Credit Agricole S A : Transcript des résultats du 1er trimestre 2023

Crédit Agricole Q1

2023 Results

Wednesday, 10th May 2023

Crédit Agricole Q1 2023 Results

Wednesday, 10th May 2023

Introduction

Jérôme Grivet

Deputy CEO, Crédit Agricole

Welcome

Good afternoon, everyone. It is a pleasure for me to host this conference with those good results to present. I will try to make the presentation quite short and swift in order to leave time for you to ask your questions.

Of course, as a reminder, you perfectly know that this quarter is the first quarter of implementation of IFRS 17. So to be very clear, all comparisons that we are going to do quarter Q1 on Q1 are on a like-for-like basis, i.e., all figures for Q1 2022 have been restated under IFRS 17, obviously. And for the rest of the year, we are going progressively to publish the coming quarters of 2022 under IFRS 17.

Very strong results of the universal banking model

If I start directly with page four. Just a few simple messages on this page. The first message is that we are publishing very good, excellent results all in all with a first quarter, which is a record for Crédit Agricole SA. The second element is that we benefit clearly this quarter from the diversification of our revenue sources and our businesses. The third element, which is also important to bear in mind, is that we have continued to keep a very strong discipline on the cost base despite the inflation of our environment.

And the last point, of course, is the fact that besides, I would say, the management of the day- to-day business, we have continued to deal with structural operations in order to further enhance our revenue generation capacity going forward. And we will have the opportunity to discuss a little bit about these operations.

CASA key figures pro forma IFRS 17

On page five, you have the main figures for CASA. And what you can see is that the stated net income is above €1.2 billion. It is doubling actually as compared to Q1 2022, restated again under IFRS 17.

Revenues are sharply up, plus 10.5% quarter Q1 on Q1, despite the fact that last year we had roughly €100 million of TLTRO benefits, which we no longer have this quarter. Cost base is up only 2.5%. This benefits obviously from the reduction in our contribution to the Single Resolution Fund, but also we have a very moderate evolution of the operational cost basis.

The cost of risk is sharply down, minus 31%. Of course, in Q1 2022, we had a significant one- off provision regarding the Russian invasion of Ukraine, but nevertheless the cost of risk continues to be quite benign. And the underlying net income, lastly, is also a little bit above €1.2 billion, and it is up 61%.

On the right-hand side of this page, you can see the cost/income ratio, excluding the contribution to the Single Resolution Fund 54%. Solvency 11.6% for the CET1 ratio at CASA, benefiting from the transition to IFRS 17. And the return on tangible equity is around 14.5%, which is also a very high level.

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Crédit Agricole Q1 2023 Results

Wednesday, 10th May 2023

CAG key figures pro forma IFRS 17

If I go now on page six for the figures regarding Crédit Agricole Group globally. Net profit is also up, plus 23.6% Q1 on Q1 at around €1.7 billion. Revenues are up around 2% on an underlying basis. Cost base is up only 0.9%, benefiting also from a reduction in the contribution to the Single Resolution Fund. So the gross operating income is slightly up, plus 3.6%. Cost of risk down for the same reason, minus 21%. And underlying net profit, plus 12.5%, close to €1.7 billion.

The cost/income ratio for the Group globally is at 59% and the CET1 ratio at 17.6%, stable as compared to end of '22.

Activity

Excellent business momentum

On page eight, some elements regarding the activity and the commercial momentum that we have had this quarter, which was very good.

Just a few highlights. The first element customer capture is dynamic, +555,000 new customers in our different retail banks in France and the rest of Europe. We continue to increase the equipment rate of our customer base with internal products, especially P&C insurance policies.

And in terms of the production of new loans, it has been dynamic for consumer credit, dynamic in the retail banks for professional and SME loans, less dynamic for home loans. But nevertheless, the production of new loans at LCL, the regional banks of Crédit Agricole and Crédit Agricole Italia, remained above the evolution globally on their market.

Activity

2025 ambitions: new structural operations

On page nine, a few elements on the new structural operations that were either concluded or closed this quarter. The first operation, we have been discussing a lot about it since now probably one year, but it is now completed and it is now live in the second quarter. It is the reshuffling of the agreements that we have with Stellantis and the new joint venture that we built between Crédit Agricole Consumer Finance and Stellantis, Leasys, which is going to become one of the leaders in long-term car rental in Europe. And it has been completed by the acquisition of some of the activities coming from ALD and LeasePlan in Portugal and Luxembourg. At the same time, we are taking over 100% of the capital of Crédit Agricole Auto Bank, which used to be called FCA Bank and Drivalia. And this entity is going to be complemented also by 70,000 new cars coming also from acquisitions coming from ALD and LeasePlan in Ireland, Norway and the Czech Republic and Finland.

Second point is in the payments space. We have concluded recently an agreement with Worldline in order to create a major player in the payment services business in France. We are actually combining the forces of the French leader in acquisition, which is Crédit Agricole, and the French leader in acceptance, which is Worldline. And the goal is to grow our business in merchant payment services in France, twice as fast as the market.

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Crédit Agricole Q1 2023 Results

Wednesday, 10th May 2023

Third point, in the real estate business, Crédit Agricole Immobilier has acquired Sudeco, which is a property management player, and this is enhancing the capacities of Crédit Agricole Immobilier in proposing its property management services to different categories of customers.

Revenues

Revenues +10.4%, +12.6% excluding TLTRO

If we zoom on page 10 on the revenue generation that we have had this quarter, what you can see is that whatever the way you see, you look at the revenues, the increase is very sharp.

On a stated basis, it is plus 9.5%. On an underlying basis, it is plus 10.5%. And lastly, if we restate those figures from the fact that we no longer have the TLTRO benefit, the increase is even sharper, plus 12.5%.

Second interesting point is that this revenue generation, strong revenue generation can be acknowledged in three of our four main business divisions. It is true in the asset gathering division, where the slight decrease in revenues at Amundi, because of a less significant level of performance fees, is more than compensated by the good level of revenues in the insurance activities.

It is true also within the large customer business division, where both CACIB and CACEIS performed very well. And it is true also in the Retail Banking business division, where the pressure on net interest income at LCL is more than compensated by the dynamics that we see in Italia, in Poland and in Egypt.

For the Specialised Financial Services division, we have more or less a stable level of revenues, which is the combination of a good development of the business with, again, a significant increase in the production of new loans at CACF, but nevertheless, production margins that continues to be a little bit under pressure even though they've started to improve this quarter as compared to Q4 last year.

So all in all, the increase in the top line is very strong. And this is, I would say, a feature that we continue to post since at least six years in a row.

Expenses

Positive jaws +3.5 pp, +5.7 pp excluding TLTRO effect

If we look now on page 11 at the cost base, what we can see is that we have been able to post a positive jaws effect, whatever, again, the way you look at it, be it on an underlying basis or on a stated basis, because the operational cost base is increasing by 6.2% to 6.9%, depending on which figure we look at.

In addition to that, we can see that in the Asset Gathering Business division, in SFS and in retail banking activities, the cost base is more or less flattish. And it is not only in the Large Customer Business division, where the revenue increase has been the most dynamic that we see a significant increase in the cost base.

And within this increase in the cost base, actually, more than half of it is a provision for future and potential, I would say, variable compensation depending, of course, on the performance of the rest of the year. So nevertheless, a very positive jaws effect globally and positive jaws effect also in most of our business lines.

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Crédit Agricole Q1 2023 Results

Wednesday, 10th May 2023

Operating efficiency

Low underlying cost/income ratio at 54.1%

Going now on page 12, we can see that we post, as I said, significant decrease in the cost/income ratio, which is now at 54.1%. We had said when we published the medium-term plan back in June last year, that thanks to IFRS 17, we will reduce our cost/income target down to 59%. Actually, the mechanical effect of the transition to IFRS 17 is higher than what we had in mind. And so we restate again our target, and now the medium-term plan target for the cost/income ratio post IFRS 17 is now at 58%. So we can see that we are already far below this target.

Risks

Normalisation of the cost of proven risk, Q1-2022 base effect related to the war in Ukraine

On page 13, some elements on the cost of risk. The cost of risk, as I have said, is significantly down as compared to Q1 2022, minus 31% from the perimeter of CASA and minus 21% for the Group globally.

Second point, which is important to note this quarter is that, of course, within this cost of risk, what comes from the coverage of incurred risks is increasing. But nevertheless, we have continued to book €75 million of S1 and S2 provisions this quarter.

And maybe the last point is the fact that this quarter, the cost of incurred risk at €284 million for CASA and at €464 million for the Group globally is below the average that we had back in 2019, i.e., before the COVID crisis.

And we can see that the cost of risk in terms of bps as compared to outstandings at 28 or 30 bps for CASA and 23 or 19 for the Group, depending if we look at it on the basis of four rolling quarters or on an annualisation of Q1 this year. So these levels are below the assumptions that we have made for the medium-term plan as across the cycle, I would say, assumptions. So cost of risk globally, that continues to be moderate.

Net income Group share

Excellent quarter. Strong increase in gross operating income thanks to dynamic activity, lower cost of risk

In terms of net profit, the result of this sharp increase in the revenues, the good control of the cost base and the decrease in the cost of risk, this is leading to a sharp increase in the net profit, plus 61% on an underlying basis and a multiplication by more than two on a stated basis for CASA. This comes from almost, again, every business line.

Asset gathering, large customers and retail banking all contribute significantly to this increase. And what is also interesting is that this increase is a combination of a significant improvement of the gross operating income. Of course, we have this decrease in the contribution to the Single Resolution Fund. We have also a significant decrease in the cost of risk. Of course, corporate tax is up and the bits and pieces are slightly less profitable, €56 million than in Q1 2022. All in all, an increase in the net profit of €655 million.

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