CREDIT AGRICOLE SA: First quarter 2023 results - Excellent results of the "multi-universal" banking model
| EXCELLENT RESULTS OF THE “MULTI-UNIVERSAL” BANKING MODEL | |||||||||
| CAG AND CASA STATED AND UNDERLYING DATA Q1-2023 | |||||||||
| CRÉDIT AGRICOLE S.A. | CRÉDIT AGRICOLE GROUP | ||||||||
| Stated | Underlying | Stated | Underlying | ||||||
| Revenues | €6,121m +9.6% Q1/Q1 | €6,153m +10.4% Q1/Q1 | €8,927m +0.5% Q1/Q1 | €8,959m +1.8% Q1/Q1 | |||||
| Expenses | -€3,841m +1.9% Q1/Q1 | -€3,841m +2.4% Q1/Q1 | -€5,909m +0.6% Q1/Q1 | -€5,909m +0.9% Q1/Q1 | |||||
| incl. SRF | -€513m -19.4% Q1/Q1 | -€513m -19.4% Q1/Q1 | -€626m -21.2% Q1/Q1 | -€626m -21.2% Q1/Q1 | |||||
| Gross Operating Income | €2,280m +25.6% Q1/Q1 | €2,312m +26.8% Q1/Q1 | €3,018m +0.4% Q1/Q1 | €3,049m +3.6% Q1/Q1 | |||||
| Cost of risk | -€374m -49.5% Q1/Q1 | -€374m -31.4% Q1/Q1 | -€548m -38.3% Q1/Q1 | -€548m -21.0% Q1/Q1 | |||||
| Net income Group share | €1,226m x2.1 Q1/Q1 | €1,249m +61.5% Q1/Q1 | €1,669m +23.6% Q1/Q1 | €1,692m +12.6% Q1/Q1 | |||||
| C/I ratio (excl. SRF) | 54.4% -1.7 pp Q1/Q1 | 54.1% -1.8 pp Q1/Q1 | 59.2% +2.0 pp Q1/Q1 | 59.0% +1.4 pp Q1/Q1 | |||||
ATTRACTIVE UNIVERSAL BANKING: STRONG ACTIVITY IN ALL BUSINESS LINES
SOLID UNIVERSAL BANKING: SOLID CAPITAL AND LIQUIDITY POSITIONS
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| Dominique Lefebvre, Chairman of SAS Rue La Boétie and Chairman of the Crédit Agricole S.A. Board of Directors “The strength of our results commits us. The Group continues to play a leading role in actively supporting the economy and in accompanying major societal transitions locally. I would like to thank all our customers for their trust, as well as all the Group's employees and elected representatives, who are mobilised every day to provide a comprehensive, local response to all their needs.” | |
| Philippe Brassac, Chief Executive Officer of Crédit Agricole S.A. “Crédit Agricole is a "multi-universal" bank: active in all types of markets, in all regions, serving the greatest number of people, and organised to provide a global response to its customers' needs under a long-term relationship. Our naturally hyper-inclusive model by nature allows us to regularly present excellent commercial and financial results, as it is the case again this quarter. These results bear witness to our commercial utility, to the extreme diversification of our model, and of course to the remarkable commitment of all our teams.” | |
This press release comments on the results of Crédit Agricole S.A. and those of Crédit Agricole Group, which comprises the Crédit Agricole S.A. entities and the Crédit Agricole Regional Banks, which own 57.1% of Crédit Agricole S.A. Please See Appendixes of this press release for details on specific items, which are restated in the various indicators to calculate underlying net income.
Crédit Agricole Group
Group activity
The Group recorded a strong commercial activity over the quarter across all business lines thanks to the customer focused banking model. Gross customer capture has been dynamic. In the first quarter of 2023, the Group recorded +555,000 million new customers in retail banking, and the customer base continued to grow (+145,000 customers) in line with the MTP Ambitions 2025 targets. More specifically, over the quarter, the Group recorded +426,000 new Retail banking customers in France and +129,000 new International retail banking customers (Italy and Poland), and the customer base also grew (+78,000 and +67,000 customers respectively). Inflows remained stable over the quarter for all entities, with total net inflows at Amundi of -€11.1 billion affected by a few outflows on institutional assets with very low margins but including positive retail inflows (excluding JV and China) of +€4.3 billion. At CA Assurances, there were record unit-linked inflows of +€2.4 billion and positive net inflows of +€0.7 billion in Wealth Management (Indosuez Wealth Management and LCL Private Banking). At constant scope (excluding La Médicale), property and casualty insurance premium income increased by +9% compared to March 2022 and personal protection insurance premium income increased by +6% over the same period. Business was also highly dynamic in corporate and investment banking (underlying revenues up +20.9% compared to first quarter 2022). Underlying revenues in capital markets and investment banking increased by +36.8% with excellent activity in all product lines and particularly in the FICC business (+41.8%). Financing activities also recorded an increase in underlying revenues of +6.1%, driven by the performance of structured finance (+7.1%). In Retail banking, loan production was down over the quarter in a context of increased customer production rates, with €35 billion in new loans at Regional Banks, LCL and CA Italia1 (-10.6% compared with the first quarter of 2022). However, loans production is dynamic on professionals market with an increase, compared with the first quarter 2022, of +4.7% at Regional Banks (professionals and corporates), +6.2% for LCL and +25.7% for CA Italia (professionals and corporates). On home loans, production is declining in a bearish market2. In France, new home loans granted by the Regional Banks and LCL fell by -16.0%. At CA Italia home loans production fell by -21.3%. The insurance equipment rate3 was high in Retail banking at the end of March 2023 and increased compared to the first quarter of 2022, standing at 42.9% for Regional Banks (+0.5 point), 27.4% for LCL (+0.9 point) and 17.3% for CA Italia, including Creval (+2.2 points). Finally, Retail banking deposits were stable over the quarter. As a result, on-balance sheet customer assets within Regional Banks, LCL and CA Italia amounted to €793 billion at the end of March 2023 (+0.4% compared to the end of December 2022, of which
-0.1% for Regional Banks, +2.3% for LCL and -0.6% for CA Italia). Finally, the SFS division also recorded a good level of activity, with CACF’s consumer finance production up +15.8% compared to the first quarter of 2022, driven by the dynamism of the car channel (+38.5%), and CAL&F’s factoring production up +5.8%.
Each of the Group’s business lines posted strong levels of activity (see Infra).
Implementation of the medium-term strategy
In the first quarter of 2023, the Group continued to implement its Medium-Term Plan. Growth drivers were set in motion and stay the first Group priority. Business units continue to develop themselves with a dynamic activity this quarter. In 2023, the Group complemented this growth with strategic operations that will strengthen its position as a major player in mobility in Europe, but also in property services and payment services in France.
Firstly, on 4 April 2023, Crédit Agricole Consumer Finance announced the finalisation of its agreement with Stellantis, leading to the creation of a new 50/50 Leasys JV by pooling the activities of Leasys and Free2Move Lease, allowing Crédit Agricole to become one of the top five European players in long-term car rental, with a target of more than 1 million vehicles under long-term rental by 2026; secondly, Crédit Agricole Auto Bank was created, an entity resulting from Crédit Agricole Consumer Finance’s 100% takeover of FCA Bank and Drivalia (car rental and car sharing), to create a pan-European leader in multi-brand automotive financing, independent of any manufacturer and backed by the Crédit Agricole Group, with a target of €10 billion in outstanding car financing by 2026. In addition, on 23 March 2023, Crédit Agricole Consumer Finance and Stellantis announced their intention to acquire the activities of six European subsidiaries of ALD Automotive and LeasePlan, together representing a fleet of more than 100,000 vehicles (and total outstandings of €1.7 billion): the Leasys joint venture will take over the activities of ALD in Portugal and of LeasePlan in Luxembourg for a total of approximately 30,000 vehicles; Crédit Agricole Auto Bank will take over the activities of ALD in Ireland and Norway and of LeasePlan in the Czech Republic and Finland for a total of over 70,000 vehicles. The Crédit Agricole Auto Bank takeover will have a neutral impact on CET1 (the RWA increase linked to the consolidation being offset by a synthetic securitisation). On the other hand, the total impact of the acquisition of ALD’s and LeasePlan’s activities on CASA’s CET1 ratio in 2023 will be less than -10 bps in 2023.
In addition, on 20 April 2023, the Crédit Agricole Group announced that it had entered into exclusive negotiations with Worldline in order to establish a long-term strategic partnership in the field of payment services for merchants in the French market. This transaction, which brings together two major French groups, each a leader in their respective markets, is fully in line with the strategic guidelines of the MTP Payments 2025, in particular the objective of doubling the growth rate of the payment services business for merchants.
Lastly, Crédit Agricole Immobilier’s acquisition of Sudeco, a property management player (property management, rental and technical management) specialising in commercial real estate, announced on 14 March 2023, will allow the Group to become the fourth largest institutional property management player in France (in terms of gross revenues), accelerating its strategic ambition to join the top three in the sector by 2025. This transaction will have a negligible negative impact on the CET1 of Crédit Agricole S.A. and the Crédit Agricole Group.
Group results
In the first quarter of 2023, Crédit Agricole Group’s stated net income Group share came to €1,669 million, up +23.6% compared to the first quarter of 2022.
Specific items in the first quarter of 2023 had a negative net effect of -€24 million on Crédit Agricole S.A.’s net income Group share. These include the following recurring accounting items: recurring accounting volatility items in revenues, such as the DVA (Debt Valuation Adjustment), the issuer spread portion of the FVA, and secured lending for -€6 million in net income Group share on capital markets and investment banking, and the hedging of the loan book in the Large customers segment for -€18 million in net income Group share.
Excluding these specific items, Crédit Agricole Group’s underlying net income Group share4 amounted to €1,692 million, up +12.6% compared to the first quarter of 2022.
| Crédit Agricole Group – Stated and underlying results, Q1-2023 and Q1-2022 |
| €m | Q1-23 stated | Specific items | Q1-23 underlying | Q1-22 stated | Specific items | Q1-22 underlying | ∆ Q1/Q1 stated | ∆ Q1/Q1 underlying |
| Revenues | 8,927 | (32) | 8,959 | 8,882 | 79 | 8,802 | +0.5% | +1.8% |
| Operating expenses excl. SRF | (5,284) | - | (5,284) | (5,082) | (18) | (5,064) | +4.0% | +4.3% |
| SRF | (626) | - | (626) | (794) | - | (794) | (21.2%) | (21.2%) |
| Gross operating income | 3,018 | (32) | 3,049 | 3,005 | 61 | 2,944 | +0.4% | +3.6% |
| Cost of risk | (548) | - | (548) | (888) | (195) | (693) | (38.3%) | (21.0%) |
| Equity-accounted entities | 108 | - | 108 | 108 | - | 108 | (0.3%) | (0.3%) |
| Net income on other assets | 4 | - | 4 | 13 | - | 13 | (68.8%) | (68.8%) |
| Change in value of goodwill | - | - | - | - | - | - | n.m. | n.m. |
| Income before tax | 2,581 | (32) | 2,613 | 2,238 | (134) | 2,372 | +15.4% | +10.2% |
| Tax | (711) | 8 | (719) | (703) | (15) | (688) | +1.1% | +4.5% |
| Net income from discont'd or held-for-sale ope. | 2 | - | 2 | 1 | (4) | 5 | +29.1% | (64.2%) |
| Net income | 1,872 | (24) | 1,896 | 1,536 | (153) | 1,689 | +21.9% | +12.3% |
| Non controlling interests | (204) | - | (204) | (186) | (0) | (185) | +9.5% | +9.8% |
| Net income Group Share | 1,669 | (24) | 1,692 | 1,350 | (153) | 1,504 | +23.6% | +12.6% |
| Cost/Income ratio excl. SRF (%) | 59.2% | 59.0% | 57.2% | 57.5% | +2.0 pp | +1.4 pp |
In the first quarter of 2023, underlying revenues amounted to €8,959 million, up +1.8% compared to the first quarter of 2022, thanks to sustained activity in all business lines, and due to the positive impact of the rise in rates on the revenues of International retail banking in particular, and despite the rise in interest rates impacting Retail banking and consumer finance in particular. Underlying operating expenses excluding the Single Resolution Fund (SRF) rose by +4.3% in the first quarter of 2023 to €5,284 million, due in particular to the support of the development of the business lines and IT expenses, but also to the increase in compensation in an inflationary context. Overall, the Group’s underlying cost/income ratio excluding SRF recorded an increase of +1.4 percentage points to 59.0% in the first quarter of 2023. The underlying gross operating income was up +3.6% compared to first quarter 2022, reaching €3,049 million. Under IFRS 17 implementation, the impact of internal margin reclassified on Group revenues is equal to -€746 million and represent an improvement of -€746 million on expenses on first quarter 2023. This impact is accounted for in Corporate Center.
The underlying cost of credit risk improved, standing at -€548 million, including -€67 million in cost of risk on performing loans (stage 1 and 2), -€464 million in cost of proven risk (stage 3), and -€16 million in other risks, i.e. a decrease of -21.0% compared to the first quarter of 2022. The provisioning cost related to the war in Ukraine amounted to -€56 million in the first quarter of 2023, including -€46 million on performing loans5 and -€10 million for proven risk. Excluding this effect, provisioning remained limited on performing loans at -€21 million and amounted to -€454 million for proven risk. The provisioning levels were determined by taking into account several weighted economic scenarios, as in previous quarters, and by applying adjustments on sensitive portfolios. The weighted economic scenarios for the first quarter have not been updated, with a favourable scenario (French GDP at +1.2% in 2023, +2.1% in 2024) and an unfavourable scenario (French GDP at -1.6% in 2023 and +2.0% in 2024). The cost of credit risk on outstandings6 over a rolling four-quarter period stood at 23 basis points, which is in line with the 25 basis point assumption of the Medium-Term Plan. It stands at 19 basis points on a quarterly annualised basis7.
Underlying pre-tax income stood at €2,613 million, a year-on-year increase of +10.2%. The underlying pre-tax income included the contribution from equity-accounted entities for €108 million (stable at -0.3%) and net income on other assets, which came to €4 million this quarter. The underlying tax charge was up +4.5% over the period. Underlying net income before non-controlling interests was up +12.3% to €1,896 million. Non-controlling interests rose +9.8%. Lastly, underlying net income Group share was €1,692 million, +12.6% higher than in the first quarter of 2022.
Regional Banks
The Regional Banks’ activity was strong in Q1-23. Gross customer capture increased by +321,000 new customers and the customer base grew by +54,000 new customers since the beginning of the year. The share of customers using digital tools increased to 74.9%8 (+1.9 percentage points compared to end-March 2022) and the number of online signatures9 increased by +60% between the first quarter of 2022 and the first quarter of 2023.
Loan production fell this quarter by -6.2% compared to first quarter 2022. The decline is sharp in home loans (-14.3% compared to the first quarter of 2022), but this decline remains lower than that of the market10. Production remains dynamic in specialised markets11 (+4.7% compared to the first quarter of 2022). Furthermore, since the third quarter of 2022, the average customer loan production rate12 has been higher than the average loan outstandings rate. The home loan production rate13 is up14 compared to the fourth quarter of 2022, and the average rate for 20-25 year lending reached 3.0% in early April 2023. Loan outstandings reached €637 billion at the end of March 2023, up +5.5% compared to the end of March 2022 (+1.0% compared to the end of December 2022) driven by the corporate market (+8.9% compared to the fourth quarter of 2022).
Total customer assets rose by +2.6% year on year to €861 billion at end-March 2023. This growth was driven by on-balance sheet deposits, which reached €576 billion at end-March 2023, up +3.1% compared to end-March 2022 (including +11.4% for passbook accounts and +37% for term deposits). Off-balance sheet customer assets reached €285 billion, up +1.6% over the quarter.
In the first quarter of 2023, the Regional Banks’ stated revenues stood at €3,333 million, down -9.6% compared with the first quarter of 2022, due to a decline in the intermediation margin and an increase in refinancing costs. Portfolio revenues are up, benefiting from positive market effects. Fee and commission income is up by +1.6%. Operating expenses excluding SRF increased +4.9%, largely due to the increase in employee expenses. Underlying gross operating income fell by -35.2%. The cost of risk increased by +18.3% compared to the first quarter of 2022 to -€172 million. It is composed of a +€8 million reversal on performing loans and a -€180 million addition on Non-Performing Loans.
The stated net income Group share of the Regional Banks was €420 million in the first quarter of 2023, down -45.5% compared to the first quarter of 2022. The underlying net income Group share of the Regional Banks was €420 million, down -41.6% compared to the first quarter of 2022.
Specific items in the first quarter of 2023 had no impact on the Regional Banks’ stated net income Group share. In the first quarter of 2022, specific items had a positive impact of +€52 million on the Regional Banks’ stated net income Group share (positive impact of the provision for home purchase savings of +€70 million).
The Regional Banks’ consolidated net income, including the SAS Rue La Boétie dividend15, amounted to €435 million in the first quarter of 2023, down -44.1% compared to the first quarter of 2022.
Crédit Agricole S.A.
Results
Crédit Agricole S.A.’s Board of Directors, chaired by Dominique Lefebvre, met on 9 May 2023 to examine the financial statements for the first quarter of 2023.
Résultats consolidés de Crédit Agricole S.A. au T1-2023 et au T1-2022
| €m | Q1-23 stated | Specific items | Q1-23 underlying | Q1-22 stated | Specific items | Q1-22 underlying | ∆ Q1/Q1 stated | ∆ Q1/Q1 underlying |
| Revenues | 6,121 | (32) | 6,153 | 5,584 | 10 | 5,575 | +9.6% | +10.4% |
| Operating expenses excl.SRF | (3,328) | - | (3,328) | (3,133) | (18) | (3,114) | +6.2% | +6.9% |
| SRF | (513) | - | (513) | (636) | - | (636) | (19.4%) | (19.4%) |
| Gross operating income | 2,280 | (32) | 2,312 | 1,815 | (9) | 1,824 | +25.6% | +26.8% |
| Cost of risk | (374) | - | (374) | (740) | (195) | (545) | (49.5%) | (31.4%) |
| Equity-accounted entities | 86 | - | 86 | 95 | - | 95 | (9.8%) | (9.8%) |
| Net income on other assets | 4 | - | 4 | 10 | - | 10 | (61.0%) | (61.0%) |
| Change in value of goodwill | - | - | - | - | - | - | n.m. | n.m. |
| Income before tax | 1,996 | (32) | 2,028 | 1,180 | (204) | 1,383 | +69.2% | +46.6% |
| Tax | (521) | 8 | (530) | (401) | 3 | (404) | +30.1% | +31.2% |
| Net income from discont'd or held-for-sale ope. | 2 | - | 2 | 1 | (4) | 5 | n.m. | n.m. |
| Net income | 1,476 | (24) | 1,500 | 780 | (205) | 985 | +89.2% | +52.3% |
| Non controlling interests | (250) | 1 | (251) | (209) | 0 | (209) | +19.6% | +19.7% |
| Net income Group Share | 1,226 | (23) | 1,249 | 571 | (204) | 776 | x 2.1 | +61.1% |
| Earnings per share (€) | 0.36 | (0.01) | 0.37 | 0.15 | (0.07) | 0.22 | x 2.4 | +69.6% |
| Cost/Income ratio excl. SRF (%) | 54.4% | 54.1% | 56.1% | 55.9% | -1.7 pp | -1.8 pp | ||
| Net income Group Share excl. SRF | 1,680 | (23) | 1,703 | 1,137 | (204) | 1,341 | +47.8% | +27.0% |
In the first quarter of 2023, Crédit Agricole S.A.’s stated net income Group share amounted to €1,226 million, a 2.1-fold increase compared with the first quarter of 2022.
Specific items for this quarter had a cumulative impact of -€23 million on net income Group share, and included the following recurring accounting items: recurring accounting volatility items in revenues, such as the DVA (Debt Valuation Adjustment), the issuer spread portion of the FVA, and secured lending for -€6 million in net income Group share on capital markets and investment banking, and the hedging of the loan book in the Large customers segment for -€17 million in net income Group share.
Excluding specific items, underlying net income Group share16 stood at €1,249 million in first quarter 2023, a +61.1% rise over first quarter 2022.
In the first quarter 2023, underlying revenues reached at €6,153 million, up sharply by +10.4% compared to first quarter 2022. This growth was driven by the dynamism of the Asset Gathering (+11.3%) and Large customers (+19.9%) divisions, while Retail banking and the SFS division were penalised by rising interest rates.
Underlying operating expenses totalled €3,841 million in first quarter 2023, an increase of +2.4% compared to first quarter 2022. Excluding SRF, it totalled €3,328 million in first quarter 2023, an increase of €214 million, or +6.9% (and +6.3% for the expenses of the business lines, excluding Corporate Centre). The jaws effect was positive by +3.5 percentage points. Stated operating expenses (excluding SRF) up by +6.2% (+€195 million), explained by the increase of employee expenses of +€77 million especially for Asset Management, Large Customers divisions and LCL, and a +€97 million provision for variable compensation and bonuses (particularly in Corporate and Investment Banking).
The underlying cost/income ratio excluding SRF in first quarter 2023 thus stood at 54.1%, an improvement of -1.8 percentage points compared to first quarter 2022.
Gross underlying operating income for first quarter 2023 totalled €2,312 million, up +26.8% and +28.3% for the business lines excluding the Corporate Centre.
As at 31 March 2023, risk indicators confirm the high quality of Crédit Agricole S.A.’s assets and risk coverage level. The diversified loan book is mainly geared towards home loans (28% of gross outstandings) and corporates (45% of Crédit Agricole S.A. gross outstandings). The Non Performing Loans ratio remained stable and low at 2.7%. The coverage ratio17 was high at 70.8%, up +0.8 percentage points over the quarter. Loan loss reserves amounted to €9.4 billion for Crédit Agricole S.A., relatively unchanged (+0.2%) compared to end December 2022. Of those loan loss reserves, 36% were for performing loan provisioning. Loan loss reserves for performing loans are higher by €1.4 billion compared with the fourth quarter of 2019.
The underlying cost of risk shows a net addition of -€374 million, i.e. an improvement of 31.4% (-€171 million) compared to the first quarter of 2022, which amounted to -€545 million and was characterised in particular by a provision of -€389 million linked to the war in Ukraine. In the first quarter of 2023, the expense of -€374 million consisted of the provisioning for performing loans (Stages 1 and 2) for -€75 million (versus -€356 million in first quarter 2022) the provisioning for proven risks (Stage 3) for -€284 million (versus -€161 million in first quarter 2022), and -€15 million in other corresponding items. Excluding the provisioning of -€56 million relating to the war in Ukraine (of which -€46 million on performing loans18 and -€10 million for proven risk), provisioning remained limited in the first quarter of 2023, i.e. -€29 million on performing loans and -€274 million for proven risk. In first quarter 2023, the cost of risk relative to outstandings over a rolling four-quarter basis19 was 28 basis points, and was 30 basis points on an annualised quarterly basis20.
The underlying contribution of the equity-accounted entities stood at €86 million in first quarter 2023, down -9.8% from first quarter 2022. Net income on other assets stood at €4 million in first quarter 2023, down -€6 million compared to