CREDIT AGRICOLE SA: Q4-21 and 12M-21 RESULTS
| Crédit Agricole Q4-21 and 12M-21 RESULTS | |||||||||||||||||
| 2022 MTP targets reached in 2021, one year ahead of schedule | |||||||||||||||||
| CRÉDIT AGRICOLE GROUP | CRÉDIT AGRICOLE S.A. | ||||||||||||||||
| Stated | Underlying | Stated | Underlying | ||||||||||||||
| Revenues | €36,822m +9.6% 12M/12M | €36,730m +7.9% 12M/12M | €22,657m +10.5% 12M/12M | €22,651m +9.1% 12M/12M | |||||||||||||
| Costs excl. SRF | -€22,602m +6.3% 12M/12M | -€22,255m +5.1% 12M/12M | -€13,429m +7.8% 12M/12M | -€13,082m +5.8% 12M/12M | |||||||||||||
| GOI | €13,741m +16.8% 12M/12M | €13,812m +12.3% 12M/12M | €8,836m +16.1% 12M/12M | €9,047m +13.7% 12M/12M | |||||||||||||
| Cost of risk | -€2,193m -39.9% 12M/12M | -€1,849m -49.4% 12M/12M | -€1,576m -39.5% 12M/12M | -€1,232m -52.7% 12M/12M | |||||||||||||
| Net income Group share | €9,101m +94.1% 12M/12M | €8,512m +38.9% 12M/12M | €5,844m x2.2 12M/12M | €5,397m +40.2% 12M/12M | |||||||||||||
| C/I ratio (excl. SRF) | 61.4% -1.9 pp 12M/12M | 60.6% -1.6 pp 12M/12M | 59.3% -1.5 pp 12M/12M | 57.8% -1.8 pp 12M/12M | |||||||||||||
| STRONG HIKE IN CASA Q4-21 AND 12M RESULTS ACROSS ALL BUSINESS LINES Reported net income €1,428m in Q4, €5,844m in 2021 Underlying income +47.2% Q4/Q4 to €1,435m, +40.2% 12M/12M to €5,397m Dynamic activity, +1.7 million new retail banking customers in 2021, equipment rate up Revenues +9.1% Q4/Q4, positive jaws Q4 and 12M Cost/income ratio excluding SRF 57.8% in 2021 (-1.8 pp 12M/12M), Prudent provisioning of performing loans maintained against a backdrop of macro uncertainties. | |||||||||||||||||
| PROFITABILITY AND CAPITAL POSITION AMONG BEST IN THE SECTOR IN EUROPE | |||||||||||||||||
| CRÉDIT AGRICOLE GROUP | CRÉDIT AGRICOLE S.A. | ||||||||||||||||
| CET1phasé | 17.5% | +10 bp Dec/Sept | 11.9% | -80 bp Dec/Sept | |||||||||||||
| +8.6 pp above SREP requirements | +4.0 pp above SREP requirements | ||||||||||||||||
| ROTE CASA 13.1%1 in 2021. At least 2.6 pp above the average of 10 major European banks for the past five years | |||||||||||||||||
| 2021 DIVIDEND: €1.05 per share (€0.85 : 50% pay-out policy; €0.20 : 2019 dividend catch-up) | |||||||||||||||||
| 2022 MTP FINANCIAL TARGETS REACHED IN 2021 | |||||||||||||||||
| CASA net income Group share2 €5.4bn > €5bn; CASA cost/income ratio3 57.8% < 60%; Crédit Agricole SA ROTE1 13.1% > 11%; CASA CET1 11.9% > 11%; CAG CET1 17.5% > 16% 50% dividend distribution throughout the span of the MTP UNWINDING OF 100% OF SWITCH IN 2021 | |||||||||||||||||
Strength of our Group Project
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| The Group will present its new 2025 development plan on 22 June 2022 | |||||||||||||||||
| Dominique Lefebvre, Chairman of SAS Rue La Boétie and Chairman of the Crédit Agricole S.A. Board of Directors “Our performance commits us. It is our responsibility to support all of our customers and society in their transitions." |
| Philippe Brassac, Chief Executive Officer of Crédit Agricole S.A. “The Group upholds its long-term commitments and, on 22 June, will present a new development plan to accelerate transitions” |
Crédit Agricole Group
Group activity
Commercial activity in the Group’s business lines was strong this quarter, reflecting the strength of the Universal Customer-focused Banking model. Gross customer acquisition was strong. In the whole year 2021, the Group recorded +1,701,000 new Retail banking customers, 1,560,000 of them in France (1,218,000 customers for the Regional Banks) and 140,000 in Italy, while the customer base continued to grow (+278,000 retail banking customers, 226,000 of them Regional Bank customers and 256,000 customers in France). In the fourth quarter of 2021, the Group gained +391,000 new retail banking customers, of which 360,000 of them in France (284,000 for the Regional Banks) and 31,000 in Italy. In addition, the production of loans in retail banking in France rose in the fourth quarter, by +1.3%4 compared to fourth quarter 2019 and increased significantly over 2021 by +6.9% compared to 2019. Premium income from property and casualty insurance was also up sharply (+15.7% since the fourth quarter of 2019) while consumer finance and leasing production grew +1.5% compared to the same period. The equipment rate of Regional Banks, LCL and CA Italia also posted an increase since end 2020 (+1 percentage points, +1.1 percentage points and +1.9 percentage points respectively) to 42.7%, 26.6% and 19% respectively at 31 December 2021.
Group Project
Customer and human-centric projects - amplification of the universal customer-focused banking model: digital technology and empowered local teams.
This year, the Group continued to amplify the universal customer-focused banking model, which combines digital technology and empowered local teams. The Crédit Agricole Group’s offers are constantly adapted to the needs of its customers. 2021 saw the launch of several inclusive and flexible packages.
In line with its universal banking model, the Crédit Agricole Group aims to make essential day-to-day banking services available to all, both online and in branches, in particular through the EKO and LCL Essentiel offers. For young people, the Globetrotter and LCL City Explorer offers provide an international payment card with no foreign payment fees. The insurance activity is also developing inclusive offers: the EKO Crédit Agricole Assurance and Primo LCL packages offer a car insurance service that is accessible to all with no limits on essential coverage.
In addition, Crédit Agricole gives all customers access to the bank’s premium services with its flexible Nouvelle Banque du Quotidien offer, which includes “essential”, “premium” and “prestige” packages. For December 2021, the premiumisation rate was 23%.
The Crédit Agricole Group is also constantly improving its offers and services through innovation and the digitalisation of the customer experience. As a result, the Group’s app usage rate (active profile on apps in the last month) rose sharply this year, recording an increase at the Regional Banks and at LCL (respectively, +18 percentage points compared to January 2019 to 45.5% and +20.5 percentage points to 57.4%). Similarly, the Group continues to deploy innovative digital tools for its customers and in particular for young people to facilitate their activities, such as the digital “piggy bank” on the CA Italia application (which allows amounts as small as €5 to be saved and invested in a mutual fund at any time with a simple click on a mobile phone), and Plick, a new private payment service also developed by CA Italia (which allows payments to be made throughout Europe without an IBAN, using only the beneficiary’s mobile phone number or e-mail). Innovative non-banking platforms and services have also been set up, such as Vizio Client (which allows face-to-face exchanges with one’s advisor and sharing and viewing documents during a videoconference call) and platforms for young people and professionals (Youzful, Blank, Yapla).
However, Crédit Agricole Group goes the extra mile and enhances the digital experience and the strength of its offers and services for its customers through customer-focused empowered local teams. The inclusion of an “empowerment index” in this year's ERI (Engagement and Recommendation Index) survey is a good illustration of this, as is the strong increase in the participation rate of employees in the ERI survey (75%, +13 points compared to 2016). In addition, the Group launched innovative measures in managerial transformation, supported by organisational transformation, to ramp up the employee empowement process, aimed at creating more value for customers. Lastly, the Crédit Agricole Group continues to take steps to promote gender equality. By the end of 2021, 31% of Crédit Agricole S.A.’s Executive Committees will be made up of women.
Finally, this year’s achievements were made possible thanks to the full mobilisation of the Group’s employees.
As a result of all these actions, the Group’s positioning in terms of customer satisfaction continued to improve: Crédit Agricole is now at the top of the “France’s favourite brand” ranking in the banking category. Crédit Agricole’s Net Promoter Score (NPS) rose in 2021 from 2020 (+2 points to +10), placing it in the top three French banks in terms of customer satisfaction. After being recognised during lockdown as the leading bank in terms of contactability, LCL was awarded the “2022 Customer Service of the Year” trophy and received the prize for the best remote customer service and bank branch of the year (Trophée 2022 Moneyvox). Finally, the Sofinco website was elected “Best User Experience” in 2021.
The Group’s societal project – societal commitment for energy transition and social cohesion
The Group’s commitment to the energy transition has two main components: the Group’s support for the energy transition of corporates and individual customers, and the progressive reallocation of financing and investment portfolios towards green assets.
There are several concrete examples of the Group’s commitment to support its customers in their transition strategies in 2021. Indeed, 8,000 listed companies have been assigned transition scores, i.e. a single score used by CACIB and Amundi to better support and meet the energy transition needs of their customers. CACIB confirmed its position as one of the world’s top five green, social and sustainable bond arrangers (with $46 billion of bonds arranged in 2021). At Amundi, the assets under management dedicated to social and environmental solutions totalled €35 billion in 2021. In addition, CACF granted financing in the amount of €2 billion for vehicles emitting less than 95 g of carbon dioxide per km. Lastly, according to a May 2021 Bloomberg study, Crédit Agricole CIB is the first bank among the 30 largest worldwide banks to have arranged more green financing since the beginning of 2016 than hydrocarbon financing.
Several concrete examples of the reallocation of financing and investment portfolios towards green assets can also be noted 2021. CACIB’s green loan portfolio amounts to €13.2 billion at year end. CAA has invested €2.5 billion in renewable energies (i.e. an installed capacity of close to 8.5 GW), and 100% of Amundi’s open-ended active management funds have an ESG score target5 above the score for the investment universe. Finally, CALEF is, once again this year, the first private provider of renewable energy financing6, with €2.6 billion outstandings in 2021.
The Group’s Societal Project covers the Group’s societal commitment to both energy transition and social cohesion. The Group's commitment in this area includes support for young people and the regions. The Crédit Agricole Group was the second largest private recruiter7 of work-study students in France in 2021. In addition, CACF and the Regional Banks have developed support measures to help limit over-indebtedness and combat fragility: 4,200 over-indebted customers were accompanied by CACF this year, and 10,000 families were supported by the Regional Banks’ “Points Passerelle” scheme. Lastly, on a different note, social investment vehicles such as Amundi Finance et solidarité, or the Contrat solidaire CAA are offered within the Amundi and CAA ranges.
In addition, in 2021, as part of its Societal Project, the Crédit Agricole Group presented a programme with 10 ambitious commitments in the area of climate, social cohesion and inclusion, and agriculture, embedded within the activities of the Group.
The first part of this programme involves acting for the climate and the transition to a low-carbon economy through:
1. Achieving carbon neutrality by 2050 in our own footprint and in our investment and financing portfolios. The Group’s business lines have signed on to all collective commitments made by the major financial institutions, joining business alliances to contribute to carbon neutrality by 2050. These commitments are supplemented by specific commitments starting in 2022: a total halt to all project finance directly linked to the extraction of unconventional hydrocarbons starting in January 2022; protection of the Arctic region, where we prohibit all direct financing of oil and gas projects; significant reduction in our exposure to oil extraction by 20% by 2025; for investment, by 2025, 100% of Amundi’s open-ended active management funds, representing €400bn today, will aim to have a better energy transition rating than their benchmark universe. In addition, the Group is committed to the financing of renewable energy. Already one of the world’s leading issuers of green bonds and France’s leading provider of renewable energy financing, Crédit Agricole intends to multiply its impact: €20bn committed by 2025, via Amundi, in funds that will invest in companies that contribute positively to environmental or social performance (Article 9 SFDR impact funds). Crédit Agricole also aims to double the production capacity of renewable energy facilities financed by Crédit Agricole Assurances to reach 10.5 GW by 2025, i.e. the average energy consumption of 4 million households. Crédit Agricole CIB’s exposure to non-carbon energies will increase by 60% by 2025, and the development of its platform dedicated to advising on and financing hydrogen projects will accelerate. Other targets include the 50% growth in the financing of renewable energy projects in France by 2025 by Unifergie, a subsidiary of Crédit Agricole Leasing & Factoring (1 project out of 3 in France), and making energy transition a focus of the real estate master plan for Crédit Agricole Immobilier. Lastly, the Group is making responsible savings accessible, launching a range of “green” savings books starting in 2022 and a “green” savings plan starting in 2023.
2. Advising and supporting 100% of our customers through their energy transition, in particular through the Agilauto offer, which provides access to clean vehicles, or the “J’écorénove mon logement” offer for homes, or, for the SME and small business customers of the Regional Banks, the “Objectif Transition Energétique” platform. In addition, Credit Agricole commits itself to use its agencies to equip territories with electric vehicle charging station.
3. The inclusion of non-financial criteria in 100% of financing for corporate and farmers.
The second part of this programme plan aims to strengthen cohesion and social inclusion through:
4. A range of offers that ensures no customers are excluded, to promote social and digital inclusion and adapt to economic and societal changes, including the “Living well at home” offer for senior customers, enhanced with a digital and human-centred offer with simplified diagnostics for carers and a package of services for carers, and EKO Assurances to make day-to-day insurance (housing, mobility) accessible to all without cutting back on the quality of basic coverage.
5. The contribution to revitalising the most vulnerable areas and reducing social inequalities by promoting employment, solidarity, access to goods and services and digital technology
6. The Group’s commitment to the integration of young people through employment and training, through the welcoming and training 50,000 young people by 2025 in France and abroad, mostly through work-study programmes and internships
7. Increasing gender equality and diversity in all Crédit Agricole S.A entities and within its governance, with a coordinated and global approach to set an example in our social policies, in particular with the commitment to reach between 30% and 40% of women among senior managers by 2025, depending on the Crédit Agricole S.A. entity, or to train 100% of the Group’s employees and elected representatives in CSR-related issues.
The third and final part of this programme plan focuses on successfully achievin agricultural and agri-food transitions with:
8. Supporting the development of farming techniques to create a competitive and sustainable agri-food system. For this reason, Crédit Agricole is launching a pan-European private equity and debt fund with an objective of €1 billion.
9. Enabling French agriculture to fully contribute to the fight against climate change. In this context, starting in 2022, the Group will explore the usefulness of a French platform for trading carbon credits from French farms and will support all local projects that contribute to decarbonising agriculture.
10. Contributing to the strengthening of food sovereignty by facilitating the installation of new generations of farmers, deploying green savings accounts and offering short-channel platforms
Finally, it should be noted that as at 31 December 2021, the energy mix of the energy portfolios of large corporate financing activities, asset management activities, investment activities linked to life insurance contracts and SME and mid-cap financing activities are as follows8 (see page 67 of the 2020 URD for a methodological explanation of the scope)
- Large corporate financing activity: coal €348 million, oil €6,722 million, gas €5,166 million, nuclear €137 million, renewable energy €4,834 million 9.
- Asset management activity: coal €1,202 million, oil €25,090 million, gas €11,905 million, nuclear €3,556 million, renewable energies €3,224 million in connection with market trends and outstandings10.
- Investments related to life insurance contracts: fossil fuels €8,084 million, nuclear €1,525 million, renewable energies €4,025 million11.
- SME and mid-cap financing activity: fossil fuels €123 million, renewable energies €268 million12.
The 2020 and 2019 data have been restated from the figures published in the Statement of Non-Financial Performance in the 2020 URD to incorporate the revised process for identifying energy commitments. These figures obtained via the Greenway platform are based on a financing scope of €178 billion at end 2021 and an investment scope of €482 billion.
The Group's development model
The financial targets announced for Crédit Agricole S.A. as part of the 2022 Medium-Term Plan were achieved in 2021, i.e. one year early:
- Underlying net income Group share is above the €5 billion target, reaching €5.4 billion in 2021
- The underlying cost/income ratio excluding SRF exceeded its 60% target, reaching 57.8% in 2021
- The underlying RoTE reached 13.1% in 2021, above its target of 11%.
- The fully loaded CET1 ratio reached 11.9% in 2021, above its steering target of 11%.
- The commitment to distribute 50% of net income throughout the Medium-Term Plan will have been met despite the regulatory prohibition on distributing dividends for 2019. As a result, in 2021, the dividend is set at €1.05 per share, of which €0.20 for the catch-up on the undistributed 2019 dividend (out of €0.40).
Moreover, Crédit Agricole SA has demonstrated agility in managing its capital throughout the Medium-Term Plan, fully unwinding the switch13, thereby simplifying Crédit Agricole SA’s capital structure, and devoting a total of €4.3 billion in 2019, 2020 and 2021 to acquisitions14, receiving €2.3 billion over the same period in disposals15, and signing eight new strategic partnerships over this period16. The CET1 impact of acquisitions in 2019, 2020 and 2021, net of the impact of disposals over the same period, is roughly -50 basis points.
As part of the medium-term development of its business lines, Crédit Agricole SA also confirmed its European ambitions regarding mobility this year, particularly in the specialised financial services business line. In December 2021, Crédit Agricole and Stellantis announced their intention to join forces in 2023 to create a European leader in long-term leasing. CACF would become Stellantis’s exclusive long-term leasing partner, and the purpose of the joint venture would be to manage a fleet of over one million vehicles by 2026. This exclusive partnership project between CACF and Stellantis would allow CACF to immediately become one of the top five long-term leasing players in Europe and offers additional revenue growth potential in a profitable segment from which CACF has been largely absent until now. Alongside this partnership, CACF has also announced its intention to develop a pan-European multi-brand player in automotive financing, leasing and mobility, based on the expertise of FCA Bank and Leasys Rent, which will be wholly owned by CACF in 2023, with a target of €10 billion in outstanding by 2026. This new entity would offer white-label products and target manufacturers, dealerships, short-term rental companies and independent direct distribution platforms. To that end, CACF acquired a stake in Cosmobilis, the leading French automotive distributor in Europe, investing €100 million. Finally, the long-term rental offer of CACF and CAL&F for the distribution network of the Group’s retail banks was structured via the creation of CA Mobility, a joint venture between CACF and CALF, with a target of 100,000 vehicles by 2026. All of these operations support the objective of a 15% RoNE for CACF in 2023,17 with an overall neutral CET1 impact for Crédit Agricole SA.
Group results
In the fourth quarter of 2021, Crédit Agricole Group’s stated net income Group share reached €2,354 million versus €530 million in the fourth quarter of 2020, a rise of a factor of 4.4. The specific items recorded this quarter generated a positive net impact of €44 million on net income Group share.
The specific items recorded this quarter included recurring volatile accounting items in revenues, such as the DVA (Debt Valuation Adjustment, i.e. gains and losses on financial instruments related to changes in the Group’s issuer spread) amounting to +€1 million in net income Group share, hedges on the Large customers loan book for +€3 million in net income Group share and provisions for home purchase savings plans in the amount of +€83 million in net income Group share. In addition to these recurring items, there were items recognised in CA Italia’s results for Creval: finalisation of the recording of net badwill for +€101 million in net income Group share, recording of off-balance sheet deferred tax assets for +€89 million in net income Group share, technology infrastructure upgrade and IT migration costs for Creval, amounting to -€13 million in net income Group share, and other miscellaneous Creval adjustments for -€12 million in net income group share. In addition to these items, there were actions to improve the quality of CA Italia’s assets, including the impact of the disposal of a gross portfolio of €1.5bn and additional provisions on CA Italia’s portfolio for -€180 million in net income Group share, the launch of a Next Generation HR plan for CA Italia and the associated job protection plan for -€109 million in net income Group share, the exceptional contribution by CA Italia to the Italian banks safeguard plan for - 14 million in net income Group share, and the “Affrancamento” gains related to exceptional tax provisions in Italy for the non-accounting revaluation of goodwill and its amortisation for +€50 million in net income Group share for CA Italia. Also recognised as specific items were the Lyxor acquisition costs for -€8 million in net income Group share in asset management, transformation costs related to the Turbo project, the Caceis transformation and development plan for -€12 million in net income Group share in Asset servicing, and finally the “Affrancamento” gains in Specialised financial services for AGOS for +€66 million in net income Group share.
Specific items in fourth quarter 2020 amounted to -€899 million in net income Group share impact and included the goodwill impairment of CA Italia, with a negative impact of -€884 million on net income Group share. Also included under specific items was the reclassification of entities held for sale (CACF NL, CA Bank Romania) and the ongoing disposal project of the Private banking activities in Miami and Brazil, for a total de -€97 million on net income Group share, including on the one hand -€66 million for CACF NL and -€7 million for CA Bank Romania, and, on the other hand, -€24 million for Private banking. Specific items also included exceptional contributions related to the COVID-19 crisis: CAA's exceptional contribution for supplementary exceptional Covid-19 healthcare contributions in the amount of -€15 million in net income Group share and CA Italia's exceptional contribution to the Italian banks safeguard plan for -€7 million. Also included under specific items was the reversal of the provision AGCM (Italian Competition Authority) addressed to FCA Bank for +€89 million. The impact of the better fortune adjustment on the activation of Switch 2 was neutralised at Group level. In addition to these items, there were recurring accounting volatility items, with a net positive impact of +€19 million in net income Group share, namely DVA (Debt Valuation Adjustment, i.e. gains and losses on financial instruments related to changes in the Group’s issuer spread), totalling +€13 million, the hedge on the Large customers loan book amounting to -€21 million, and the variation in the provision for home purchase savings plans amounting to +€26 million.
Excluding these specific items, Crédit Agricole Group’s underlying net income Group share18 in fourth quarter 2021 amounted to €2,311 million, a year-on-year increase of +61.7%. The quarterly increase in underlying net income Group share was +€882 million, driven by the quarterly increase in gross operating income which came in at €475 million, as well as the positive effect of a lower cost of risk amounting to +€454 million.
Crédit Agricole Group – Stated and underlying results, Q4-2021 and Q4-2020
| €m | Q4-21 stated | Specific items | Q4-21 underlying | Q4-20 stated | Specific items | Q4-20 underlying | ∆ Q4/Q4 stated | ∆ Q4/Q4 underlying |
| Revenues | 9,500 | 120 | 9,380 | 8,665 | 5 | 8,660 | +9.6% | +8.3% |
| Operating expenses excl. SRF | (6,109) | (297) | (5,812) | (5,585) | (18) | (5,567) | +9.4% | +4.4% |
| SRF | - | - | - | - | - | - | n.m. | n.m. |
| Gross operating income | 3,391 | (177) | 3,568 | 3,080 | (13) | 3,093 | +10.1% | +15.4% |
| Cost of risk | (783) | (319) | (464) | (919) | 0 | (919) | (14.7%) | (49.5%) |
| Equity-accounted entities | 92 | - | 92 | 163 | 89 | 74 | (43.4%) | +25.0% |
| Net income on other assets | 10 | - | 10 | (26) | - | (26) | n.m. | n.m. |
| Change in value of goodwill | 119 | 119 | 0 | (965) | (965) | - | n.m. | n.m. |
| Income before tax | 2,829 | (376) | 3,205 | 1,334 | (889) | 2,223 | x 2.1 | +44.2% |
| Tax | (269) | 438 | (707) | (634) | 4 | (638) | (57.5%) | +10.8% |
| Net income from discont'd or held-for-sale ope. | 4 | - | 4 | (91) | (98) | 7 | n.m. | (44.7%) |
| Net income | 2,564 | 61 | 2,503 | 609 | (983) | 1,592 | x 4.2 | +57.2% |
| Non controlling interests | (210) | (18) | (192) | (80) | 84 | (163) | x 2.6 | +17.5% |
| Net income Group Share | 2,354 | 44 | 2,311 | 530 | (899) | 1,429 | x 4.4 | +61.7% |
| Cost/Income ratio excl. SRF (%) | 64.3% | 62.0% | 64.5% | 64.3% | -0.2 pp | -2.3 pp |
In fourth quarter 2021, thanks to steady momentum across all business lines, underlying revenues increased by +8.3% compared to fourth quarter 2020 to come in at €9,380 million. On a like-for-like basis19, underlying revenues were up +7.2% from fourth quarter 2020. The Asset gathering division posted a decline in revenues of -2.9% (-€48 million) linked to the prudent management of the financial margin and the prudent provisioning of technical risks in insurance, and despite dynamic management fee and commission income in asset management, linked to favourable market conditions and dynamic inflows. Revenues for the Large customers division were up +8.6% from fourth quarter 2020 (+€123 million), with revenues in capital markets normalising in a context of low customer demand. This impact was partially offset by strong growth in structured finance and commercial banking revenues and strong fee and commission income from transactions in Asset servicing. Revenues from Specialised financial services grew by +4.9%, with CACF enjoying an increase in commercial production and insurance equipment, and CALF from dynamic leasing and factoring activity. In French retail banking, the Regional Banks recorded revenue growth of +6.6% compared to fourth quarter 2020, with LCL recording revenue growth of +3.0%. In International retail banking, CA Italia recorded strong revenue growth this quarter, mainly due to the effect of the consolidation of Credito Valtellinese since May 2021 (+21.8%). In addition to this scope effect, revenues were negatively impacted by the outflow of amounts outstanding (loan disposals) and pressure on the interest margin and positively by higher fees on managed savings and amounts outstanding. International retail banking outside Italy recorded a +10.6% increase in revenues, driven in particular by the dynamic activity of CA Poland and CA Ukraine.
Underlying operating expenses excluding the contribution to the Single Resolution Fund (SRF) stood at €5,812 million in fourth quarter 2021, a year-on-year rise of +4.4%. On a like-for-like basis20, underlying operating expenses excluding SRF were up +3.0% compared to fourth quarter 2020. The Asset gathering division experienced an expense decrease of -2.4% due to scope effects (integration of Sabadell AM, creation of Amundi Bank of China, Fund Channel and Anatec) and accounting effects (reclassification of La Médicale in IFRS5 following the signature of the disposal agreement with Generali). Excluding the scope effect, they were up +3.1% due notably to continued investments in the development of Amundi Technology. In the Large customers division, expenses increased by +5.2%, mainly due to IT investments. Specialised financial services recorded a rise of +8.9%, in line with activity. The French retail banking division posted a +1.1% rise in expenses from fourth quarter 2020 to €2,941 million. The International retail banking division posted a +29.7% increase in expenses following the integration of Creval, or stable expenses excluding Creval and excluding contribution to the Italian Interbank Deposit Protection Fund (FITD).
Overall, the Group posted an improved underlying cost/income ratio excluding SRF of -2.3 percentage points, taking it to 62.0% in fourth quarter 2021.
Underlying gross operating income was therefore up +15.4% year-on-year to €3,568 million. On a like-for-like basis, gross operating income was up +14.8% from fourth quarter 2020.
The underlying cost of credit risk, excluding the impact of the disposal of CA Italia NPL and the complementary provisioning of CA Italia outstandings (€319 million) was down to -€464 million (of which -€97 million from the cost of risk on performing loans (Stage 1 and 2), and -€360 million from Stage 3 cost of risk) compared to -€919 million in fourth quarter 2020, i.e. a decrease of -49% compared to fourth quarter 2020. Compared to third quarter 2021, when it stood at -€403 million, it was up by +15%.
The decline in the cost of risk this quarter was marked in financing activities (-90% where it amounted to -€12 million compared to -€121 million in fourth quarter 2020) and at LCL (-39% where it amounted to -€54 million compared to -€89 million in fourth quarter 2020).
Note that CA Italia’s cost of risk increased by +4% compared to fourth quarter 2020 and +48% compared to third quarter 2021 and amounted to -€118 million, due to the alignment this quarter of Creval’s performing loan provisioning models with Crédit Agricole Italia’s practices and to additional provisions linked to NPL disposal.
The cost of risk relative to performing loans was down significantly by -85% compared to fourth quarter 2020, a trend related to the evolution of the health crisis, this drop was particularly marked at the level of CA Italia (a reversal of +€8 million in fourth quarter 2021 compared to a provision of -€22 million in fourth quarter 2020) and LCL (a reversal of +€9 million of cost of risk in fourth quarter 2021 compared to a +€60 million provision in fourth quarter 2020). The provisioning for proven cost of risk was up moderately by +8% to -€360 million in fourth quarter 2021 compared to -€334 million in fourth quarter 2020, in particular in retail banking in France (increase of +89% and +77% respectively for Regional Banks and LCL due to the transfer to Stage 3 of individual files). In total, the cost of risk for 2021 amounted to €1,849 million euros and was down by -49% compared to 2020.
The provisioning levels were determined this quarter taking into account several weighted economic scenarios. These include a favourable scenario at +6.0% in 2022 and +2.7% in 2023) and a less favourable scenario (French GDP at +3.0% in 2022 and +0.9% in 2023). Due to macroeconomic uncertainties that were not taken into account in the economic scenarios (changes in the health situation, inflation, interest rate adjustments, etc.), an exceptional additional €88 million in provisions on performing and deteriorated loans (cost of risk S1&S2) was recorded this quarter in cost of risk (of which €44 million for CIB, €17 million for LCL, €22 million for CACF and €5 million for CALF).
The cost of risk relative to outstandings21 over four rolling quarters continued to normalise, reaching 18 basis points (down -20 basis points from fourth quarter 2020 and down -5 basis points from third quarter 2021). It also reached 18 basis points on an annualised quarterly basis22 (compared to 37 basis points in fourth quarter 2020 and 16 in third quarter 2021).
Asset quality remains very satisfactory: the doubtful loan ratio was 2.0% at end December 2021 for the Crédit Agricole Group, down 0.3 percentage points compared to December 2020 and 0.2 percentage points compared to September 2021; and the coverage ratio improved by +3.6 percentage points compared to December 2020 and stood at 87.5% at end December 2021. Loan loss reserves amounted to €18.9 billion at end December 2021, of which 39% related to performing loans (Stage 1 & 2), compared to 29% at end 2019, i.e. an increase of €2.0 billion between end 2019 and end 2021.
Underlying pre-tax income stood at €3,205 million, a year-on-year increase of +44.2% compared to fourth quarter 2020. In addition to the changes explained above, underlying pre-tax income included the contribution from equity-accounted entities in the amount of €92 million (up +25.0%, driven by the strong performance of equity-accounted entities at Amundi and CA Consumer Finance) and net income on other assets, which stood at €10 million this quarter versus -€26 million in fourth quarter 2020. The underlying tax charge was up +10.8% over the period, driven by the increase in underlying pre-tax income and offset by an underlying tax rate of 22.7% — down from fourth quarter 2020 (29.7%). In fact, the tax rate is never representative on a quarterly basis. Underlying net income before non-controlling interests was up +57.2% to €2,503 million. Non-controlling interests rose +17.5%. Lastly, underlying net income Group share was €2,311 million, significantly higher than in fourth quarter 2020 (+61.7%).
Crédit Agricole Group – Stated and underlying results, 2021 and 2020
| €m | 2021 stated | Specific items | 2021 underlying | 2020 stated | Specific items | 2020 underlying | ∆ 2021/2020 stated | ∆ 2021/2020 underlying | |
| Revenues | 36,822 | 92 | 36,730 | 33,596 | (439) | 34,035 | +9.6% | +7.9% | |
| Operating expenses excl.SRF | (22,602) | (347) | (22,255) | (21,266) | (96) | (21,169) | +6.3% | +5.1% | |
| SRF | (479) | 185 | (664) | (562) | - | (562) | (14.7%) | +18.2% | |
| Gross operating income | 13,741 | (70) | 13,812 | 11,768 | (536) | 12,304 | +16.8% | +12.3% | |
| Cost of risk | (2,193) | (344) | (1,849) | (3,651) | 0 | (3,651) | (39.9%) | (49.4%) | |
| Equity-accounted entities | 392 | 5 | 387 | 419 | 89 | 330 | (6.6%) | +17.3% | |
| Net income on other assets | (27) | (15) | (12) | 52 | - | 52 | n.m. | n.m. | |
| Change in value of goodwill | 497 | 497 | 0 | (968) | (965) | (3) | n.m. | n.m. | |
| Income before tax | 12,409 | 73 | 12,337 | 7,620 | (1,411) | 9,031 | +62.9% | +36.6% | |
| Tax | (2,463) | 616 | (3,079) | (2,165) | 152 | (2,317) | +13.7% | +32.9% | |
| Net income from discont'd or held-for-sale ope. | 6 | 3 | 3 | (262) | (268) | 6 | n.m. | (57.0%) | |
| Net income | 9,953 | 692 | 9,261 | 5,193 | (1,528) | 6,720 | +91.7% | +37.8% | |
| Non controlling interests | (852) | (104) | (748) | (504) | 87 | (591) | +69.1% | +26.6% | |
| Net income Group Share | 9,101 | 589 | 8,512 | 4,689 | (1,440) | 6,129 | +94.1% | +38.9% | |
| Cost/Income ratio excl.SRF (%) | 61.4% | 60.6% | 63.3% | 62.2% | -1.9 pp | -1.6 pp | |||
Over the full year 2021, stated net income Group share amounted to €9,101 million, versus €4,689 million for full year 2020, for a stated net income Group share which increased by +94.1%.
Specific items in full year 2021 had a positive impact of +€589 million on stated net income Group share. In addition to the fourth quarter items already mentioned above, the items for the first nine months of 2021 had a positive impact of +€545 million and also corresponded to recurring accounting volatility items, i.e. the DVA for +€4 million, the hedging of loan portfolios in Large customers for -€15 million and the changes in the Home Purchase Savings Plan for -€7 million as well as the overpayment of contributions to the SRF for financial years 2016 to 2020 for +€185 million, the recording of provisional net badwill for Creval for +€321 million in net income Group share, an additional provisioning of the performing Creval loans for -€21 million, Affrancamento gains within the Asset Gathering, International retail banking and Specialised financial services business lines for a total of +€116 million, Creval acquisition costs for -€9 million, Creval integration costs for -€4 million, the reclassification of Serbia as an asset held for sale for -€4 million, transformation costs related to the LCL New Generation Network project, new branch regrouping at LCL and the Turbo project, Caceis transformation and development plan for a total of -€20 million, the integration costs of Kas Bank and S3 by CACEIS for -€2 million and the losses on the wealth management activities in Miami and Brazil held for sale for -€1 million within the Wealth management business line.
Specific items from 2020 had an impact of -€1,440 million on net income Group share. Compared to specific items in fourth quarter 2020 already mentioned above, these items had an impact of -€-541 million on net income Group share in the first nine months of 2020 and corresponded to recurring accounting volatility items, i.e. the DVA for -€5 million, hedges of the Large customers loan book for +€28 million, changes in the provision for home purchase savings plans for -€134 million, the integration/acquisition costs of Kas Bank and S3 by CACEIS for -€6 million, the impact of COVID-19 solidarity donations for -€225 million and reclassifications of held-for-sale assets (CACF NL, Bankoa, Romania) for -€170 million.
Excluding these specific items, underlying net income Group share reached €8,512 million, up +38.9% compared to 2020.
Underlying revenues were up +7.9% compared to 2020. In addition to a scope effect of €419 million mainly23 related to the integration of Creval from second quarter 2021 in International retail banking, and to the adjustment of CACF NL following its exit from IFRS 5 status24, underlying net banking income grew by +8.7% excluding scope effect. This increase in revenues is mainly due to the dynamism of the business lines. More specifically, for the Asset gathering division, it was due to dynamic management commission income in asset management, which benefited from both a favourable market effect and dynamic inflows, as well as prudent management of the financial margin and prudent provisioning of technical risks in Insurance; for the Large customers division, a normalisation of revenues in capital markets offset by strong growth in revenues in structured finance and commercial banking, as well as a good level of fees in asset servicing, driven by dynamic activity; for the Specialised financial services division, dynamic commercial production in consumer credit, growth in insurance equipment, and a sustained level of activity in leasing and factoring; for the retail banking division, growth in the revenues of the Regional Banks driven by commissions and more favourable refinancing conditions, balanced growth in LCL’s revenues between interest margins and fee and commission income, and the dynamism of CA Italia’s fee and commission income. In the Corporate Centre division, revenues were up thanks to lower refinancing costs and volatility factors (such as the impact of inflation on changes in hedging swaps and, particularly in second and third quarters 2021, eliminations on intra-group securities underwritten by Predica and Amundi).
Underlying operating expenses excluding SRF increased by +5.1% compared to 2020, and by +3.8% excluding scope effect. The increase in operating expenses both including and excluding scope effect is less than the increase in revenues over full-year 2021, thus generating a positive jaw effect of 2.8 points and 2.9 points respectively. The cost/income ratio excluding SRF for 2021 is thus 60.6%, down 1.6 percentage points compared to 2020. The SRF totalled €664 million in 2021, up 18.2% compared to 2020. Note that the refund of an overpayment over financial years 2016-2020 was accounted for under specific items in first quarter 2020 for +€185 million. Underlying gross operating income totalled €13,812 million, up +12.3% compared to 2020.
Lastly, cost of risk was down sharply (-49.4%/-€1,802 million, to -€1,849 million versus -€3,651 million in 2020).
Regional Banks
Regional Bank activity was dynamic in 2021, with gross customer capture up sharply (+1,218,000 customers since the beginning of the year) and customer base growth of an additional +226,000 customers. The auto/home/health insurance25 equipment rate also increased (+1 percentage points compared to end December 2020), reaching 42.7% at end December 2021. Mobile app use rates26 reached 71.2% and were up +3 percentage points compared to December 2020 (+6.8 percentage points compared to December 2019). Loans outstanding reached €596 billion at end December 2021 and increased by +5.8% compared to end December 2020 (including +6.5% for housing and +7.8% for corporates). On-balance sheet deposits rose significantly (+7% since end December 2020), driven by demand deposits (+11.0%) and passbooks (+9.8%), as did off-balance sheet deposits, which were up +4.8% since the same period (of which +3.7% in life insurance). As a result, total customer assets increased by +6.2% compared to end December 2020 to reach €839.5 billion at end December 2021.
In fourth quarter 2021, underlying revenues of the Regional Banks amounted to €3,596 million, a year-on-year increase of +6.6%. This increase was driven by fee and commission income (+13.5%), which was dynamic, especially in insurance and fee and commission income and account/management payment instruments. Interest revenues were up compared to fourth quarter 2020 (+0.9%). Operating expenses excluding SRF held steady at €2,337 million in fourth quarter 2021 (+1.2% compared to fourth quarter 2020). Accordingly, there was a favourable jaws effect (+5.4 percentage points this quarter), and the underlying cost/income ratio excluding SRF improved (-3.5 percentage points compared to fourth quarter 2020) to 65.0% that quarter, and the underlying gross operating income was up in fourth quarter 2021 by +18.5% compared to fourth quarter 2020. The cost of risk amounted to -€130 million27, down -68.7% compared to fourth quarter 2020. The doubtful loan ratio is lower (1.6% at end December 2021 compared to 1.7% at end December 2020), and the coverage ratio remained high (103.3% at end December 2021 compared to 100.9% at end December 2020). The contribution to taxes was up this quarter compared to fourth quarter 2020 (+52%). All in all, the contribution of the Regional Banks to underlying net income Group share reached €882 million in fourth quarter 2021, up +87.6% compared to the fourth quarter 2020.
Over full-year 2021, the Regional Banks’ underlying revenues reached €14,011 million, increasing +5.9% compared to full-year 2020. Underlying operating expenses excluding SRF increased by +3.3% compared to full-year 2020, mainly due to higher employee expenses (notably profit sharing and the exceptional purchasing power bonus). As a result, there was a positive jaws effect of 2.6 percentage points over the year, and the underlying cost/income ratio excluding SRF improved (-1.6 percentage points compared to full-year 2020, to 64.1%). Underlying gross operating income rose sharply (+10.8% compared to full-year 2020). The underlying cost of risk decreased by -41.9% in 2021 and reached -€606 million. Finally, the contribution of the Regional Banks to the underlying net income Group share reached €3,068 million over full-year 2021, up sharply (+37.6%) compared to full-year 2020.
The performance of the other Crédit Agricole Group business lines is described in detail in the section of this press release on Crédit Agricole S.A.
Crédit Agricole S.A.
Crédit Agricole S.A.’s Board of Directors, chaired by Dominique Lefebvre, met on 9 February 2022 to examine the financial statements for fourth quarter 2021.
Results
Crédit Agricole S.A. – Stated and underlying results, Q4-2021 and Q4-2020
| €m | Q4-21 stated | Specific items | Q4-21 underlying | Q4-20 stated | Specific items | Q4-20 underlying | ∆ Q4/Q4 stated | ∆ Q4/Q4 underlying |
| Revenues | 5,815 | 36 | 5,779 | 5,251 | (47) | 5,299 | +10.7% | +9.1% |
| Operating expenses excl.SRF | (3,720) | (297) | (3,423) | (3,226) | (18) | (3,208) | +15.3% | +6.7% |
| SRF | - | - | - | - | - | - | n.m. | n.m. |
| Gross operating income | 2,094 | (261) | 2,356 | 2,025 | (65) | 2,090 | +3.4% | +12.7% |
| Cost of risk | (647) | (319) | (328) | (538) | (38) | (500) | +20.2% | (34.5%) |
| Equity-accounted entities | 82 | - | 82 | 137 | 89 | 47 | (40.0%) | +73.9% |
| Net income on other assets | (9) | - | (9) | (9) | - | (9) | +1.5% | +1.5% |
| Change in value of goodwill | 119 | 119 | 0 | (903) | (903) | - | n.m. | n.m. |
| Income before tax | 1,640 | (461) | 2,100 | 712 | (916) | 1,628 | x 2.3 | +29.0% |
| Tax | 9 | 462 | (453) | (436) | 33 | (469) | n.m. | (3.5%) |
| Net income from discont'd or held-for-sale ope. | 4 | - | 4 | (96) | (97) | 1 | n.m. | n.m. |
| Net income | 1,652 | 1 | 1,651 | 179 | (981) | 1,160 | x 9.2 | +42.4% |
| Non controlling interests | (224) | (8) | (216) | (56) | 129 | (185) | x 4 | +16.9% |
| Net income Group Share | 1,428 | (7) | 1,435 | 124 | (851) | 975 | x 11.5 | +47.2% |
| Earnings per share (€) | 0.46 | (0.00) | 0.46 | 0.02 | (0.29) | 0.31 | x 29.6 | +48.2% |
| Cost/Income ratio excl. SRF (%) | 64.0% | 59.2% | 61.4% | 60.5% | +2.5 pp | -1.3 pp |
In fourth quarter 2021, Crédit Agricole S.A.’s stated net income Group share amounted to €1,428 million, a multiplication by 11.528, versus €124 million in fourth quarter 2020.
The specific items recorded this quarter included recurring volatile accounting items in revenues, such as the DVA (Debt Valuation Adjustment, i.e. gains and losses on financial instruments related to changes in the Group’s issuer spread) amounting to +€1 million in net income Group share, hedges on the Large customers loan book for €3 million in net income Group share and provisions for home purchase savings plans in the amount of +€22 million in net income Group share. In addition to these recurring items, there were items recognised in CA Italia’s results for Creval: finalisation of the recording of net badwill for €90 million in net income Group share, recording of off-balance sheet deferred tax assets for €80 million in net income Group share, technology infrastructure upgrade and IT migration costs for Creval, amounting to -€12 million in net income Group share, and other miscellaneous Creval adjustments for -€11 million in net income group share. In addition to these items, there were actions to improve the quality of CA Italia’s assets, including the impact of the disposal of a gross portfolio of €1.5bn and additional provisions on CA Italia’s portfolio for -€161 million in net income Group share, the launch of a Next Generation HR plan for CA Italia and the associated job protection plan for €97 million in net income Group share, the exceptional contribution by CA Italia to the Italian banks safeguard plan for -€13 million in net income Group share, and the “Affrancamento” gains related to exceptional tax provisions in Italy for the non-accounting revaluation of goodwill and its amortisation for €45 million in net income Group share for CA Italia. Also recognised as specific items were the Lyxor acquisition costs for -€8 million in net income Group share in asset management, transformation costs related to the Turbo project, the Caceis transformation and development plan for -€12 million in net income Group share in Asset servicing, and finally the “Affrancamento” gains in Specialised financial services for AGOS for +€66 million in net income Group share.
Specific items in fourth quarter 2020 amounted to -€851 million in net income Group share impact and included the goodwill impairment of CA Italia, with a negative impact of -€778 million on net income Group share. Also included under specific items was the reclassification of entities held for sale (CACF NL, CA Bank Romania) and the ongoing disposal project of the Private banking activities in Miami and Brazil, for a total de -€96 million on net income Group share, including on the one hand -€66 million for CACF NL and -€7 million for CA Bank Romania, and, on the other hand, -€23 million for Private banking. Specific items also included exceptional contributions related to the COVID-19 crisis: CAA's exceptional contribution for supplementary healthcare contributions in the amount of -€15 million in net income Group share and CA Italia's exceptional contribution to the Italian banks safeguard plan for -€6 million. Also included under specific items were the reversal of the provision AGCM (Italian Competition Authority) addressed to FCA Bank for +€89 million and the impact of the claw-back following the activation of Switch 2 (Insurance) for -€26 million in net income Group share. In addition to these items, there were recurring accounting volatility items, with a net negative impact of -€16 million in net income Group share, namely DVA (Debt Valuation Adjustment, i.e. gains and losses on financial instruments related to changes in the Group’s issuer spread), totalling +€13 million, the hedge on the Large customers loan book amounting to -€20 million, and the variation in the provision for home purchase savings plans amounting to -€9 million.
Excluding these specific items, the underlying net income Group share29 reached €1,435 million, up sharply by +47.2% compared to fourth quarter 2020, thanks in particular to dynamic activity in all businesses, continued positive market effects and a reduction in the cost of risk.
In fourth quarter 2021, underlying revenues reached €5,779 million, up +9.1% compared to fourth quarter 2020, and +7.3% like-for-like30. For the past five years, Crédit Agricole S.A.’s quarterly revenues have been growing steadily.
Revenues from the Asset gathering division (-3.5% compared to fourth quarter 2020 and -1.2% excluding scope effect31) were down despite dynamic management fees thanks to sustained inflows and a favourable market effect, against a backdrop of prudent provisioning of technical risks and prudent management of the financial margin in insurance. Revenues in Large customers were up (+8.6% compared to fourth quarter 2020 and +7.6% excluding scope effect32), with the normalisation of revenues in capital markets against a backdrop of weak customer demand being offset by strong growth in revenues in structured finance and commercial banking and by higher fees in Asset servicing thanks to dynamic activity. In the Specialised financial services division, revenues rose sharply (+5.6% compared to fourth quarter 2020, +4.6% excluding scope effect33). CACF’s revenues benefited from increased commercial production and insurance equipment, and from the dynamic activity in Leasing and Factoring. Retail banking revenues increased (+10.0% compared with fourth quarter 2020, and +2.9% excluding scope effect34), driven by fee and commission income at LCL and Crédit Agricole Italia. Corporate Centre revenues grew strongly compared to fourth quarter 2020, thanks in particular to the dynamism of private equity revenues (CACIF), and to the impact of inflation on the valuation of hedging swaps.
Underlying operating expenses excluding SRF rose (+6.7%) compared to fourth quarter 2020 to €3,423 million in fourth quarter 2021. On a like-for-like basis,35 this increase was reduced to +4.3% compared to 2020, representing an increase in expenses of +€136 million, mainly driven by the following types of expenses: investments and IT expenditure, particularly in CIB and Asset management (37% of the increase; approximately €50 million), variable compensation and other employee expenses, particularly at LCL and CA Italia (27% of the increase; approximately €37m), the foreign exchange impact, particularly in CIB (13% of the increase; approximately €18 million), taxes, particularly at CA Italia (10% of the increase; approximately €14 million), and other miscellaneous expenses consisting of taxes, external expenses and marketing campaigns, particularly at CACF and LCL (8% of the increase; approximately €17 million). The cost/income ratio36 excluding SRF was low at 59.2%, an improvement (-1.3 percentage points) compared to fourth quarter 2020. The Medium-Term Plan targets were already reached in Asset gathering (MTP target <48%; Q4-21 at 44.6%; 12M-21 at 45.8%), Large customers (MTP target <57%; Q4-21 at 60.9%; 12M-21 at 57.8%) and LCL (MTP target <66%; Q4-21 at 64.9%; 12M-21 at 62.2%). On a like-for-like basis and35 at current scope, Crédit Agricole SA recorded a positive jaws effect of +3.0 percentage points and +2.4 percentage points respectively in fourth quarter 2021. Within the Asset gathering division, operating expenses excluding SRF were down -2.5% at current scope and up +3.5% like-for-like37, linked to the increase in expenses in asset management (+4.4% compared to fourth quarter 2020 at current scope and +2.4% like-for-like38), which includes continued development investments, particularly in Amundi Technology, and in the insurance business line (-25.6% compared to fourth quarter 2020 at current scope and +1.4% like-for-like39). In the Large customers division, operating expenses excluding SRF were up +5.2% compared to fourth quarter 2020 at current scope and +3.6% like-for-like40, mainly due to IT investments in Corporate and Investment Banking. The Specialised financial services division saw its expenses increase by +10.3% compared to fourth quarter 2020 at current scope and by +8.3% like-for-like41, in line with the increase in activity. Retail banking’s operating expenses, excluding SRF, were up 13.8% compared to fourth quarter 2020 at current scope and up 4.4% like-for-like42. The increase was contained at LCL (+0.7% compared with fourth quarter 2020) and more marked at CA Italia (+7.2% like-for-like43 compared to fourth quarter 2020), but stable (+0.7%) excluding the contribution to the Italian guarantee deposit fund (FITD). Corporate Centre expenses decreased by €9 million compared to fourth quarter 2020.
Underlying gross operating income thus rose to €2,356 million, a +12.7% increase compared to fourth quarter 2021. Excluding scope effect,35 the increase was +11.8%, demonstrating the strength of the Universal Customer-focused Banking model with steady revenue growth and continuously improving operating efficiency over the past five years. By business line, gross operating income grew compared to fourth quarter 2020 like-for-like in Large customers (+14.3%), Specialised Financial Services (+1.0%), and French retail banking (+7.5%). The Asset gathering (-4.6%) and International retail banking (-9.5%) divisions saw a decline.
The provisioning levels were determined this quarter taking into account several weighted economic scenarios. These include a favourable scenario (French GDP at +6.0% in 2022 and +2.7% in 2023) and a less favourable scenario (French GDP at +3.0% in 2022 and +0.9% in 2023). Due to various uncertainties that were not taken into account in the economic scenarios (changes in the health situation, inflation, interest rate adjustments, etc.), an exceptional additional €88 million in provisions on performing and deteriorated loans (cost of risk S1&S2) was recorded this quarter in cost of risk (of which €44 million for CIB, €17 million for LCL, €22 million for CACF and €5 million for CALF).
The cost of risk was down by -35% compared to fourth quarter 2020 and up by +23% compared to third quarter 2021. It amounted to -€328 million versus -€500 million in fourth quarter 2020 and -€266 million in third quarter 2021 respectively. It is composed of the provisioning for performing loans (Stages 1&2) for -€20 million (versus an addition of -€193 million in fourth quarter 2020 and -€27 million in third quarter 2021) and the provisioning for proven risks (Stage 3) for -€277 million (versus -€291 million in fourth quarter 2020 and -€234 million in third quarter 2021). The cost of credit risk relative to outstandings over a rolling four-quarter period44 was 28 basis points (down -34 bp compared to fourth quarter 2020 and down -5 bp compared to third quarter 2021) and 29 basis points on an annualised quarterly basis45 (down -18 bp compared to fourth quarter 2020 and up +5 bp compared to third quarter 2021).
As at 31 December 2021, risk indicators were very strong and confirmed the high quality of Crédit Agricole S.A.’s assets and risk coverage level. The diversified loan book is mainly geared towards home loans (27% of gross outstandings) and corporates (45% of Crédit Agricole S.A. gross outstandings). The doubtful loan ratio was still low at 2.5% (down -0.7 percentage point compared to December 2020), and the coverage ratio46 was high, at 74.7% and up +3.2 percentage points compared to fourth quarter 2020. Total loan loss reserves amounted to €8.9 billion for Crédit Agricole SA at end December 2021 (up €0.7 billion compared to end December 2020), of which 34% relate to performing loans (Stage 1 & 2), compared to 22% at end 2019, an increase of €1.0 billion between end 2019 and end 2021.
By business line, this quarter saw the decrease of the NPL rate for CA Italia, which amounted to 3.7% at end December 2021 versus 6.5% at end December 2020. This decrease was due to the disposal of doubtful loans, mainly in the historical scope of CA Italia. CA Italia’s coverage ratio increased to 62.0% at end December 2021 from 60.8% at end December 2020.
The underlying contribution of equity-accounted entities amounted to €82 million, up +73.9% compared to fourth quarter 2020, reflecting the good activity within entities of consumer finance (€67 million, up +33.4% compared to fourth quarter 2020) and asset management (€21 million, up +4.7% compared to fourth quarter 2020).
Net income on other assets stood at -€9 million in fourth quarter 2021, stable by comparison at -€9 million in fourth quarter 2020.
Underlying income47 before tax, discontinued operations and non-controlling interests was therefore up +29.0%, at €2,100 million. The underlying effective tax rate stood at 22.4%(-7.2 percentage points compared to fourth quarter 2020), while the underlying tax charge increased -3.5% to -€453 million. Net income before non-controlling interests was up by +42.4%.
Non-controlling interests stood at -€216 million in fourth quarter 2021, a +16.9% increase, in line with the results of the businesses and due to a change in third quarter 2020 in Insurance in the recognition methods used for subordinated debt (RT1) coupons, without impact on net earnings per share.
Underlying net income Group share was up by +47.2% compared to fourth quarter 2020 at €1,435 million.
Underlying earnings per share in fourth quarter 2021 reached €0.46, increasing by +48.2% compared to fourth quarter 2020.
The capital position was very strong with Crédit Agricole SA’s phased-in CET1 ratio at 11.9% (11.6% fully loaded), 4.0 percentage points above SREP. It includes a retained dividend provision of €1.05 per share for the year48. The completion of the simplification of the Group’s structure with the unwinding of the remaining 50% of the Switch was achieved on 16 November 2021.
Crédit Agricole SA from stated to underlying results, 2021 and 2020
| €m | 2021 stated | Specific items | 2021 underlying | 2020 stated | Specific items | 2020 underlying | ∆ 2021/2020 stated | ∆ 2021/2020 underlying |
| Revenues | 22,657 | 7 | 22,651 | 20,500 | (264) | 20,764 | +10.5% | +9.1% |
| Operating expenses excl.SRF | (13,429) | (347) | (13,082) | (12,452) | (86) | (12,366) | +7.8% | +5.8% |
| SRF | (392) | 130 | (522) | (439) | - | (439) | (10.7%) | +18.9% |
| Gross operating income | 8,836 | (210) | 9,047 | 7,609 | (351) | 7,959 | +16.1% | +13.7% |
| Cost of risk | (1,576) | (344) | (1,232) | (2,606) | 0 | (2,606) | (39.5%) | (52.7%) |
| Equity-accounted entities | 373 | 5 | 368 | 413 | 89 | 324 | (9.7%) | +13.7% |
| Net income on other assets | (51) | (15) | (36) | 75 | - | 75 | n.m. | n.m. |
| Change in value of goodwill | 497 | 497 | 0 | (903) | (903) | - | n.m. | n.m. |
| Income before tax | 8,080 | (67) | 8,147 | 4,588 | (1,164) | 5,752 | +76.1% | +41.6% |
| Tax | (1,236) | 640 | (1,876) | (1,129) | 96 | (1,225) | +9.5% | +53.2% |
| Net income from discont'd or held-for-sale ope. | 5 | 3 | 2 | (221) | (221) | (0) | n.m. | n.m. |
| Net income | 6,849 | 577 | 6,273 | 3,238 | (1,289) | 4,527 | x 2,1 | +38.5% |
| Non controlling interests | (1,005) | (130) | (876) | (546) | 133 | (679) | +84.2% | +29.0% |
| Net income Group Share | 5,844 | 447 | 5,397 | 2,692 | (1,157) | 3,849 | x 2,2 | +40.2% |
| Earnings per share (€) | 1.84 | 0.15 | 1.69 | - | (1.20) | 1.20 | n.m. | +40.0% |
| Cost/Income ratio excl.SRF (%) | 59.3% | 57.8% | 60.7% | 59.6% | -1.5 pp | -1.8 pp |
Over the full year 2021, stated net income Group share was €5,844 million, compared to €2,692 million in 2020, i.e. a rise by a factor of 2.2 in stated net income Group share.
Specific items in full year 2021 had a positive impact of +€447 million on stated net income Group share. In addition to the fourth quarter items already mentioned above, the items from the first nine months of 2021 had a positive impact of +€454 million in net income Group share and also corresponded to recurring accounting volatility items, i.e. the DVA for +€4 million, hedges of the Large customers loan book for -€15 million, changes in provisions for home purchase savings plans for -€7 million, and the overpayment of contributions to the SRF for financial years 2016 to 2020 for +€130 million. In addition to these recurring items, the following specific items for the first nine months of 2021 were included: the recording of a provisional net badwill for Creval for +€285 million in net income Group share, Affrancamento gains within the Asset gathering, International retail banking and Specialised financial services business lines for a total of +€106 million, an additional provisioning of Creval’s performing loans for -€19 million, transformation costs related to the LCL New Generation Network project, new branch grouping at LCL and the Turbo project, Caceis transformation and development plan for a total of -€20 million, Creval acquisition costs for -€8 million, the reclassification of Serbia as assets held for sale for -€4 million, Creval integration costs for -€4 million, Kas Bank and S3 integration costs by CACEIS for -€2 million and the disposal plans in Miami and Brazil in Wealth management for -€2 million.
Excluding these specific items, underlying net income Group share reached €5,397 million, up +40.2% compared to 2020.
Underlying earnings per share stood at €1.69 per share for full-year 2021, up +37.4% compared to full-year 2020.
Underlying49 RoTE, which is calculated on the basis of underlying net income Group share, net of Additional Tier 1 coupons (return on equity Group share excluding intangibles) reached 13.1% for full-year 2021, an increase from full-year 2020 (9.3%). RoNE (Return on Net Equity) increased this year compared to 2020, in line with the increasing results.
Underlying revenues were up +9.1% compared to 2020. In addition to a scope effect of +€419 million mainly50 driven by the integration of Creval from second quarter 2021 in International Retail Banking, and to the reintegration of CACF NL following its exit from IFRS 5 status51, underlying revenues grew by +7.1% like-for-like. The increase in revenues was also due to the dynamism of the business lines. For the Asset gathering division, dynamic management fee and commission income benefited from both a favourable market effect and a dynamic inflow of funds, and the change in insurance revenues reflected prudent management of the financial margin and prudent provisioning of technical risks. In the Large customers division, revenues in capital markets normalised against a backdrop of weak customer demand, while revenues grew strongly in structured finance and commercial banking. Fees and commissions were up in Asset servicing, thanks to dynamic activity. In the Specialised financial services division, consumer finance revenues were supported by dynamic commercial production and insurance equipment, and the level of activity in leasing and factoring was sustained. In Retail banking, revenues grew by +4.5% at LCL, balanced between interest margins and fee and commission income, and fee and commission income grew at CA Italia. In the Corporate Centre division, revenues were up thanks to lower refinancing costs and volatility factors (such as the impact of inflation on the valuation of hedging swaps and, in particular in the second and third quarters of 2021, eliminations on intra-group securities underwritten by Predica and Amundi).
Underlying operating expenses excluding SRF were up by 5.8% in 2021, also including a scope effect (+€281 million52). On a like-for-like basis, costs grew by 3.5% in 2021, driven by all business lines: Asset gathering (+5.9%53), Large customers (+4.1%54), Specialised financial services (5.8%55), and Retail banking (+1.4%56). At a current scope and on a like-for-like basis, revenue growth in 2021 was higher than cost growth, generating a positive jaws effect of 3.3 points and 3.6 points respectively. The underlying cost/income ratio excluding SRF for 2021 was 57.8%, down -1.8 percentage points compared to 2020. The SRF for 2021 totalled €522 million, up 18.9% compared to first half 2020. Note that the refund of an overpayment over financial years 2016–2021 was accounted for €130 million under specific items in the first quarter 2020. Underlying gross operating income totalled €9,047 million, up +13.7% compared to 2020.
Lastly, cost of risk was down sharply (-53%/-€1,375 million), to -€1,232 million versus -€2,606 million in 2020.
The decrease was pronounced at the level of the provisions for performing loans (Stage 1 and 2) at -81%, and was due to a normalisation of the cost of risk throughout 2021 due to the decrease in uncertainties and the favourable evolution of the health situation, as shown by the improvement of the macro-economic scenario in Q4-21.
The addition of -€1,232 million in cost of risk over the year 2021 is composed into provisions for performing loans (Stage 1 and 2) for -€155 million (compared to an addition of -€817 million in 2020) and provisioning for proven risks (Stage 3) for -€993 million (compared to -€1,765 million in 2020).
The decline in the cost of risk is noticeable in all of Crédit Agricole S.A.’s business lines. LCL’s cost of risk is -€222 million in 2021, down -43% compared to 2020, with a cost of risk on rolling outstandings of 15 basis points at the end of December 2021; CA Italia’s cost of risk was -€347 million in 2021, down -19% compared to 2020, with a cost of risk on rolling outstandings of 63 basis points at the end of December 2021; CACF’s cost of risk is -€445 million in 2021, down -30% compared to 2020, with a cost of risk on outstandings of 128 basis points at the end of December 2021; finally, in Financing activities, the cost of risk for 2021 is -€74 million, down -91% compared to 2020, with a cost of risk on rolling outstandings of 6 basis points at the end of December 2021.
The underlying contribution from equity-accounted entities was up +13.7% to €368 million, with Specialised Financial Services partnerships being the main contributors.
Net income on other assets stood at -€36 million in 2021 compared to +€75 million in 2020. This contribution was mainly from the deconsolidation of CACIB’s Algerian subsidiary.
Underlying income before tax, discontinued operations and non-controlling interests was therefore up +41.7%, at €8,148 million.
The tax charge was €1,876 million, up +53.2%, with an underlying effective tax rate of 24.1%, up +1.6 percentage points compared to 2020. Underlying net income before non-controlling interests was therefore up by +38.5%.
Non-controlling interests amounted to -€876 million in 2021, up +29.0% in line with the increase in underlying income before tax, discontinued operations and non-controlling interests. Underlying net income Group share increased by +40.1% to €5,394 million.
Analysis of the activity and the results of Crédit Agricole S.A.’s divisions and business lines
Asset gathering
The business line’s assets under management stood at €2,582 billion at the end of December 2021, up 11.3% from end September 2020. Of the increase of €261 billion compared to the end of September 2021, +€147.9 billion were related to a scope effect (of which +€148 billion were related to the consolidation of Lyxor assets following the completion of the acquisition announced on 31 December 2021, and -€0.1 billion due to the exit of the Miami and Brazil activities in Wealth management), net inflows increased by +€69.0 billion, of which +€65.6 billion in Asset management, +€2.3 billion in Life insurance, and +€1.1 billion in Wealth management, and market and foreign exchange impact accounted for an increase of +€44.5 billion. Excluding scope effect, assets under management were up 4.9% from end September 2021 and 9.7% from end December 2020.
In savings/retirement, activity was dynamic and Crédit Agricole Assurances continued its commercial expansion and diversification in France and internationally. Premium income was up by +23.0% compared to fourth quarter 2020. Net inflows in fourth quarter 2021 were positive (+€2.3 billion), with positive net inflows in euros contracts (+€0.3 billion). Net UL inflows totalled €2.0 billion (i.e. an increase of +57.8% from fourth quarter 2020). The share of unit linked products in total gross inflows hit a level of 42.0%, this quarter, i.e. +5.8 percentage points compared to fourth quarter 2020.
Assets (savings, retirement and death and disability) stood at €323.0 billion, up +4.8% from December 2020 and up +1.5% from September 2021. Unit-linked outstandings reached a new all-time high of €86.6 billion this quarter, with the share of unit-linked products in outstandings totalling 26.8%, up +2.6 percentage points compared with December 2020.
Lastly, the Policy Participation Reserve (PPE57) increased over the year to €13.1 billion at 31 December 2021, which was 6.3% of total euro outstandings. The average yield58 of the Crédit Agricole Assurances group’s assets was 2.26% in 2021 (2.13% at end 2020), well above even the average guaranteed minimum rate (0.16% at end 2021, compared to 0.20%59 at end 2020) and the profit sharing rate of euro-denominated policies of 1.28% at the end of 2021, stable compared to the end of 2020.
In property and casualty insurance, business was strong in fourth quarter 2021, with growth of +5.1% in premium income compared to fourth quarter 2020. The number of property and casualty insurance policies in the Crédit Agricole Assurances portfolio reached 15.2 million at end December 2021, up +3.9% over one