best after the record level that it reached in Q1, 2025. For SFS, we have a positive price effect, which was offset this quarter by a change in the residual values of the cars in Drevalia. Drevalia, as you know, is a subsidy of Criterico Alfa Bank, so this is why it has an impact on revenue. For retail banking, we had a very strong upturn in net interest income for LCL, plus 13%, and a stability of net interest income in Italy. And we can see right now what we talked about in the medium-term plan for France, an increase in the net interest income thanks to a reduction in the cost of resources, the normalization of the customer deposit mix and the rates effect, and also the gradual repricing of loans. And fees increased in all geographies. And finally, on the corporate center, we had favorable volatility effects. Now, moving to expenses, we have, again, on a like-for-like basis, we have positive jobs, 1.7 percentage points. So we do have a few positive factors, in particular the favorable FX impact on CID costs and decreased provisions for variable compensation. But more importantly, operational efficiency is improving. We have this quarter the full effect of the synergies for the Cathay for RBC operation, and therefore we can confirm 100 million additional income in 2026 linked to this operation. The de-group integration with Amos Reyes is progressing also. We now have 40% of synergies that are realized. And Amuntia and Finiadeco in Italia are expecting cost savings in the subsequent quarters. We talked about that at the end of last year. And these positive jobs that we observe, we can observe them despite the fact that we continue to invest in our investments. We continue to invest in the transformation of LCL, as you can see here in retail banking. And we invest also in SFS for our creative growth savings and development platform in Germany, for which the total costs are expected to be below 50 million in 2026. Now moving to cost of risk. Cost of risk, in fact, decreased this quarter compared to the Q4 2025, but increased by 32% compared to Q1 2025, mainly due to our prudent provisioning in the context of geopolitical and economic uncertainty. Because, as you can see, most of the increase is due to Stage 1 and Stage 2 provisioning, about 100 million, including scenario updates. We adjusted the weighting of the different scenarios. This is for about 38 million. And we added overlays, geographic and sectorial overlays, related to the conflict in the Middle East, around $28 million. So we have about $60 million provisioning due to the Middle East conflict. We have other provisions that include legal risk that represent $39 million, and those include an adjustment of $17 million for the UK car loan litigation after the SCA released the conclusions of their consultation that they had launched at the end of last year. And so as you can see, besides these elements, the Stage 3 incurred cost of risk is very close to the Q1 2025 levels after a significant increase in Q4 2025. And if we look at what happens by business line, half of the Stage 3 and total cost of risk is explained by SFS. with CAPFM being the main contributor, but the increase in cost of risk for CAPFM is mainly driven by these S1 and S2 additions. The Stage 3 provisions are relatively stable, and they're even decreasing, in fact, due to successful sales of NKL portfolios. The increase in CID is essentially due to Stage 1 and Stage 2 provisions linked to the Middle East conflict, and the cost of risk remains broadly low, with investment-grade customers mainly, and a diversified and a balanced geopolitical risk. For French retail banking, the cost of risk is under control after a strong increase in the Q4. The default flow remains steady, both for Alistair and the regional banks, and it's mainly driven by professionals and SMEs. So what we're doing is we're continuing to monitor quite closely The same sectors that we talked about last year, retail, distribution, automobile transportation for LCL, and for the regional banks, real estate, professionals, construction, and farmers. And in Italy, cost of risk is decreasing and credit quality indicators are improving. So, to conclude on this, there's no surge in loan loss provisions. We have an annualized cost of risk on outstandings that decreased Q1 and Q4. And our credit quality indicators remain at a very good level. We have the NPLs that are stable. We have coverage ratio for CAGR and loan loss reserves that are increasing, which will allow us to absorb surges in Stage 3 cost of risk going forward. As you know, our provisioning is always prudent, and that's also why, as I said, we remain cautious and we continue to monitor closely these sectors that I was talking about. Skipping slide 11 to move on to the slide 12 on income. In fact, we have a solid income in a volatile environment. I just wanted to make two comments. The fact that we have equity-accounted entities that are increasing. We have a decrease for SFS for leases related to losses on remarketing activity in the current automobile context, and we have an unfavorable base effect in China. But we have an up for asset gathering related to the ICG first consolidation impact. This is a one-off of 85 million euros. And we also have a victory capital scope effect, which is the run contribution this quarter, thanks to synergies. So we now have ICG at 5.2%, and we plan to increase it to 9.9% over the rest of the year. And so next quarter, we're gonna have a regular contribution in our equity account but for this time, it's a one-off. And also, you have to recall that we're benefiting this quarter from the fact that we do not bear minority interest on cafes any longer compared to $35 million per quarter in the Q1 2025. But most importantly, growth operating income is increasing on a life-to-life basis by 5.5%. We have 1.8% net income growth, to 1,676 million euros, so a very strong performance this quarter, thanks to strong activity and good operational efficiency. Thousand C. Now, we have a very high level of capital this quarter, and the CH1 ratio is at 11.4%, which is still well above our target at 11%, thanks to retained results, but we did have a decrease from 11.8% to 11.4% due to a certain number of elements. First, we have organic growth, 23 basis points. In particular, with an impact of CID, which accounts for 14 basis points. Why? Because we have a couple of elements. We can come back to that afterwards. But we have, in particular, a market impact on the RWAs, And we also have a front-loading of the annual RWA budget in the first quarter for CEFSIB in a context of strong activity in March to support the customers of CEFSIB. That's the first dimension. Second, we have an M&A impact, 17 basis points, out of which we have 14 basis points linked to the increase in our stake in Banco BPM to 22.9%, that I was talking about. In fact, this gives me the opportunity to mention the fact that in our past acquisitions, we completed the analysis that we did at the end of last year that showed that we had met our ROI criteria. In addition to these figures, we computed the average return on capital, you have that in the annex, and it's around 18%, so a quite profitable M&A past acquisition. So, organic growth, M&A, Finally, we have a methodological impact with CRR3 adjustments, and we have market effects on the insurance OCIs due to the rate spread and equity fluctuations by four basis points. So all in all, we remain at a very strong level of CET1 ratio for CAGA, 11.4%, which allows us to provision 0.26 euros per share in terms of dividends. The RWAs are increasing also due to a foreign exchange impact for CACIB. This foreign exchange impact has no effect on the CET1 because, as you know, we immunize our CET1 ratio against adverse foreign exchange fluctuations on the dollar by neutralizing the impact on the numerator. But you do have that in the increase in the RWAs. Moving to the slide on the CHE-1 ratio of group Crédit Agricole, we have very strong capital at this level. As you know, our objective is not to accumulate capital at the level of Kazan. So the relevant figure for the group is that of group Crédit Agricole. We're very comfortably above our stretch requirement, which, as you know, has increased by 50 basis points this quarter, due to the increase in the systemic buffer, but we're still very comfortable with 670 basis points above the requirement. And we have more or less the same impact that we had for CAVA that I talked about. We have a little bit more limited impact of Bank of BPM due to the exemption threshold that I was talking to you about last time. RWAs are increasing a little bit, due to technical adjustments on the Basel IV impact on the corporate RWAs of the regional banks, and the leverage ratio is very comfortable, as well as the TULAC and the MREL ratios. On liquidity, on the next slide, very comfortable liquidity positions, very high level of liquidity reserves, $475 billion. The LCR and MSFR ratios are excellent, and just to tell you that almost Two-thirds of our funding plan had already been completed during the first quarter, so we're very comfortable also in terms of funding plan. And as you can see here, we have stable customer deposits and very diversified and granular deposits. On the next slide on transitions, you know, we presented new targets in our Act 2028 plan. Our objective, as you know, is to be a leader in customer capture in technology and, of course, a leader in transitions. and we reaffirmed our net zero commitments. And so we have new targets, which are the following. One, to reach a green ground ratio of 90 on 10. So we're well on track to reach this. Our second target is to reach 240 billion in financing of environmental and social transition. The split today is 65% environment and 35% social. Again, we're well on track. And finally, CASEB should reach $1 billion in annual revenues from sustainable finance. And just note that on the 24th of April, Amundi announced that it would be the asset manager of the GGBI fund. So that's something I'm very proud of as well. And so coming to the last slide that I'm going to comment, slide 17, to conclude by saying that net income increases quarter pro forma for CASEB and the group. thanks to strong activity in all of the businesses, in asset management, in insurance, thanks also to strong improvement in net interest income in France. We conquered customers. We accelerated digitalization. We rolled out, started to roll out our medium-term plan with the launch of this European digital platform, CAC, leaving from Germany. We announced the acquisition this quarter of a small Ukrainian bank. We increased our position in Bank of BPM capital that now reaches 22.9%. And so revenues increased to $7 billion thanks to this activity, digitalization, and strong client capture. Operational efficiency is strong with favorable jobs and an improvement in cost-to-income ratio. Our risks are well controlled. We have cautious provisioning in the context of the conflicts in the Middle East. And all of this leads to strong profitability We're posting a high ROTE ratio at 13.7%, so these are very strong and solid results in an uncertain environment. I'm going to stop here. Thank you very much for your attention, and we can now open the floor to questions.

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 1 under touchtone telephone. To remove yourself from the question queue, please press star and 2. Please pick up the receiver when asking questions. Anyone who has a question may press star and 1 at this time. The first question is from Giulia Miotto, Morgan Stanley.