Release Date: April 30, 2025
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 record level of revenue for the first quarter of 2025, with a 6.6% increase to EUR7.3 billion.
- The company achieved a very high return on tangible equity, close to 16%, which is among the highest levels ever.
- Solvency ratios significantly improved, with the CET1 ratio increasing to 12.1% from 11.7%.
- The cost-income ratio remains competitive at 55%, well below the target ceiling of 58%.
- Credit Agricole SA (CRARF) continues to develop strategic operations, including a joint venture in China for car leasing and a partnership with Victory Capital in the USA.
Negative Points
- Net income after tax decreased due to a significant French taxation increase, impacting the group by more than EUR200 million.
- The retail banking business division experienced a slight decline in revenue, primarily due to a base effect in international retail banking activities.
- The consumer finance business saw a slight decrease in new loan production, particularly in car financing activities.
- The company faces ongoing challenges in the competitive French home loan market, impacting pricing and margins.
- The CET1 ratio is expected to decrease to 11.8% in the second quarter due to the conclusion of the Victory Capital transaction and investment in Banco BPM.
Q & A Highlights
Q: On cost efficiency, what areas do you think need more effort, and is there a risk of reversal in the capital impact from Basel IV?
A: Jerome Grivet, Deputy CEO, emphasized that Credit Agricole SA's cost-income ratio of 55% is significantly below their target, indicating strong cost efficiency. He mentioned that cost management is decentralized to business heads, who are accountable for their divisions. Regarding Basel IV, the 44 bps positive impact is higher than expected, and no reversal is anticipated. The new environment requires learning how risk-weighted assets evolve under the new framework.
Q: When do you expect an inflection in French retail net income, and is there a surprise in the Basel IV impact?
A: Grivet stated that an inflection in net interest income is expected in 2025, depending on short-term rates, customer deposit breakdown, loan volumes, and pricing. The Basel IV impact was more positive than anticipated due to conservative assessments, with improvements across equity, credit, and operational risk weightings.
Q: Can you reassure about the trajectory of the consumer finance business, and will inorganic growth be part of your targets for 2028?
A: Grivet acknowledged challenges in the consumer finance business due to increased refinancing costs but noted improvements in margins. He stated that while inorganic growth is opportunistic, the focus remains on organic growth, with readiness to seize opportunities that fit their criteria.
Q: Are you planning to keep your stake in BPM at fair value through P&L, and what about the regional banks' share purchase?
A: Grivet explained that half of the BPM stake is accounted through P&L, with part hedged to limit volatility, while the other half is through OCI. The regional banks' share purchase program is ongoing and not completed by the end of March.
Q: How does the macro uncertainty impact your business, and are there any provisions for the tariff situation?
A: Grivet noted that macro uncertainty hasn't significantly impacted their business yet. They maintain high levels of provisions for performing loans, with adverse economic scenarios considered in their overlays. The car financing business is more affected by local economic conditions and competition.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
