Credit Agricole Sa

Good morning, this is the conference operator. Welcome and thank you for joining the Credit Agricole Second Quarter and First Half 2026 Results Conference Call. As a reminder, all participants are in listen-only mode and 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 0 on their telephone. At this time, I would like to turn the conference over to Monsieur Olivier Gavalda, Chief Executive Officer of Credit Agricole. Please go ahead, sir.

Thank you. Good morning, everyone. It's a pleasure for me to share with you the strong results published this morning by Credit Agricole SA. Clotilde will present them extensively in a few minutes, but before, let me share with you a few key highlights, both on financials and on recent important developments, illustrating the fact that Credit Agricole Group is on the move. Let me start with the results we released this morning. Credit Agricole SA is posting high results of 2.1 billion euros this quarter, up plus 1.4% on pro forma basis. This thanks to two elements. First of all, a very strong growth in revenues, plus 7.7% quarter over quarter, resulting from the dynamic activity observed in all business lines. Revenues reached their highest level this quarter at 7.4 billion euros. Secondly, high profitability as we are posting for H1-26, a cost-to-income ratio below 55%, precisely 54.7%, and a return on tangible equity above 50%. 14% up 14.3%. Based on these very solid results in H-126, we will pay our first interim dividend amounting to 57 cents per share on the 15th of October. This corresponds to 50% of our H1 distribution table results, consistently with our distribution policy, as you know. Finally, CASE-CASA 31 ratio is just about stable at 11.3%, so still above the 11% target for Crédit Agricole SA, even considering the impact on the recently increased position in Banco BPM Capital up to 29.3%. Indeed, we continue to develop strategically in Europe, particularly we are developing in Italy. Italy, as you know, is our second domestic market and a strategic priority for the Group. Over the years, we have significantly expanded our presence in Italy and we remain committed to further investing and growing our franchise. Notably, since the beginning of the year, we have continued to strengthen our ties with Banco BPM. We increased our stake from Thank you very much. Having that said, as you know, there has been considerable market speculation regarding further consolidation in the Italian banking sector. Our position remains unchanged. Any transaction involving Banco BPM should create long-term value for Crédit Agricole Sa and the other Banco BPM shareholders. With our 29.3% position, we are now by far the first shareholders in Banco BPM. We will thus have a say on any transaction involving the company alongside the other Banco BPM shareholders. and we will analyze any solid project with respect to its strategic interest, execution risk and capacity to create value over the long term for all of Banco BPM's shareholders. As always, there are many scenarios on the table, but at the time being, we are not aware of any concrete project regarding MPS and Banco BPM, and we have not been approached by other parties regarding any potential involvement in such a project. At this stage, it is very difficult to see how a combination between MPS, Montepasqui, and Banco BPM can be value-accurate for Banco BPM shareholders. More generally, we are rolling out our strategic plan. We continue to develop in Germany. Last quarter, we announced the launch of our European digital platform Credit Agricole Savings. The initial phase in a success as we are onboarding 200 new clients per day already. This should accelerate with the upcoming launch of the app and be complemented soon by the launch of Credit Agricole Deutschland. We continue to develop in France where our activity is very strong and where we have also started and integrated the MILES group since the end of April with LCL. And we continue to develop all over Europe in Spain with new partnerships. and in all the other geographies where we are present. We are innovating. We have launched a stablecoin in Euro, Gaza Euro XT. We have led new initiatives related to tokenized finance and we are working on other on-chain settlement solutions for institutional clients and for big corporates. and we are also accelerating our AI transformation. Indeed, as you know, the Data Econ Group will allocate 500 million euros of its IT investment plan over three years to accelerate the industrial deployment of AI across the Group. We are thus creating a dedicated AI and data company and investing 150 million in capital in it. This company will operate industrially the AI technology basis for all entities and create a shared data platform at the level of the group. Agnostic infrastructures and private cloud solutions are essential for strategic autonomy and more importantly for the long-term management of our costs and the control of our industrial choices. We will also deploy an industrial agentic platform designed to enhance productivity and enrich customer interactions. Driven by principles of performance, European technological sovereignty and ethical AI, this initiative aims to make AI a collective lever for transformation and efficiency at the service of the entire group. I will stop here now and leave the floor to Clotilde. Thank you very much for your attention and see you soon after the holidays. Bye-bye.

Thank you, Olivier. So I'm going to pick up on the following slide on the key figures, and I just wanted to take a step back from the listed entity to look at Groups PD Agricole, which posted a very strong performance this quarter, with a strong increase in net income by 7.8% Q2 over Q2, and 22.4% excluding the Amundi U.S. base effect. You know that we're of course looking at figures pro forma of Banco BPM, i.e. considering that Banco BPM was at 20.1% equity accounted in the Q2 of 2025, and this 22.4% excludes the around roughly €300 million impact of the Amundi deconsolidation of last year. And so this strong performance is driven by revenues. which grew 12.9% to reach the record level of 10.9 billion euros this quarter. And this strong increase in revenues results from both scopes. CASA's activities and revenues, of course, I will come back to that. But what we'll see this quarter is also the reiterated performance of the regional bank's revenues that increased by 12.9% thanks again this quarter to a spectacular upturn in net interest income plus 38% this quarter. Growth operating income grew by 25.8% Q2 over Q2, and the cost-to-income ratio is well below 60% at 58.3%. We have very favorable jobs of more than 8 percentage points this quarter. The cost of risk is stable at 30 basis points and outstandings, and of course we maintain a very strong position in terms of solvency with a CET1 ratio of 17.2%. and very strong liquidity. Now, if I come back to CASA, where we have, thanks to a strong growth in revenues and positive jobs, an increase in gross operating income by 11.4% this quarter. So this strong performance in revenues was driven by strong activity in all of the business lines. And on the next slide, you see that activity was dynamic everywhere because this quarter we have Strong customer capture, 580,000 new customers in the Q2 in retail banking. That is close to 1.2 million new customers since the beginning of the year. This customer capture again benefited from increased digital acquisition in France and in Italy. And if we dig down a little bit by business line, in retail banking in France, credit production is strong. Home loans are growing by 10%, corporate by 8%. In Italy, credit production is dynamic, 8.5%, thanks to the recovery in home loan production this quarter in a very competitive market, and we also have dynamic production in Poland. The loans outstanding in the on-balance sheet assets continue to grow globally, and the growth in off-balance sheet assets was dynamic in France and in Italy. And this was therefore reflected in the asset gathering division, which also posted a very good quarter, and Anne-Catherine Ropers. Amundi, as you know, posted very strong net inflows and record AUMs. The medium to long-term inflows are strong, thanks both to ETFs and to active management, and activity is dynamic in third-party distribution and through the insurers of our partners. And finally, in wealth management, AUMs are increasing strongly with positive net inflows. If I turn to CAPFM, the production increased to 4%. 12.8 billion, thanks both to mobility and to personal finance. Now, of course, the used cars remarketing activity is impacted by an unfavorable automobile market that weighs on the sale of these used cars, but it's the case for all of the players on the market. And this bears witness to the strength of our diversified business model. You can see that in the large customers division, the CIB posted a record Q2. Thanks to the excellent performance in investment banking, in particular in structured equity and to ECM, we have FIC, which is stable at a high level. And finally, Casais had a high level of settlement and delivery volumes that was boosted also by market volatility in 2026. And we continue to increase our outstandings of AUMs and AUCs. So a buoyant activity across the line, which reflects on slide 9 in the growth in revenues, which was very high this quarter at 7.7% driven by all the divisions. So I talked about the high, the strong activity in asset gathering. So these revenues are growing thanks to higher management and technology fields for Amundi and to strong commissions in wealth management. The insurance revenues grew by 9.1%, supported by the performance of all of the business lines and, of course, by a favorable market effect, particularly in savings and retirement. In the large customers, I talked about the record Q2, in particular with investment banking, which had a growth of above 63%, excluding FX effect, and asset servicing, more than 8% growth. In SFS, I was talking about the fact that mobility was impacted by a weaker automobile market. This led, in terms of revenues, to a quarter to lower results on the used cars that Cadillac, Ricor, Autobank, Vivalia. But these effects were compensated by the good performance in personal finance revenues that was supported by positive price effects. And then in retail banking, I talked about strong volume growth, but as you can see, we have, in the same way as we had that with the regional banks, A very strong upturn in net interest income in France, 17% growth for LCL, so volume and price effects. And we also have an increase in Italy of net interest income by 2% thanks to an efficient management of the cost of resources and of macro hedging. And of course, the fees increased in all of the geographies in France and in Italy. So you see all of these green bars for the businesses. All of the businesses are contributing to the growth and revenues. And finally, in the corporate center, we integrate the contribution of Banco BPM for €111 million. In fact, at the end of the second quarter in our accounts, we have a 24.9% share of Banco BPM, even though, as you'll see just afterwards, The CET1 is impacted in full by our participation that was brought to 29.3% in July. And so the contribution of Banco BPM to the corporate center revenues should increase in the following quarters. And so based upon the current results of Banco BPM, it could be something around $150 million per quarter onward. Now, if I move now to expenses, we have significantly positive jobs this quarter, plus 3.1 percentage points. And we have a limited increase in expenses in all of the businesses. So, as you can see on the right, we have some scope effects that are summarized on slide 34, including Milleis in insurance, Abanca in Italy, and we have integration costs for Industrielles. But besides this, It's mostly the variable compensation increase, which is 75 million, linked to the strong performance of Amundi and Kassib that explains most of the increase in asset gathering in large customers' divisions. We continue to invest in our development, in particular in SFS and in the retail banking divisions. In SFS, as you know, we're supporting the strategic launching of CA Savings and CA Deutschland, with costs that represent Over the first half year, around 10 million. I had talked to you about 50 million, 5 euros, expected in 2026. We're also investing in the transformation of LCL, with 33 million in the first half of the year out of the 95 expected over 2026. And even as we invest, we are improving operational efficiency because our cost-to-income ratio is at 54.7%, minus 1.2 percentage points H1 over H1, thanks of course to our decentralized cost steering model, but also to the integration of recent acquisitions. I'm thinking in particular of Cassis. We're fully benefiting from the synergies generated by the integration of RBC Europe, which are going to generate more than 100 million additional net income from 2026, of which three quarters are linked to cost synergies. and just by the way, the DeGroove-PeterKam integration is progressing also with about 45% of synergies realized. So we're well on track to reach our additional 150 to 200 million net income target linked to this operation in 2028. Now moving to cost of risk. The cost of risk decreased Q2 on Q1 and was roughly stable from Q2 to Q2. and this evolution was mainly driven by an increase in Stage 3 provisions. A share of this increase, 128 million, is a technical transfer from Stage 1 to Stage 3 of exposures that are currently being disposed of in CAFIB. And excluding this, incurred risk is at 571 million and we have the increased Q2 over Q1 which is explained About 60 million in CAPSM by the increased risk on personal finance in France, due of course to the economic environment. We're monitoring this closely, as well as some adverse impacts of model revisions. And in CIB, roughly 100 million by additional bucket transfers from the Stage 1 and Stage 2 to the Stage 3 on a few tickets. So these transfers are not a surprise. These exposures are closely monitored. and they, of course, have an impact on the Stage 1 and Stage 2 cost of risk which presents a net reversal. But as you see, we have a very prudent provisioning and that's why you see, by the way, this net reversal in the Q2. And so, in the end, there's no surge in loan loss provisions. The annualized cost of risk on outstandings are decreasing since the Q4 2025. The credit quality indicators are very good. The non-performing loans ratio remains very low. and the coverage ratios are very high and this is going to allow us to absorb any surge in incurred risk. As you can see, our provisioning is as always very prudent and we have among the best coverage ratios in Europe. Now, with that said, of course, we remain cautious and we continue to monitor closely the corporate customers in retail banking, real estate, construction, distribution, automobile, generally SMEs, But as you see, by the way, on this slide, moving forward, in French retail banking in particular, the cost of risk remains under control. In this slide, page 12, you see that we have this additional stage 3 cost of risk of CAPFM, but everything remains very, very controlled. And in the CID, as you can see, there's these migrations, but we have very low cost of risk with investment-grade customers and the diversified and balanced assets. and just for Crédit Agricole d'Italia, the cost of risk is decreasing and credit quality indicators have been improving since the fourth quarter of 2025. Now moving on to results, net income. All in all, the net income is high and it's increasing by 1.4% if we exclude the base effect linked to the capital game realized last year with the deconsolidation of Amundi US for $304 million in the Q2 of last year. So I already mentioned the very strong increase in revenues, the improved operational efficiency, the controlled cost of risk. Let me just take you a few minutes about the fact that our net income is impacted by the slight decrease in equity-accounted entities. We have various opposite effects. We have a decreased contribution from Levis, minus $33 million, this quarter due to lower margins on used cars. I talked about it. This is really a market effect. a pro forma issue on Banco BPM which is very limited and this is partially offset by a positive base effect in Calais and by positive effects for Amundi where we have the contribution of ICG for plus 12 and victory capital for today 28. So we have pluses and minuses and so the evolution of equity accounted entities is very limited. And of course we have a higher income tax Thank you very much. Activity with Song, Net Interest Income High, JAWS Positive, Cost of Risk Stable. And so this is really the strength of our diversified universal banking model. This allows us, following slide, to generate organic capital. And so as you can see, the capital remains very strong this quarter for Casa with a CET1 ratio of 11.3%. even as we integrate significant M&A activity. So first, if we look at organic capital generation, the 31 BIPs, this includes an active management of the balance sheet with a new SRT, significant risk transfer this quarter in CIB. And this brings the total of RWA released thanks to these optimization measures to 3.8 billion euros this first half year. Of course, we want to intensify securitizations in the medium-term plan, but we're always making sure that the cost of release is accretive. This allows us to provision the dividend that Olivier was talking about of 57 euros per share, which I recall will be paid on the 15th of October. We have an M&A, in fact, which is quite strong, with 33 bps related to the increase in our stake in Banco BPM to 29.3%. and Four Beats for the integration of Mideis. We have a methodological impact positive for 10 basis points. This includes bits and pieces, but as a reminder, it comes after a couple of negative impacts in the past, so all in all, we don't have that strong methodological impact over the last three quarters. And finally, OCI and other impacts plus 12 basis points, notably thanks to market recovery this quarter. and on the right you see the RWAs are moderately increasing, 2.2 billion over the quarter, with organic growth almost entirely offset by positive methodological effects and you see the fact that we have this quite stable RWAs in CID. Moving to the group Crédit Agricole, because as you know, our objective is not to build up capital at CASA level. So when we assess the capital strength, the relevant figure is group Crédit Agricole to each one ratio, which is above 17%. Despite, again, the strong M&A activity, we have the same factors that apply, but as you know, the M&A is lower for group Crédit Agricole because we have not gone beyond the threshold for the significant financial stake. for Group Crédit Agricole, and we have an additional positive methodological effect in the regional banks. This brings the total to 28 BIPs. The TILAC and the REL ratios are very comfortable, in particular because we have front-loaded our medium to long-term refinancing plan, which is today at close to a 90% refinancing plan for CAZAT, so very prudently managed. and as you see on the next slide, we have a very comfortable liquidity position with very high levels of liquidity reserves at $475 billion. The LCR and NSFR ratios are excellent. Customer deposits are stable and are diversified, granular, so everything is fine on that front. And so moving to the next slide, let me just conclude by saying that we're posting strong and growing results thanks to dynamic activity in all business lines and in particular thanks to a record performance in the asset gathering division and to dynamic loan production and net interest income in France. This allows us to reach a record level of revenues of 7.4 billion euros which bears witness to the strength of our universal model and diversified business mix. As we grow, operational efficiency is controlled with a steady cost of risk, positive jobs, declining cost to income ratio even as we invest. We're investing in AI, as Olivier was saying, with a pooled industrial AI platform, in stable coins, in the transformation of our businesses in France and in Europe. We integrated Millet's this quarter. We signed a partnership with Kahamar. We're rolling out our savings platform in Germany, and we have increased our participation in Banco BPM to 29.3%. And all in all, profitability is very high, with a return on tangible equity of 14.3%, and this allows us to maintain strong capital levels and to announce the payment of an interim dividend of 57 cents per share in cash on the 15th of October. So I'm going to stop here. Thank you for your attention just before the summer break and we can now open the floor to questions.