• Net Profit (First Nine Months): EUR5.4 billion.
• Net Profit (Q3): EUR1.7 billion, down 4.7% Q3-on-Q3, but up 8.2% when restated.
• Cost-Income Ratio: 54.4% for the first nine months.
• Return on Tangible Equity: 14.5%.
• CET1 Ratio (Credit Agricole SA): 11.7%, up 10 bps.
• CET1 Ratio (Group): 17.4%, up 10 bps.
• Customer Base Growth: Net increase of over 100,000 customers in Q3.
• Underlying Revenues (Q3): Up 7%, an increase of EUR425 million.
• Asset Gathering Revenues: Up EUR214 million.
• Large Customers' Activities Revenues: Increase of EUR166 million, organic growth.
• Retail Banking Revenues: Slight decrease of EUR36 million, but slightly up when restated.
• Corporate Center Revenues: Decrease of EUR187 million, but significantly up when restated.
• Cost of Risk: Stable, with variations across business lines.
• NPL Ratio (CASA): 2.5%; Group level: 2.2%.
• Coverage Ratios: Above 70% at CASA, above 80% at group level.
• Liquidity Reserves: EUR466 billion.
• Dividend Accrued: EUR0.83 per share by end of Q3.

• Warning! GuruFocus has detected 3 Warning Sign with CRARF.

Release Date: November 06, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Credit Agricole SA (CRARF) reported a net profit of EUR 5.4 billion for the first nine months of 2024, with a third-quarter net profit of EUR 1.7 billion.
• The company's cost-income ratio remains strong at 54.4%, and its return on tangible equity is comfortably above the target at 14.5%.
• Credit Agricole SA (CRARF) attracted close to 500,000 new customers in its retail banks across Europe, with a net increase of over 100,000 customers.
• Amundi, a subsidiary of Credit Agricole SA (CRARF), reached a record level of assets under management, contributing to strong performance in asset management.
• The CET1 ratio for Credit Agricole SA (CRARF) increased by 10 basis points to 11.7%, indicating a strong capital position.

Negative Points

• The net profit for the third quarter was down 4.7% year-on-year, although it was up 8.2% when adjusted for specific provisions.
• The insurance segment experienced revenue volatility due to crop insurance impacts, raising concerns about future earnings stability.
• The cost of risk increased slightly in the retail banking activities in France, particularly among self-employed professionals.
• The specialized financial services division showed stable revenues, with ongoing challenges in passing increased refinancing rates to customers.
• The corporate tax surcharge in France is expected to impact profitability, with historical references suggesting a potential EUR 300 million extra charge.

Q & A Highlights

Q: What impact do you expect from the increased corporate tax in France, given that Credit Agricole makes about 40% of its income there? A: Jerome Grivet, Deputy CEO, explained that the exact impact is difficult to determine due to uncertainties in the rules and taxable results. He referenced a similar situation in 2017, where the total extra charge was around EUR300 million, split between regional banks and Credit Agricole SA. This figure serves as a rough estimate for potential impact.

Q: How do you see the earnings evolving in the insurance sector, given the volatility due to crop insurance impacts? A: Jerome Grivet noted that despite revenue volatility, the net profit for Credit Agricole Assurance increased by 16% in the quarter and 11% for the first nine months. He emphasized that while climate change may increase claims, pricing adjustments should maintain profitability. The guidance remains for mid-single-digit growth in net profit.

Q: Can you explain the increase in RWA at LCL despite minimal loan growth? A: The increase in RWA at LCL is primarily due to downgrades in internal models for corporate and SME exposures, reflecting normal volatility in response to economic conditions. This is not expected to be a recurring trend every quarter.

Q: Why is there a shift from AT1 to Tier 2 debt in Credit Agricole Assurance's financial structure? A: The shift is part of a strategic move to optimize the financial structure. AT1 coupons are accounted for as minority interest, while Tier 2 coupons are deducted from revenue. This transition is expected to have a minor impact on revenue, with a run rate effect of around EUR15 million.

Q: What is driving the optimism in French home loan demand, and how reliant is it on interest rate movements? A: Jerome Grivet expressed cautious optimism based on recent data showing increased production of new home loans. Factors include decreased rates, stabilized home prices, and increased borrower purchasing power due to salary increases. The expectation is for continued improvement, independent of short-term rate fluctuations.

Q: What are the growth prospects for the fleet leasing business in the next few years? A: Growth in the fleet leasing business is supported by new agreements with Stellantis, despite a challenging car market. The business is expected to continue building its portfolio, although market conditions remain uncertain.

Q: How is the consumer finance business performing in terms of revenue yield and margin recovery? A: The consumer finance business experienced a significant increase in refinancing costs 1.5 to 2 years ago, impacting margins. While new loan margins have improved, the overall margin recovery on outstanding loans is ongoing. The business remains sensitive to market rate changes.

Q: How does Credit Agricole account for climate change risks in its credit risk assessments? A: Credit Agricole incorporates climate change impacts into credit risk assessments, aligning with ECB requirements for materiality assessments. This involves evaluating the potential effects on customer creditworthiness and adjusting credit criteria accordingly.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.