Credit Agricole Sa: Third quarter and first nine months 2024 results - VERY STRONG QUARTER, 2024 INCOME TARGET CONFIRMED

Crédit Agricole Group

Group activity

The Group's commercial activity during the quarter continued at a steady pace across all business lines, with a good level of customer capture. During the third quarter of 2024, the Group recorded +482,000 new customers in retail banking, and the customer base grew by +104,000 customers. More specifically, over the quarter, the Group recorded +383,000 new customers for Retail Banking in France and +99,000 new International Retail Banking customers (Italy and Poland), and the customer base also grew (+64,000 and +40,000 customers, respectively).

At 30 September 2024, retail banking on-balance sheet deposits totalled €830 billion, up +2.8% year-on-year in France and Italy (+3.1% for Regional Banks and LCL and -0.4% in Italy). Outstanding loans totalled €876 billion, up +0.4% year-on-year in France and Italy (+0.2% for Regional Banks and LCL and +3.0% in Italy). Home loan production picked up gradually in France during this quarter, recording an increase of +20% for the Regional Banks and +73% for LCL compared to the second quarter of 2024, and -11% and +17% respectively compared to the third quarter of 2023. In Italy, home loan production was down -12% for CA Italy due to a base effect related to successful marketing campaigns in the third quarter of 2023. However, they were still up on second quarter 2024. The property and casualty insurance equipment rate¹ rose to 43.8% for the Regional Banks (+0.7 percentage points compared to the third quarter of 2023), 27.9% for LCL (+0.3 percentage point) and 20.0% for CA Italy (+1.7 percentage point).

In asset management, inflows remained healthy (+€14.4 billion excluding an insurance mandate withdrawal totalling -€11.6 billion), particularly with regard to medium/long-term assets excluding JVs (+€9 billion). Commercial momentum within JVs was also solid. In savings/retirement, Crédit Agricole Assurances posted a high level of gross inflows (€7.2 billion, up +56% year-on-year), the unit-linked rate remained high in production (32.8%), and net inflows were positive (+€1.6 billion) and growing. In property and casualty insurance, the portfolio grew by +5.1% year-on-year to 16.6 million policies. Assets under management were once again at their highest level ever, rising compared to the end of September 2023 in asset management (€2,192 billion, or +11.1%), life insurance (€343.2 billion, or +5.8%) and wealth management, which benefited from the integration of Degroof Petercam (IWM and Private Banking of LCL €274 billion, or +46.9%).

SFS business line registered an activity stable at a high level, with an increase in consumer finance outstandings at CAPFM (+5.2% compared to the end of September 2023), driven by automotive activities, which account for 53%² of total outstandings, and growth in production and leasing outstandings at CAL&F (€20.1 billion, or +8.8% compared to the end of September 2023).

Momentum is strong in Large Customers, with record revenues in corporate and investment banking (best nine-month cumulative total), with capital markets and investment banking being driven by capital market activities, and financing activities benefiting from growth in commercial banking. CACEIS also posted a high level of assets under custody (€5,061 billion, +12.1% compared to the end of September 2023) and assets under administration (€3,386 billion, +4.2% compared to the end of September 2023). It benefited during the quarter from strong commercial momentum and positive market effects.

Each of the Group's business lines posted strong activity (see Infra).

Continued support of transition

Crédit Agricole Assurances has set out its new climate commitments, announcing its target to reduce carbon intensity of its portfolio³ by -50% by 2029 (compared to 2019).

Crédit Agricole Group has also decided to participate in CDC's energy and ecological transition financing support scheme. The Group will thus be able to raise up to €5.3 billion in liquidity by November 2025, exclusively for financing new projects contributing to the energy and ecological transition.

The Group is continuing the mass roll-out of financing and investment to promote the transition. As such, the Crédit Agricole Group doubled its exposure to low-carbon energy financing⁴ between the end of 2020 and September 2024, with €21.9 billion at 30 September 2024. In addition, Crédit Agricole Assurances's financing of renewable energy production capacity increased by +17% compared to the end of 2022, representing 13.8 gigawatts at 30 June 2024.

Lastly, Crédit Agricole CIB's green loan portfolio⁵ grew by +67% between the end of 2022 and September 2024, and represented €20.7 billion at 30 September 2024.

Group results

In the third quarter of 2024, the Crédit Agricole Group's stated net income Group share came to €2,080 million, down -12.8% compared to the third quarter of 2023. This was due to significant specific items in the third quarter of 2023.

Specific items in the third quarter of 2024 had a negative net impact of -€20 million on the net income Group share of the Crédit Agricole Group. These items comprise the following recurring accounting items: recurring accounting volatility items, namely the DVA (Debt Valuation Adjustment), the issuer spread portion of the FVA, and secured lending for +€3 million in net income Group share from capital markets and investment banking, and the hedging of the loan book in Large Customers for -€1 million in net income Group share. In addition to these recurring items, there were other items specific to this quarter: ISB integration costs of -€14 million in net income Group share of Large Customers, the Degroof Petercam integration costs of -€6 million in net income Group share of Asset Gathering, and the acquisition costs of Degroof Petercam totalling -€2 million in net income Group share of private banking.

Specific items in the third quarter of 2023 had a cumulative positive impact of +€317 million in net income Group share and comprised DVA and hedging items for +€1 million under Large Customers, reversals of the Home Purchase Savings Plan provisions for +€297 million (+€38 million for LCL, +€171 million for the Corporate Centre and +€88 million for the Regional Banks), and the impact of the SFS division's Mobility⁶ business for -€26 million under the equity method and +€45 million under gains and losses on other assets.

Excluding these specific items, Crédit Agricole Group's underlying net income Group share⁷ amounted to €2,100 million, up +1.5% compared to third quarter 2023.

Crédit Agricole Group - Stated and underlying results, Q3-24 and Q3-23

The underlying cost of credit risk stood at -€801 million, a year-on-year increase of +15.6%. This figure comprises an addition of -€93 million for prudential provisions on performing loans (stages 1 and 2), an addition of -€709 million for the cost of proven risk (stage 3), the consequence of an increase in defaults in the corporate market, and additional provisioning for a number of corporate-specific files. There was also a reversal of +€1 million on other risks. The provisioning levels were determined by taking into account several weighted economic scenarios and by applying some flat-rate adjustments on sensitive portfolios. The weighted economic scenarios for the third quarter were unchanged from the second quarter, with a favourable scenario (French GDP at +1.2% in 2024, +1.5% in 2025) and an unfavourable scenario (French GDP at -0.2% in 2024 and +0.5% in 2025). The cost of risk/outstandings⁸ reached 26 basis points over a four rolling quarter period and 27 basis points on an annualised quarterly basis⁹.

Underlying pre-tax income stood at €2,912 million, a year-on-year decrease of -1.6%. This includes the contribution from equity-accounted entities of €61 million (down -3.5%) and net income on other assets, which came to -€2 million this quarter. The underlying tax charge fell by -13.8% over the period, the tax rate this quarter falling by -3.0 percentage points to 20.9%. Underlying net income before non-controlling interests was up +2.0% to €2,317 million. Non-controlling interests rose +6.5%. Lastly, underlying net income Group share was €2,100 million, +1.5% higher than in the third quarter of 2023.

Crédit Agricole Group - Stated and underlying results 9M-24 and 9M-23

Specific items for the first nine months of 2024 include the specific items of the Regional Banks for the first nine months of 2024 (+€47 million in reversals of Home Purchase Savings Plan provisions) and Crédit Agricole S.A. specific items, which are detailed in the Crédit Agricole S.A. section.

Excluding specific items, underlying net income Group share reached €6,489 million, up +8.0% compared to the first nine months of 2023.

Underlying revenues totalled €28,127 million, up +4.3% compared to the first nine months of 2023. This increase is attributable to growth in all business lines, reaching a total, excluding the Corporate Centre division, of +4.6% compared to the first nine months of 2023.

Underlying operating expenses amounted to -€16,782 million, up +6.5% excluding SRF compared to the first nine months of 2023, mainly due to higher compensation in an inflationary environment, support for business development, IT expenditure and scope effects as detailed for each division. The underlying cost/income ratio for the first nine months of 2024 was 59.7%, up +1.2 percentage points compared to the first nine months of 2023 excluding SRF. The SRF stood at -€620 million in 2023.

Underlying gross operating income totalled €11,345 million, up +7.2% compared to the first nine months of 2023.

The underlying cost of risk for the first nine months of 2024 rose to -€2,304 million (of which -€178 million in cost of risk on performing loans (stages 1 and 2), -€2,148 million in cost of proven risk, and +€22 million in other risks corresponding mainly to reversals of legal provisions), i.e. an increase of +10.0% compared to the first nine months of 2023.

As at 30 September 2024, risk indicators confirm the high quality of Crédit Agricole Group's assets and risk coverage level. The diversified loan book is mainly geared towards home loans (45% of gross outstandings) and corporates (33% of gross outstandings). Loan loss reserves amounted to €21.3 billion at the end of September 2024 (€11.7 billion for Regional Banks), 41% of which represented provisioning of performing loans (47% for Regional Banks). The prudent management of these loan loss reserves meant that the Crédit Agricole Group's overall coverage ratio for doubtful loans at the end of September 2024 was 82.8%.

Underlying net income