Release Date: August 01, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Credit Agricole SA (CRARF, Financial) reported a net profit of EUR 3.7 billion for the first half of 2024, up 14% year-over-year.
- The company achieved a return on tangible equity of 15.5%, significantly above its medium-term target of 12%.
- The CET1 ratio remains strong at 11.6%, well above the target of 11%.
- The cost-income ratio improved to 53.2% for the quarter, indicating efficient cost management.
- The insurance and asset management segments showed strong performance, with record levels of assets under management and significant growth in life insurance flows.
Negative Points
- Net profit for Q2 2024 was EUR 1.8 billion, down 10% compared to Q2 2023.
- The CET1 ratio decreased by 20 basis points compared to the end of March 2024.
- The cost base increased by 12.5% year-over-year, driven by scope effects and regulatory contributions.
- The home loan activity in France remains at a low level, despite signs of stabilization.
- The company faces potential new bank levies in Italy, which could impact profitability.
Q & A Highlights
Q: There were some headlines about a potential new solidarity levy for Italian banks and insurance. Do you have any comments on that?
A: New bank levies in Italy are not confirmed, but if implemented, they would apply to all banks, maintaining competition. It's not necessarily good news, but it's not a gamechanger.
Q: Can you provide an update on the Degroof Petercam acquisition and its potential impacts post full integration?
A: We started controlling Degroof Petercam in June. We target an additional net profit contribution of EUR150-200 million by 2028. Integration costs are modest so far, and we've taken the full solvency impact of the acquisition.
Q: Can you remind us of the regulatory impacts on capital, especially with Basel IV?
A: Basel IV is expected to be neutral overall but will have several steps. A negative impact of 13 bps is expected in Q4 2024 due to leasing activities, followed by a positive impact in early 2025. FRTB in 2026 may have a minor negative impact.
Q: What is your outlook for French retail banking, especially regarding client deposits and revenue development?
A: We see a stabilization in customer deposits and a slight rebound in sight deposits. The reduction in regulated savings account rates will positively impact the cost of customer liabilities. However, uncertainties remain regarding the yield of the loan book.
Q: Can you provide more color on the strength of the insurance business this quarter?
A: The insurance business had a very good quarter with significant growth in life activities and premium income in P&C and protection. The good performance is due to a combination of commercial momentum and favorable market conditions.
Q: What are your plans for capital optimization, especially regarding RWA?
A: We continue to work on optimizing RWAs. The EUR5 billion TRIM impact is part of the Basel IV implementation in 2025. We also use securitization and other techniques to manage RWA consumption effectively.
Q: Can you discuss the strength in the consumer finance business and its outlook?
A: The consumer finance business is growing well, especially in mobility financing. We are improving margins due to lower refinancing costs and stable risk costs. The outlook remains positive.
Q: How confident are you in your M&A process and team, and does this give you confidence in pursuing larger deals?
A: We have a seasoned team capable of assessing and negotiating deals. We ensure management dedication to integration and remain disciplined in evaluating strategic and financial merits before considering funding options.
Q: What is your guidance for net profit for the full year, given the strong H1 performance?
A: We are on track to meet our EUR6 billion net profit target for the full year. While there is normal seasonality in H2, there are no significant negative factors expected.
Q: Can you provide more details on the ECB review of leveraged finance exposures?
A: We are regularly monitored by the ECB, and we do not expect any significant impact from the review of leveraged finance exposures.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
