Credit Agricole(CRARY) - 2024 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - For the first half of 2024, the company reported a net profit of €3.7 billion, which is an increase of 14% compared to the previous year, while the quarterly net profit for Q2 2024 was €1.8 billion, down 10% year-over-year [2][4] - The cost-income ratio was reported at 53.4% for the first half and 53.2% for the quarter, indicating efficient cost management [3] - The return on tangible equity was above 15%, specifically at 15.5%, significantly exceeding the medium-term target of 12% [3] - The CET1 ratio stood at 11.6%, down 20 basis points from the end of Q1 2024, but still above the target of 11% [3][16] Business Line Data and Key Metrics Changes - Retail banking activities showed good customer acquisition and an increase in customer deposits in France and Italy, with a slight stabilization in home loan activity [5][6] - Consumer finance loans, particularly for car financing, remained strong with new loan production around €12 billion for the quarter [6] - Insurance activities experienced significant growth in life insurance inflows and steady growth in premium income for property and casualty insurance [6][36] - Asset management activities reached record levels in terms of inflows and assets under management [7] Market Data and Key Metrics Changes - The company noted a slight increase in production of new corporate loans in France, while retail banking abroad saw significant growth in new loans [5][6] - Customer deposits in retail banking in France showed signs of stabilization, with a slight rebound in site deposits after a period of decline [18][30] Company Strategy and Development Direction - The company aims to exceed its initial net profit forecast of €6 billion for 2025, now targeting it for 2024 [2] - Management emphasized the importance of maintaining competition in the banking sector, especially in light of potential new levies in Italy [20] - The company is open to further consolidation opportunities in specialized business lines, while remaining cautious about large cross-border retail bank consolidations [21] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving the net profit target for 2024, despite normal seasonal fluctuations expected in Q3 and Q4 [60] - The impact of recent ECB rate cuts was noted as modest, with potential implications for home loan pricing and competition among banks [58][59] - The company remains vigilant regarding the economic environment and consumer behavior, particularly in relation to political uncertainties in France [41] Other Important Information - The company reported a stable cost of risk, with non-performing loans (NPL) remaining at 2.2% and a high coverage ratio [13][14] - The liquidity situation remains strong, with liquidity reserves close to €480 billion and customer deposits continuing to grow [17] Q&A Session Summary Question: Comments on potential new solidarity levy for Italian banks - Management stated that while new levies could impact all banks, it is not seen as a game changer and competition must be maintained [20] Question: Consolidation plans in Europe - Management indicated that consolidation opportunities would focus on specialized business lines rather than large commercial banks due to existing headwinds [21] Question: Update on Degroof Petercam integration - Management confirmed that integration costs are modest at €5 million, with an expected contribution to net profit of €150 million to €200 million by 2028 [22] Question: Impact of regulatory changes on capital - Management discussed the neutral impact of Basel IV and the phasing out of IFRS 9, with some expected negative impacts in Q4 2024 [27][28] Question: Outlook for French retail banking - Management noted a positive outlook for net interest income, driven by stabilization in customer deposits and a reduction in the cost of regulated savings accounts [30][31] Question: Strength in the insurance business - Management highlighted strong commercial momentum in insurance, particularly in life insurance, despite complexities from IFRS 17 [36] Question: Performance in consumer finance - Management attributed strong performance in consumer finance to investments in mobility financing and improved margins due to reduced refinancing costs [51]