Credit Agricole Unsp/Adr

Thank you so much and good afternoon to everyone. So we can start with this meeting. And first of all, I would like to thank you for being present or connected for this meeting. It's notably a good pleasure for me to meet some of you after three years of remote organization for this kind of presentation. Well, in a few minutes, Jerome will sum up the key or the main figures, the main metrics for both for the fourth quarter and for the whole year 2022. Naturally, we shall try to answer to your questions. But at this step, let me introduce Olivier Gavalda in this room, one of the new deputy CEO with Jerome Grivet since he was appointed in current summer last year. Let me state a brief introducing speech to this presentation. I would like simply to come back first on the environment, the paradigm, We have to face and then on the situation of Crédit Agricole ESSAR, very briefly. For the environment, for the paradigm we are living in, I would like to tell you that our diagnosis did not change at all since we launched our medium-term plan in June in 2022. Always this very high level of capacity on the very short term, An opacity that is, you know, that's absolutely linked and due to the accumulation of many impacts of differential waves all around the world. First of them, the necessary normalization of the monetary policy, probably quicker than we thought in terms of increase for the rates. Then, of course, the war in Ukraine, the different turmoil about energy, both in terms of prices even in terms of availability and different geopolitical concerns you of course all know. But the good points, the right points, the positive points are first of all that rigs are always still mastered. Difficult to explain this point but my idea, my assumption is that for corporates probably, corporates succeed to adapt to this new paradigm More or less, for most of them, through pricing, probably. And for households, notably towards home loans, and notably for Crédit Agricole with France, a very important territory for us, the fact that households are protected by fixed income. Please do not underestimate this positive point for the economy and impacts of banks. So we've still mastered. Of course, accepting the direct consequences of the war between Ukraine and Russia. And the second point, I would like to repeat this point, and I would like you to be convinced this is not a theoretical point. The universal model of development of the group is neither damaged nor slowed down by this opacity. And I would like to be very concrete on this point. The fact is that we have on the very long term three ways, three axes to develop on a commercial and then financial point of view. Each of these axes are at the end of the day organic rules. The first one is our ability to enlarge range of offers linking or linked to the individual needs of customers and now to the collective needs of society. Our predecessors decided to launch insurance, then real estate solution. Now we are launching solutions for energy transition, for healthcare setups, and so on. The ability being a bank of the global relation to enlarge on the very long term new kind of businesses is for us a non-saturated axe on the very long term to develop. The second one is naturally linked to the first one, our level of equipment. When you see our equipment, they are increasing, but they are absolutely not saturated. You can see our different market shares, the strongest one on savings or lending, the smallest one on the very new businesses. So our ability to cross-sell, as many times you say that, and for us we simply enlarge the global approach of our customer, is very important and never saturated. And the third axis is the fact that we succeeded to create and to organize our business lines to serve these banks as legal entities with their own autonomy. And each of these legal entities today is a main consolidator of the market in this business. Of course, we can speak about asset management, asset servicing, insurance life activity, consumer finance activity, and so on. This proves that we have three axes. The range of offers, then the equipment, then the ability of business lines to develop partnerships on different countries, different customers. And this is why we always insist towards you to look at our commercial pace in terms of development. Of course, we can see and you can probably imagine many headwinds usually to face, and notably in 2023, these headwinds of course exist. But the main answer of Crédit Agricole Group to this kind of headwinds to face, to cope with, and probably to offset this kind of headwinds is the development. And look at the development of the Gradually High Call Group, the different commercial development. It is very high and it is accelerating on the very long term. Just look at the main figures of our development. This is simply or mainly a matter of structure, architecture of the group in terms of offers, in terms of global approach of customers, in terms of ability of business lines to develop with partners. So this is for the opacity on the short term. On the very long term, and this is, of course, a kind of singular discrepancy, I've already stated that it was very surprising to have this high level of opacity on the short term and to be so able to see the future, at least the necessary future for 2030 in terms of energy transition, in terms of health setups for facing aging population. in terms of agri or agro process that have to shift in terms of many things. Fortunately or unfortunately, the long term is very clear in terms of what we have to do today, on what we have to invest, on what we have to develop on a commercial point of view today. That means as soon as 2023 for the future. And yes, clearly, the matter of decarbonized energy Health Setups or Agri-Transition, just to take this example, are immediate huge new drivers for business and, of course, new revenues. This is for the vision we have, driving Crédit Agricole Group, about our paradigm in this kind of opacity, but the way to develop on the very long term is very clear, and this feeds and fuels our development as soon as the present and notably for the next 2023. Just very briefly a word about the situation of Crédit Agricole ESSA because of course, Jerome will be very concrete and very precise about this. Since I want to be very brief, let me try this exercise. If I had only one figure to give to our shoulders about our performance, Necessarily, I think that all together we could choose simply, at the end of the day, at the summit of the group, the profitability we succeed to reach above the equity that our shareholders give us. 12.6% in terms of return on tangible equity. Only one figure, this figure. Because this is the summit of all the activities, all the efficiencies, All the mastering of Crédit Agricole Group and you personally know this is top in terms of benchmark and I would like to highlight the fact that this is a regular performance for Crédit Agricole. I stop on this point and Jerome, I give you immediately the floor to be much more precise than I was.

Thank you, Philippe. Good afternoon, everyone. Happy to share also these Results Review. I'll try to make it brief in order to leave you time for your questions, of course. Let me start. I've forgotten to take the main tool. Let me start with this page on which actually you have all the main messages that we want to insist on when presenting those results. And actually, I could stick only to this page. Messages are here. In terms of net profit, this has been an excellent Q4 for Credit Agricole SA and actually the best Q4 ever with a record high level of profitability and a very sharp increase in revenues in all business lines. It's been also a very good year and let me just come back three quarters ago when we presented Q1 results. The net profit that we posted for Q1 was down 47% as compared to Q1 2021 because what happened during the first quarter was the start of this war in Ukraine and we wanted to book significant, prudent provisions in order to cover the risks incurred by us due to this event. So down 47%. At the end of the first half of the year, the net profit was down 16%. So the catch up has started indeed quite rapidly. At the end of the first nine months of the year, net profit was down 12%. And now, in terms of stated figures, it's down only 7%. So it means that for the rest of the year, we've been regularly catching up with this A very important level of provisions that we wanted to book in the first quarter of the year. In terms now of underlying figures, which is of course more readable and more usable in order to understand the underlying performance that we've produced, the net profit is up, slightly up for the full year and sharply up for the quarter. In terms of financial targets for the full year, it's the final year for the previous medium-term plan, so it's the occasion for us to come back on the targets that we had set for this previous medium-term plan. And, of course, we are there and above the target on all profitability items. It's the case for the net profit, 5 billion as a minimum, we are at 5.5. It's the case for the cost-income ratio. We wanted to be below 60. We are at 58.2. And it's the case for the return on tangible equity. Philippe mentioned it. We targeted to be above 11, and we are above 12.5%, at 12.6%. So it's a very, very solid set of achievements for this previous medium-term plan. Let me finish this page with two additional elements. The first one regards the dividend. We are going to propose to the General Assembly meeting to adopt a dividend of €1.05, as was the case last year, a combination of 85 cents regarding the, I would say, normal payout policy, plus the last 20 cents in line with what we had said regarding the 2019 skip dividend. And last point, it's very important to keep that in mind, we've continued to be agile last year, in order to generate new partnerships, new activities that are going to fuel our future growth going forward. In terms of main figures on the next page, you have the main figures here. Maybe one or two additional elements to complete what I have said on the previous page. We are posting very dynamic revenues, up 4.4%, and we post also a positive jaws between the evolution of the top line and the evolution of the cost line. Second element, the cost of risk is up as compared to last year, but we will dig a little bit into the composition of the cost of risk, and you'll see that most of the increase, actually more than All of the increase is due to this Russia-Ukraine conflict. And then in terms of solvency, for CASA, we now stand at 11.2%. So again, it's perfectly in line with our target of being at 11%. For the group globally, it's a very resilient level of profitability that we post. Above 8 billion euros for the full year on a stated basis and above 7.9 billion euros for the full year on an underlying basis. It's slightly down as compared to last year but very modestly actually and perfectly in line with the global business model that Philippe was referring to in his introduction. Last point on this page, the solvency of the group has further increased this quarter and is now at 17.6% for the CET1, which is of course one of the highest levels in the space of European banks. If I go now on this page, which you know perfectly because we've had many occasions to comment this chart, but it's again an occasion to illustrate how we are producing this constant growth. We've been attracting new customers this year. 1.9 million new customers for the full year in our retail banks in France, Italy, and Poland. So very dynamic increase of the customer base. We've been very present vis-a-vis those customers in lending to them because the production of new loans has increased by close to 6% year on year. We've continued to increase the equipment rate of these customers with the different Product and services that we manufacture within the group and we've enhanced permanently the scope of offers that we propose to those customers. Let me now zoom a little bit on the breakdown of the revenues in 2022. I think what is interesting on this page is first to see that we've been increasing the top line both on the quarter and on the full year. Second point, this increase has been the case for all business divisions. Asset gathering, large customers, specialized financial services and retail banking activities. Third point, it's been the case actually steadily since 2017 and probably a little bit before 2017 and this is this famous chart that we published on the right-hand side of the page. Every quarter since 2017, we've been able to post a level of revenues that was above the level posted the previous year, the same quarter. So it's a very, very proven capacity of growing the revenue base of the group that is illustrated by these charts. Coming now to the management of the cost base. Of course, the cost base has increased this year. has increased on the full year and on the quarter, but maybe one or two additional elements that you must have in mind when assessing the cost base. First point, in Q4, we've managed to post the positive shows globally for the group. Second point, for the full year, this has been also a positive show for the business lines alone. When it comes to the corporate center, and we'll have are probably occasions to discuss that. We have many technical elements, restatements, some of them being non-cash elements. And so it's more relevant to really assess the situation on the basis of the business lines. And this Joe's effect has been positive for the business lines globally for the full year. And then third point, when we analyze more precisely what is The origin of the increase of the cost base of the business lines, plus 380 million euros around. It's made of three main parts. The forex effect, which is absolutely unavoidable, which is linked to the fact that the euro has depreciated as compared to the dollar, especially. This represents an additional cost for us above 100 million euros. We've continued to invest in IT. and the development of new setups, 190 million euros of additional costs. And then of course, we've had to increase the salaries and exceptionally, we've made an effort to increase them in the course of the year, middle of 2022. And all in all, this represents an additional 130 million euros of additional costs, including a one-off which is a specific premium that is going to be paid to the employees beginning of 2023 but has been booked end of 2022 for close to 30 million euros. So this is leading to a situation where the gross operating income is up both on the quarter and on the full year. It's even more the case for the business lines only outside the corporate center, again, for the same reasons I already mentioned. And the cost income that we publish at 58.2% is far below our target, our ceiling, and is also far below the average of our peers in Europe. Going now to the cost of risk, and of course, it's better to analyze the cost of risk business line by business line, but nevertheless, If we start by assessing it globally, on CASA first, it's an increase as compared to 2021 plus 35%, but actually close to half of this cost of risk is linked only to the events in Ukraine. So it means that outside this event, we would have posted the cost of risk It's decreasing slightly compared to 2021. And it's exactly the same on the perimeter of the group globally, where we have indeed a slight increase, quarter on quarter, and a sharper increase, full year on full year. But definitely, the biggest part of this increase is linked to the consequences of the war in Ukraine. In addition to that, we've continued, both for CASA and for the group globally, to add up some provisions in the S1 and S2 buckets, i.e. provisions on sound assets. And this is what you see on the following page, because actually the proportion of non-performing loans in our books continues to be very low. 2.7% for Crédit Agricole SA, 1.7% for the regional banks and globally for the group 2.1%. So this explains why with the same amount globally of provisions for Casa 9.3 billion euros of provisions all in all in our balance sheet we've increased quite significantly since the outbreak of the Covid crisis we've increased The proportion of S1 and S2 provisions within this amount, which remains globally more or less stable. When it comes to the coverage ratio, it apparently decreases a little bit, but it's completely explained by one specific file that I will not name that has been transferred from S2 to S3 in the fourth quarter. with an average level of provision which is below the average of the S3 provisions for reasons that are perfectly in line with this specific file. And this is leading to the situation where again the coverage ratios both for the group and for CASA are amongst the highest in the European space and they apply to a portfolio which continues to be very diversified and again very sound. This is leading to the net income posted by CASA, both for the quarter and for the full year. On an underlying basis, it's up 6.7% on the quarter and 1.3% on the full year, up on the basis of a reference in 2021 that was already very high, and that was already a record year. So if we assess this performance On the basis of 2020, you see that the increase is, of course, much sharper, plus 57% on the quarter and plus 42% on the full year. And last point, on the full year, what you can see is that all business lines have posted an increase in their bottom line. Let me go now to the solvency, starting with CASA. actually the, I would say, normal course of business recurring course of activity would have led the CET1 ratio to the level of 11.4%. And so we've taken the decision on the basis of this figure to top up the normal dividend of 85 cents with this additional 20 cents that we wanted to repay to our shareholders with regards to the 2019 Thank you very much. of additional solvency. Last point, MNA, i.e., the deconsolidation of Crédit du Maroc generated an improvement of 12 bps of our solvency. The OCI evolution of the insurance activities on this quarter were quite actually stable, so this is leading to a hit of only, let's say, 2 bps. And then last point, this dividend add-on represents an additional 20 bps of solvency consumption. So this is why we went from 11% to 11.2% over the quarter. For the full year, we were at 11.9% beginning of the year. We end up the year at 11.2%, so it's a decrease of 70 bps. Out of which 100 BIPs in connection with market effects. And so it means that outside those market effects, we will have posted an improvement of the CET1 ratio. Last point, of course, we started the year with an unrealized capital gain within our solvency that was due to amortize progressively, we end up the year with a negative element in our solvency, which is going to amortize over time. So it means that going forward, all things being equal, we have some further improvement of the solvency. At the level of the group, of course, a very high level of solvency with the same elements playing over the quarter for the group, retained earnings plus RWA evolution of the business lines, plus M&A, plus the dividend top-up for Casa, plus also we take into account the decision of the majority shareholder to buy €1 billion of Casa shares in the course of 2023. As the decision has been taken and announced, it's already impacted in our solvency. Despite all these elements, the solvency improves. from 17.2% to 17.6% with the highest distance to SREP amongst the European banks. And for CASA, 330 bps of distance to SREP. So again, a very comfortable level. Profitability, we've already mentioned the figure of 12.6% for the return on tangible equity. What is interesting to note in addition to that is the fact that This overperformance as compared to the space of European banks is a regular feature for Casa. It's been now at least six years in a row that we publish a return on tangible equity that is at least two and a half or three percentage points above the average of European banks. And on the right hand side of the page you have just as a reminder the sequence of dividends that we've been paying on the basis of Casa's results. These elements have already been mentioned. We are, of course, perfectly on line with the target that we had set for 2022, but we are also en route and well on our road to 2025 targets. During this year, it's not only been a very efficient We've taken three examples of those initiatives that we've taken. Of course, the restructuring of the partnership that we had with FCA Bank, which is now transformed into a very Very promising partnership with Stellantis for the development of car leasing over Europe. Second point, the negotiation and the signature of an agreement with RBC in order for CASEIS to purchase their European activities, which is going to be completed middle of this year. And last point, the signature end of December of an agreement with Banco BPM through which Crédit Agricole Assurance is going to purchase 65% of their non-life activities in order to develop in the long run the distribution of non-life and protection insurance products in the network of Banco BPM. So all these initiatives are going to represent at least 150 million euros of net profit, additional net profit in three years' time. We've continued to develop our model, and I'm not going to describe all the examples that are on this page, but we've continued to develop alongside these three main elements which are key to our model. Utility for all customers, i.e. the development of offers that can fit the needs either of the wealthiest customers or the most fragile customers. contribution to the development of all the territories in which we are implemented, and of course enhancing our support to the energy transition efforts of all our customers. I'm going to zoom now a little bit in what has been the main features of the different activities of the business lines of CASA over 2022, starting with the asset gathering and insurance activities. globally for the business division it's been a very positive year with positive inflows over the year plus a net profit of the division that is significantly up for the quarter and also up for the full year inside this business division insurance activities it's been all in all a good year commercially with net inflows in the life insurance business and again some market share gains for the non-life activities both PNCs and protection activities and in terms of financials a very very good year with a sharp increase in the net profit on the quarter but also on the full year. Of course the insurance activities are going to encounter a very profound modification of the way they are going to report their financial figures starting this year with IFRS 17 and we have in this pack of document a few slides that illustrate what we can say from now on about this but I think this is going to be a recurring element of our discussions going forward over 2023. Asset management, you perfectly know Amundi's results, they've been published yesterday and I think that they've been well received by the market. The business has proven resilient over 2022. It's been a difficult year market-wise, but nevertheless Amundi managed to continue to attract new inflows and Amundi continued to be able to adapt to this new environment, adapting its cost base and improving its net profit on Q4 as compared to Q3. All in all, for the full year, the net profit is only very slightly down. The cost income ratio continues to stand at a very attractive level of around 55%. Large customers, it's been a very, very active quarter for CACIB with a record high level of revenues, both in capital market activities and in financing activities, especially in ITB, transaction banking. And Cassie posted a very positive Joe's effect, both on the quarter and on the full year, and ended the year with a cost of risk which was almost zero, with a combination of Loan Loss Reserves Reversal, and some additional provisions, of course, but this is the normal course of business. So at the end of the day, the cost of risk for the full year remains quite benign for CASIB, despite the Russian environment, Russian-Ukraine environment. Asset servicing, this is one of the businesses in which we benefit immediately from the increase in interest rates. At CASEIS, The assets under custody or under administration reduced a little bit in value because of market movements but nevertheless as the treasury is more and more remunerated globally revenues are significantly up and the profit of CASEIS is very significantly up over the quarter and the full year. Specialized Financial Services Thank you very much. The net profit is up for CACF on the quarter and around flat for the full year, which is a good performance. For the leasing and factoring activity, also a very high level of revenues for the quarter and the full year, and a net profit which is significantly up. Going now to French retail activities with LCL. LCL has had a very buoyant activity for the full year and for the quarter, with a high level of new customers captured, close to 350,000 new customers for the full year, with a level of activity that is characterized by a significant increase in the loans outstanding, plus also an increase in customer assets despite the market effect on the off-balance sheet assets. Of course, we start to feel a little bit the pain of the shrinking of the net interest income, but despite that, we've managed to post an increase in the top line globally for the full year, a cost base which continues to be very well under control, cost of risk which continues to be quite benign, and all in all, for the full year, a net profit which is up 13%. In Italy, it's a different business model. The activity has been very dynamic, even in the fourth quarter of the year. But what is really important to note is that the top line increases very sharply in this fourth quarter. It's plus 14.5%. So this is leading to a very significant increase in the gross operating income. Cost of risk remains very well under control globally, plus 11% or 10% for the quarter and the full year at a level which is far below the average that we have in mind across the cycle. And all in all, a very significant improvement of the profitability, taking also advantage, of course, of the completion of the integration of Creval in our setup. On this page, you have a presentation of all our activities regarding Italy. Again, this continues to present a very good 15% of the net profit of CASA, so it continues to be a very active, important, and developing The rest of international banking activities we have of course to distinguish a little bit because this quarter has been the quarter of the deconsolidation of Crédit du Maroc, so it's no longer a business issue, a business subject. When it comes to Ukraine, it's a Good level of activity considering actually the situation, i.e. we post a gross operating income that is progressing significantly, but very prudently we use all this gross operating income to complement the loan loss reserves that we book locally. So this is leading to a situation where Ukraine is producing a result around zero. And then when it comes to Poland and Egypt, two markets where the activity is good, where the rate curve is very steep, and so this is leading to a sharp increase in revenues and low cost of risk. Corporate Center, this quarter we have on the structural part of the Corporate Center we have a challenging base effect because last year in the fourth quarter the private equity investments that are booked in the Corporate Center posted a very high level of revenues. We are now posting a more normal level of revenues, but nevertheless it's nothing worrying regarding that. In the volatile part of the corporate center, there is this elimination of intra-group securities between Casa, Amundi, and Predica that generates this quarter a negative element of revenues. But this is going to be the last quarter when we have to report about that, because thanks to IFRS 17, This element is coming to an end, so it's not going any longer to impact our P&L. Going now to the regional banks of Crédit Agricole outside the perimeter of Casa, but nevertheless very important for the group, definitely. And again, it's very satisfying to see that the activity was good, was quite buoyant, development of the customer base. The cost of risk at the level of the regional banks appears to be sharply up as compared to last year but definitely they've continued to book very high level of S1 and S2 provisions You know their very prudent approach regarding risk, so nothing worrying regarding this evolution in the cost of risk, which continues to be all in all low compared to any kind of standards. Let me go now very quickly on liquidity issues, simply to mention that we've been repaying a significant amount of TLTRO end of last year, in December, around 70 billion euros. Despite that, we continue to have a high LCR level, above 160%. We continue to have a very important, very ample excess of stable resources as compared to stable assets. And we continue to have a very high level of liquidity reserves, which are, excuse me, which are of different categories as explained on this chart. Last point, market funding. Last year's program has been increased in the course of the year due to this quite sharp modification in the monetary policies over the world. So we've decided to be quite active in raising market funding. So we've raised last year in excess of 21 billion euros of market funding at the level of Casa and close to 50 billion euros at the level of the Group globally. And we've started very actively this new year by issuing at the level of Casa close to 6 billion euros of new debt in the single month of January. So I think I will stop here. You have in the rest of the document a very detailed presentation about IFRS 17. Maybe just I can summarize what is important to note regarding IFRS 17 with two or three ideas. The first idea is that day one, the transition to IFRS 17 is going to create an additional 15 BIPs of solvency at the level of CASA. Second point, Going forward, we do not foresee any significant deviation in our earnings trajectory in the insurance business as compared to what it would have been under IFRS 4. Third point, as you already know it, we are going to have a shrinkage, I would say, of both revenues and costs at the level of our insurance activities because part of the costs of the insurance activities are going to be directly impacted on the top line. So this is going to reduce significantly the cost-income ratio at Crédit Agricole Assurance down to probably around 15%, and it's going also to improve, all things being equal, the cost-income ratio at Casa by around one percentage point. But of course, we will have to come back on these transformations over the course of next year when we present the different quarter starting next May. I think I'll stop here and we'll take with Philippe and Olivier, of course, your questions.

My proposal is to start with the room, so if you can ask your first question.