Credit Agricole Sa: Results third quarter 2020 - Very robust, the Group is, more than ever, committed to strongly support its customers and the economy
*Very robust, the Group is, more than ever, committed to strongly support its customers and the economy*
*CAG and CASA REPORTED DATA**
**Revenues and gross operating income up for the quarter*
* * * * * * * * *CRÉDIT AGRICOLE GROUP* *CRÉDIT AGRICOLE S.A.*
Revenues *€8,468m* +3.1% Q3/Q3 * * *€5,151m* +2.4% Q3/Q3
Expenses *€5,096m* -2.4% Q3/Q3 * * *€2,991m* -1.1% Q3/Q3
Gross operating income *€3,372m* +12.5% Q3/Q3 * * *€2,160m* +7.8% Q3/Q3
Cost of risk *€596m* x1.6 Q3/Q3 * * *€605m* x1.7 Q3/Q3 96% of the hike related to performing loans 71% of the hike related to performing loans
Net income Group share *€1,769m* -4.3% Q3/Q3 * * *€977m* -18.5% Q3/Q3
Cost/income ratio (excl. SRF) *60.2%* -3.3pp Q3/Q3 * * *58.1%* -2.1pp Q3/Q3
*CASA UNDERLYING DATA**
**Increase in gross operating income (+5.2%) and resilient net income Group share (-8.8%) over 9 months excl. single resolution fund (SRF)*
*Financial solidity: CET1 ratios well above SREP requirements *
* * * * * * * * *CRÉDIT AGRICOLE GROUP* *CRÉDIT AGRICOLE S.A.*
Phased-in CET1 *17.0%* +0.9pp Q3/Q2 * * *12.6%* +0.6pp Q3/Q2 +8.1pp above SREP
Includes 16bp in dividends not distributed in 2020 +4.7pp above SREP
Includes 60bp in dividends not distributed in 2020 *€404bn in liquidity at *end-Sept. 20 * * *Dividend €0.40 * Per share over the 9M-20 * * * *
*Strength of the model : business has returned to its pre-crisis level *
* * * * * * * * *CRÉDIT AGRICOLE GROUP* *CRÉDIT AGRICOLE S.A.* *Loans outstanding in French retail banking: +5.1% excl. state-guaranteed loans*
*+1,113,000 retail banking customers (9M-20)*
*51m Group customers, 24 strategic partnerships * * * *New property and casualty insurance policies*
*+30% Sept/Sept *
* *
*Capital markets revenues (+24.8% Q3)* * * * *
*HIGHLIGHTS*
* *
*Strategic operations*
CAA’s equity interest in GNB Seguros increased to 100%, agreement with Europ Assistance in France, licence for the Amundi-Bank of China wealth management joint venture Continuation of strategic refocusing: reclassification of CACF NL as an asset held for sale, sale of the equity stake in Bankoa and of the residual stake in Banque Saudi Fransi (BSF)
* *
*State-guaranteed loans (SGL) and payment holidays* €29.5bn in state-guaranteed loans, +5.1% vs June-20, more than 50% of state-guaranteed loans placed in demand deposits. 173,500^1 active payment holidays, -69% since end-June, 97% of expired payment-holidays have resumed payments^2
*Dominique Lefebvre, *
Chairman of SAS Rue La Boétie and Chairman of the Crédit Agricole S.A. Board of Directors
“ Our third quarter results are very robust. They allow us to be, more than ever, committed to strongly support our customers and the economy. This is our “Raison d’être” and our model.».
*Philippe Brassac,*
Chief Executive Officer of Crédit Agricole S.A.
“Together, we must do everything to support the greatest possible number of people. We must not give up, because this crisis will come to an end. Thanks to its robustness, Crédit Agricole will assist those sectors that have been particularly weakened, and help them through towards next recovery.”
**Crédit Agricole Group**
*The Group, number one supporter of the economy since the beginning of the crisis*
The crisis, along with the public health conditions that are here for some time, are bringing the Group even closer to its customers. Net Promotor Score (NPS) was up in 2020 compared to 2019 for the Regional Banks and for LCL (+7 points vs 2019 at +8 and +2 respectively), as well as for CA Italia (+8 points vs 2019), which is currently the No. 2 bank in Italy in terms of customer satisfaction.
The Group is also fully committed to support its customers. From the outset it conformed itself with the strategies pursued by the public authorities and is taking targeted measures for each customer category. On 6 March, Crédit Agricole Group granted a *six-month payment holiday* on loan repayments for corporate, and professional customers impacted by COVID-19. As at 16 October 2020, a total of 173,500 moratoria were still active at the Regional Banks and LCL, representing €1.7 billion in extended maturities (of which 81% for professionals and corporate customers and 19% for households, and 61% at the Regional Banks and 39% at LCL). This corresponds to €23.9 billion remaining capital, of which €15.7 billion due from corporates, professionals, and farmers. The number of loans subject to a payment holiday has fallen by -69% since the end of June, while 97% of expired moratoria have resumed payments, attesting to the quality of the Group’s assets (98% for consumer loans within CACF). The French government also announced, on 25 March, the introduction of *State-Guaranteed Loans* (Prêts Garantis par l’Etat) to meet the cash flow requirements of businesses impacted by the coronavirus crisis. Thanks to its strong regional presence and universal model, the Group supports all businesses, from the smallest company to the largest corporation, and to date has provided €29.5 billion in state-guaranteed loans, up slightly by +5.1% since end-June 2020. With 189,900 requests from SME and small business customers and corporates, the Group’s state-guaranteed loans account for 27% of all such loans requested in France (76% of them at the Regional Banks, 24% at LCL and less than 1% at CACIB^3). The acceptance rate stands at 97.4%. More than 50% of State-Guaranteed Loans at LCL have been placed in demand deposit accounts; at the Regional Banks, the increase in such accounts held by corporates, professionals and farmers has exceeded the amount of State-Guaranteed Loans set up over the same period. CA Italia has also strongly supported its clients, with State-Guaranteed Loans^4 and payment holidays reaching 2.6 billion euros at the end of September 2020 (2 billion euros at end of June).
Nonetheless, the scenario for the upcoming months is more demanding, but the new restrictions are now more manageable. Indeed, the lockdown will not be identical to the first one. The bulk share of the economy can cope with the crisis, and there are some sectors that will remain supported in priority. The effectiveness of public policies allows for a stabilization of environment, and thus of risk, providing leeways for the Group to concretely stand by its customers.
*The Group is robust*, with a diversified business mix and resilient revenues (up +1.6% during the third quarter 2020). Its operating efficiency is proven, and Crédit Agricole Group’s underlying cost/income ratio excluding SRF has decreased to 60.2% in the third quarter 2020. The loan book is diversified, and skewed towards corporates (46% for Crédit Agricole S.A. and 33% for Crédit Agricole Group) and home loans (27% for Crédit Agricole S.A. and 46% for Crédit Agricole Group). Profitability is robust and recurrent, and the Group’s solvency and liquidity are very high, allowing for a full mobilisation for its customers.
*Furthermore, the universal banking model of the Group is powerful*, and provides it with a distributive capacity that is unequalled. With 51 million customers worldwide and more than 34 million retail banking customers in France, Italy and Poland, the Group is the leading retail bank in the European Union. As the number one “bankinsurer” in Europe, it continued to expanded its offerinsg this quarter when Crédit Agricole Assurances signed a strategic partnership agreement with Europ Assistance to provide assistance services in the French market, as well as when it increased its stake in GNB Seguros at 100% so as to re-assert its distribution partnership on non-life products with Novo Banco in Portugal. Amundi, the largest European asset manager, was granted a license to launch a new subsidiary in China with BOC, Bank of China. The Group now has 24 strategic partnerships and can reach more than 800 million customers in France and internationally, but has also continued, this quarter, to refocus its strategy, with a reclassification of CACF NL as assets held for sale, and the sale of Bankoa’ equity stake as well of the residual equity stake in Banque Saudi Fransi (BSF).
*This quarter, the Group returned to its pre-crisis level of business. Gross customer capture was very strong: +1,113,000 new customers since January 2020, 790,000 for the Regional Banks, 227,500 for LCL and 85,800 for CA Italia, with an increase in September of +170,400 customers, +159,000 of them in France and +11,500 in Italy. Compared to September 2019, this was a rise of +6.9% and +14.5% respectively. In this context, the customer base continued to grow significantly (+143,000 additional customers in 2020, of which 135,300 in France and 7,700 in Italy, +13.0% Sept/Sept). Assets under management were up from third quarter 2019 (+6.4%), as were those of life insurance (+0.9%) with a rise in the percentage of unit-links in outstandings (+0.7 percentage point between September 2019 and September 2020 to 23.1%). Property and casualty business rebounded significantly (+8.7% versus third quarter 2019), with a net increase of +196,000 policies in the third quarter, bringing the number of policies in the portfolio to 14.4 million. In the retail banking networks in France and Italy, growth in outstandings remain strong. Loans outstanding amounted to €740.4 billion (€694.4 billion in France and €46 billion in Italy; €716 billion excluding State-Guaranteed Loans), up +8.5% since September 2019 (+8.7% in France and 5.9% in Italy) and up +4.9% excluding State Guaranteed Loans (+5.1% in France). On-balance sheet deposits stood at €686.3 billion, up +11.8% from third quarter 2019, while off-balance sheet deposits slightly decreased (-0.6% at €383.5 billion). Consumer finance managed loans were down slightly from September 2019 but have rebounded in the last quarter (+0.9% compared to the second quarter). Commercial production was up (+3% versus third quarter 2019). Lastly, business in the Large customers segment was buoyant, especially in capital markets (revenues up +24.8% from third quarter 2019), with financing activities staying resilient (-3.4% versus third quarter 2019). Risk management remained prudent, with a moderate VaR at €12 million at 30 September.*
**Group results **
*In the third quarter of 2020*, Crédit Agricole Group’s *stated net income Group share* was *€1,769 million*, versus €1,849 million in the third quarter of 2019. This quarter, *specific items* generated a *net negative impact of -€165 million on net income Group share*.
*Specific items *for this quarter (-€165 million on net income Group share) include the reclassification of entities held for sale (Crédit Agricole Consumer Finance NL, Bankoa and Nacarat) for a total of -€170 million on net income Group share, broken down as follows: -€124 million in respect of Crédit Agricole Consumer Finance NL (with -€55 million in respect of goodwill on AHM's net income group share and -€69 million in respect of the IFRS 5 restatement on Specialised Financial Services’ net income group share), and -€46 million on the Regional Banks’ net income group share (with -€40 million in respect of the IFRS 5 restatement of Bankoa and -€5 million in respect of the IFRS 5 restatement of Nacarat). Specific items also include integration costs for entities recently acquired by CACEIS (Kas Bank and Santander Securities Services) for ‑€4 million in operating expenses and -€2 million in net income Group share. The adjustment on the activation of the Switch 2 guarantee was neutralised at the Group level. The recurring accounting volatility items are to be added with a net positive impact of +€8 million in revenues and +€7 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 +€14 million, the hedge on the Large customers loan book amounting to -€5 million, and the change in the provision for home purchase savings plans amounting to -€3 million. In third quarter 2019, specific items had had a *net negative impact of ‑€76 million on net income Group share*; they included only recurring accounting volatility items such as the Debt Valuation Adjustment (DVA, i.e. gains and losses on financial instruments related to changes in the Group’s issuer spread) amounting to -€2 million, the hedge on the Large customers loan book for -€1 million, and the changes in the provisions for home purchase savings schemes in the amount of ‑€73 million.
Excluding these specific items, *Crédit Agricole Group’s* *underlying*^5* net income Group share* amounted to *€1,934 million, *stable (+0.5%) compared to third quarter 2019. The +8.2% increase in underlying GOI compared to third quarter 2019 amortised the x1.6 increase in cost of risk.
*Crédit Agricole Group – Stated and underlying results, Q3-2020 and Q3-2019*
*€m* *Q3-20
stated* *Specific items* *Q3-20
underlying* *Q3-19
stated* *Specific items* *Q3-19
underlying* *Q3/Q3
stated* *Q3/Q3
underlying*
*Revenues* *8,468* *8* *8,460* *8,216* *(115)* *8,331* +3.1% +1.6%
Operating expenses excl.SRF (5,096) (4) (5,093) (5,220) - (5,220) (2.4%) (2.4%)
SRF - - - - - - n.m. n.m.
*Gross operating income* *3,372* *4* *3,368* *2,997* *(115)* *3,111* *+12.5%* *+8.2%*
Cost of risk (596) (596) (384) - (384) +55.0% +55.0%
Cost of legal risk - - - - - - n.m. n.m.
Equity-accounted entities 88 - 88 85 - 85 +3.5% +3.5%
Net income on other assets (6) - (6) 18 - 18 n.m. n.m.
Change in value of goodwill - - - - - - n.m. n.m.
*Income before tax* *2,858* *4* *2,854* *2,715* *(115)* *2,830* *+5.3%* *+0.8%*
Tax (743) (0) (742) (748) 39 (787) (0.6%) (5.7%)
Net income from discont'd or held-for-sale ope. (170) (170) (0) - n.m. n.m.
*Net income* *1,945* *(166)* *2,111* *1,968* *(76)* *2,043* *(1.1%)* *+3.3%*
Non controlling interests (177) 1 (177) (119) - (119) +48.4% +49.1%
*Net income Group Share* *1,769* *(165)* *1,934* *1,849* *(76)* *1,924* *(4.3%)* *+0.5%*
*Cost/Income ratio excl.SRF (%)* *60,2%* * * *60,2%* *63,5%* * * *62,7%* *-3,3 pp* *-2,5 pp*
In third quarter 2020, *underlying revenues* were up +1.6% from third quarter 2019 to €8,460 million, thanks to buoyant activity particularly in the Large customers segment, which posted revenue growth of +11.8% (+€166 million). For their part, the Regional Banks and LCL also posted an increase in underlying revenues (+1.9% or +€63 million and +2.6% or +€23 million respectively). By contrast, the Asset gathering and International Retail banking business lines posted a decline of -5.2% (-€78 million) and -9.0% (-€64 million) respectively due to a still-negative market effect and the fall in reference interest rates in Egypt, Poland and Ukraine. The Specialised financial services business line also recorded a drop in revenues of -8.5%, but this includes the impact of the business of CACF NL, an entity reclassified under IFRS 5 as an asset held for sale. IFRS 5 treatment requires all income and expenses recorded cumulatively for Crédit Agricole Consumer Finance NL since 1 January 2020 to be restated on each of the intermediary balances this quarter, skewing the interpretation. Excluding scope effect, the decline was just -3.4% (-€22 million).
*Underlying operating expenses excluding SRF (Single Resolution Fund) *were *down -2.4%* compared to third quarter 2019 at -€5,093 million. Apart from the Large customers business line, whose expenses increased by +€64 million (+8.0%), mainly due to the scope effect on asset servicing, all other business lines posted lower expenses for the period, particularly all Retail banks (Regional Banks: -1.5%/‑€31 million; LCL: -4.6%/-€27 million; International retail banking: -6.0%/‑€27 million). These decreases were mainly due to lower HR and travel costs. Overall, the Group posted a positive +4.0 percentage points jaws effect (Regional Banks: +3.4 percentage points). The contribution to the Single Resolution Fund was nil this quarter, as in third quarter 2019. The *underlying cost/income ratio excluding SRF stood at* *60.2%, an improvement of 2.5 percentage points *compared to the third quarter of 2019.
*Underlying gross operating income* was therefore up +8.2% to €3,368 million compared to third quarter 2019.
*Cost of credit risk* is up, albeit under control (x1.6 compared to third quarter 2019), as a result of increased provisioning on performing loans for all business lines in the context of the COVID-19 crisis. The provisioning amounts to €596 million versus €1,208 million in second quarter 2020 and €384 million in third quarter 2019. Assets quality are good: the non-performing loan ratio is stable at 2.5% at end-September 2020 (or +0.1 percentage point compared to second quarter 2020) while the coverage ratio^6 stood at 80.4%. The coverage ratio was nevertheless down compared to second quarter 2020 (-4.1 percentage points) mainly due to the impact of the change in regulations pertaining to the new definition of default and impacting the amount of outstandings in default. The diversified loan book is mainly geared towards home loans (46% of gross outstandings at Group level) and corporates (33% of gross outstandings at Group level). Loan loss reserves amounted to €19.9 billion at end-September 2020, of which 31% was for performing loans (Stages 1 and 2). The loan loss reserves increased by €0.9 billion as compared to December 2019. Starting in the first quarter of 2020, the context and uncertainties related to the global economic conditions were gradually taken into account and the expected effect of public measures were incorporated to anticipate future risks. Provisioning levels were established to reflect the sharp deterioration in the environment, taking into account *several weighted economic scenarios* and applying flat-rate adjustments for the retail banking portfolios and corporates portfolios and specific additions for some targeted sectors, namely tourism, automotive, aerospace, retail textile, energy, and supply chain. Several weighted economic scenarios were used to determine the provisioning of performing loans, of which a more favourable scenario (GDP at +7.3% in France in 2021 and +1.8% in 2022) and a less favourable scenario (GDP at +6.6% in France in 2021 and +8.0% in 2022). These scenarios have not changed since second quarter 2020.
The increase in provisioning on performing loans accounted for 96% of the total increase in provisioning between third quarter 2019 and third quarter 2020. *Annualised cost of risk/outstandings*^7* in the nine months of 2020* *was 38 basis points* (34 basis points over four rolling quarters and 24 basis points on an annualised quarter). Provisioning on Stages 1 and 2 amounted to €170 million, versus -€33 million in third quarter 2019, still very low, and €424 million in second quarter 2020. Provisioning on proven risks amounted to €428 million (versus €420 million in third quarter 2019 and €785 million in second quarter 2020).
*Underlying pre-tax income stood at €2,854 million*, stable compared to third quarter 2019 (+0.8%). In addition to the changes described above, underlying pre-tax income also includes the contribution from equity-accounted entities in the amount of €88 million (up +3.5%, mostly due to the Amundi joint ventures) and net income on other assets, which stood at -€6 million this quarter and include declassified IT projects for -€10 million within CACF (versus +€18 million in third quarter 2019 due to a one-off real estate transaction in Wealth Management on that date). The underlying *tax charge* *fell -5.7%* over the period. The underlying tax rate was stable at 26.8%, down -1.8 percentage point from third quarter 2019, mainly due to the decrease in the tax rate in France effective 1 January 2020, the favourable tax rate for international subsidiaries. Accordingly, underlying net income before non-controlling interests was up +3.3% and underlying net income Group share was stable compared to third quarter 2019 (+0.5%).
*Crédit Agricole Group – Stated and underlying results, 9M-2020 and 9M-2019*
*€m* *9M-20
stated* *Specific items* *9M-20
underlying* *9M-19
stated* *Specific items* *9M-19
underlying* *9M/9M
stated* *9M/9M
underlying*
*Revenues* *24,930* *(444)* *25,375* *24,898* *(290)* *25,188* +0.1% +0.7%
Operating expenses excl.SRF (15,680) (78) (15,602) (15,805) - (15,805) (0.8%) (1.3%)
SRF (562) - (562) (426) - (426) +31.9% +31.9%
*Gross operating income* *8,688* *(523)* *9,211* *8,667* *(290)* *8,957* *+0.2%* *+2.8%*
Cost of risk (2,733) - (2,733) (1,263) - (1,263) x 2.2 x 2.2
Equity-accounted entities 256 - 256 273 - 273 (6.4%) (6.4%)
Net income on other assets 78 - 78 21 - 21 x 3.7 x 3.7
Change in value of goodwill (3) - (3) - - - n.m. n.m.
*Income before tax* *6,286* *(523)* *6,808* *7,698* *(290)* *7,989* *(18.4%)* *(14.8%)*
Tax (1,531) 148 (1,679) (2,323) 96 (2,420) (34.1%) (30.6%)
Net income from discont'd or held-for-sale ope. (171) (170) (1) 8 - 8 n.m. n.m.
*Net income* *4,584* *(545)* *5,128* *5,383* *(194)* *5,577* *(14.9%)* *(8.1%)*
Non controlling interests (424) 4 (428) (372) - (372) +14.1% +15.1%
*Net income Group Share* *4,159* *(541)* *4,700* *5,012* *(194)* *5,205* *(17.0%)* *(9.7%)*
*Cost/Income ratio excl.SRF (%)* *62.9%* * * *61.5%* *63.5%* * * *62.7%* *-0.6 pp* *-1.3 pp*
*Net income Group Share excl. SRF* *4,682* *(541)* *5,223* *5,417* *(194)* *5,611* *(13.6%)* *(6.9%)*
In the first nine months of 2020, *underlying net income Group share declined by -9.7%* compared to the first nine months of 2019. Underlying revenues were stable (+0.7%), while underlying operating expenses excluding SRF were down -1.3%, resulting in a positive jaws effect of 2.0 percentage points. Excluding the SRF contribution, the underlying gross operating income was up +4.1% to €9,772 million, compared to the first nine months of 2019. Cost of credit risk was multiplied by 2.2, gains or losses on other assets were multiplied by 3.7, reaching €78 million, and the tax charge was down -30.6% compared to the first nine months of 2019.
**Regional banks**
*Commercial activity* at the Regional Banks was *buoyant* in this quarter, with *growth in outstandings remaining strong*. *Loans outstanding *amounted to €552.8 billion (€537.6 billion excluding state-guaranteed loans), up +8.2% from September 2019 (+5.2% excluding state-guaranteed loans). There was a strong increase in* home loans* (+6.4%) and *loans to SMEs and small businesses, and farmers* (+15%). *Loan production* was up from third quarter 2019 (+0.8%) but down when state-guaranteed loans are excluded (-8%). Consumer finance loan production was up +7.8% year-on-year. *On-balance sheet deposits* stood at €506.3 billion, representing an increase from September 2019 of +12.1% (of which +26.5% for demand deposits and +10.3% for passbooks), while *off-balance sheet deposits* were down slightly (-1.4 % to €264.6 billion) with life insurance assets up slightly (+0.3%) and assets related to mutual funds and securities linked to securities falling by -6.1%, largely due to market impact. Lastly, *gross customer capture remained highly active* (+790,000 customers since the start of the year). For instance, since 1 January 2020 the Regional Banks have added 114,000 new customers (growth in the customer base) and posted year-on-year growth in their active demand deposit of 1%. Meanwhile, the Group decided to strengthen its mutual shareholder structure , which has grown significantly year-on-year, with +315,000 additional mutual sharehoders and the mutual shares outstanding have risen +7.6%.
This growth in the customer base is accompanied by a strong focus on the quality of the customer relationship, as reflected in the improvement in the Net Promoter Score (NPS) of more than +8 percentage points over the full year. The Group is also continuing to develop its multi-channel model and recorded a +3.9 percentage point increase year-on-year in the number of digital customers, taking it to 66.2%^8.
*In third quarter 2020*, underlying *revenues *of the Regional Banks amounted to €3,308 million, a +1.9% increase from third quarter 2019. Favourable refinancing conditions led to an increase in the *net interest margin*, while the overall level of *fee and commission income* was back up (+1.1%), driven by insurance fees and commission which offset lower penalty-based fees. *Portfolio revenues *were stable. Underlying *costs *were kept under control, decreasing during the period (-1.5% versus third quarter 2019) in line with lower staff costs and other external services costs. As a result, underlying *gross operating income* increased in third quarter 2020 (+8.4%) thanks to a positive jaws effect (+3.4 percentage points). Underlying *cost of risk* stood at -€22 million, down 53.4% from third quarter 2019, provisions on Stage 3 being lower as a result of the application from July 2020 of the threshold for the new definition of default. Loan loss reserves were therefore stable at €9.8 billion. The non-performing loan ratio fell to 1.8% (versus 1.9% at end-September 2019), while the coverage ratio was still high, at 95.2%, even though it was down compared to the 99.2% at 30 June 2020. The reason for this was the enforcement of the new definition of default. The Regional Banks’ contribution to underlying *net income Group share *stood at €775 million, a rise of +12.5%.
*In the first nine months of 2020*, underlying *revenues *were down -1.5% compared to the first nine months of 2019. Thanks to lower operating expenses, underlying *gross operating income* was down by just -0.6%, despite the increase in SRF in the first half of the year. GOI excluding SRF was up slightly by +0.5%. The underlying *cost/income ratio* excluding SRF was down -0.7 percentage point to 64.8%. Lastly, with an increased underlying *cost of risk* (+83.0%), the Regional Banks’ contribution to the Group’s underlying *net income Group share* was down -8.2%.
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.
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**Crédit Agricole S.A.**
**Solid performance (-9.1% Q3/Q3, -8.8% 9M/9M excl. **SRF) thanks to growth in revenues (+1.4%) and GOI (+5.3%) over Q3; underlying ROTE*^9* 10.0% **
· *Stated result*: €977m (-18.5% Q3/Q3); revenues: €5,151m (+2.4%); GOI: €2,160m (+7.8%)
· *Underlying GOI excl. SRF up* (€2,156m, +5.3% Q3/Q3; €6,308m, +5.2% 9M/9M, thanks to higher revenues (+1.4% Q3/Q3) and lower expenses (-1.2% Q3/Q3)
· *Improvement in the underlying cost/income ratio *excl. SRF of +1.5 pt Q3/Q3 to 58.1%; positive jaws effect (+2.6pp Q3/Q3)
· *Underlying net income Group share* down (-9.1% Q3/Q3, -8.8% excl. SRF 9M/9M) as a result of increased provisioning (x1.7 Q3/Q3)
· Underlying earnings per share : Q3-20: €0.36, +6.7% Q3/Q3; 9M-20: €0.89, -7.7% 9M/9M
**Sustained customer capture and buoyant activity in loans, deposits, insurance and capital markets**
· *High level of customer acquisition* (+227,500 new SME and small business customers since the start of 2020 for LCL and +85,800 for CA Italia)
· *Q3/Q3 increase in *asset under management (+6.4%), life insurance oustandings (+0.9%), loan outstandings excluding State-Guaranteed Loans at LCL (+5%, of which loans to small businesses +12%, to corporates +1% and home loans +6%), and loan outstandings at CA Italia (+5.9%). Slight decline in consumer finance managed loans (-1.5%), but up from the previous quarter (+0.9% Q3/Q2)
· *Q3/Q3 increased inflows* at LCL (on-balance sheet deposits +13.0%, off-balance sheet savings ‑1.3%), and CA Italia (off-balance sheet +6.4% and on-balance sheet deposits +6.7%)
· *Increased share of UL in gross inflows* (36.2%, +7.1pp Q3/ Q3) and in outstandings (23.1%, +0.7pp Sept/Sept). Strong recovery in property & casualty business (+8.7% Q3/Q3)
· *Excellent commercial activity in capital markets* (+24.8%) and resilience in financing activities (-3.4%); prudent risk management (moderate VaR at €12m at 30 September)
· *Strategic operations*: Crédit Agricole Assurances’s equity interest in GNB Seguros increased to 100%, agreement with Europ Assistance on the French market; continued strategic refocusing (reclassification of Crédit Agricole Consumer Finance as an asset held-for-sale, sale of CACIB’s residual stake in Banque Saudi Fransi)
**Government measures allow for a stabilisation of provisioning (x1.7 Q3/Q3). 71% of the Q3/Q3 increase linked to performing loans provisioning**
· *NPL ratio* (3.4%, +0.2pp vs 30 June), *coverage ratio still high* (69.7%), despite the lowering impact of the new definition of default; loan loss reserves at €10bn, i.e. more than seven years of the average historical cost of risk, of which 25% related to performing loans; diversified loan book, 46% to corporates and 27% on home loans; 72% of EAD investment grade
· *Prudent increase in provisioning *(€577m, of which €165m for Stages 1 and 2 and €425m for Stage 3, x1.7 Q3/Q3, -36% Q3/Q2). 9M-20 annualised cost of risk/outstandings 67bp
**Very robust solvency**
· *Phased-in CET1 ratio up sharply (+0.6pp) to 12.6%, +4.7pp above the SREP requirement (+0.7pp Sept./June) and 160bp above the target, including, since 31 March, 60bp of dividends not distributed in 2020.* 9m provision for dividends of €0.40 per share. *Fully loaded ratio at 12.4%. *
· *Risk weighted assets down over the quarter*: decline in contribution from the business lines (-€9.9 Bn), particularly in Large customers (optimised securitisations, reduced market and foreign exchange risk) and Retail Banking (expiry of the two-month waiting period for State-Guaranteed Loans), increase in insurance equity-accounted value.
**Increase in Group’s liquidity **
· *€404bn in reserves at 30/09, stable (-€1bn) vs 30 June 2020. Increase in the LCR: 140.7%*.^10
· 97% of the €12bn MLT market funding programme completed at end-October.
Crédit Agricole S.A.’s Board of Directors, chaired by Dominique Lefebvre, met on 5 August 2020 to examine the financial statements for the second quarter and first half of 2020.
*Credit Agricole S.A. – Stated and underlying results, Q3-20 and Q3-19*
*€m* *Q3**-20
**stated* *Specific items* *Q3-20
underlying* *Q3**-19
**stated* *Specific items* *Q3-19
underlying* *Q3/Q3
stated* *Q3/Q3
underlying*
*Revenues* *5**,**151* *8* *5**,**143* *5**,**031* *(43)* *5**,**073* *+2**.**4%* *+1**.**4%*
Operating expenses excl.SRF (2,991) (4) (2,988) (3,025) - (3,025) (1.1%) (1.2%)
SRF - - - (2) - (2) (100.0%) (100.0%)
*Gross operating income* *2**,**160* *4* *2,156* *2**,**004* *(43)* *2**,**046* *+7**.**8%* *+5**.**3%*
Cost of risk (605) (28) (577) (335) - (335) +80.8% +72.5%
Cost of legal risk - - - - - - n.m. n.m.
Equity-accounted entities 98 - 98 82 - 82 +19.9% +19.9%
Net income on other assets (3) - (3) 17 - 17 n.m. n.m.
Change in value of goodwill - - - - - - n.m. n.m.
*Income before tax* *1,650* *(23)* *1,674* *1,769* *(43)* *1,811* *(6.7%)* *(7.6%)*
Tax (346) 8 (354) (423) 14 (437) (18.3%) (19.0%)
Net income from discont'd or held-for-sale ope. (125) (124) (0) - n.m. n.m.
*Net income* *1,180* *(139)* *1,319* *1,346* *(28)* *1,374* *(12.3%)* *(4.0%)*
Non controlling interests (203) 1 (204) (147) (148) +37.9% +38.0%
*Net income Group Share* *977* *(139)* *1,115* *1,199* *(28)* *1,226* *(18.5%)* *(9.1%)*
Earnings per share (€) 0.32 (0.05) 0.36 0.33 (0.01) 0.34 (4.6%) +6.7%
*Cost/Income ratio excl. SRF (%)* *58.1%* * * *58.1%* *60.1%* *59.6%* *-2.1 pp* *-1.5 pp*
*Net income Group Share excl. SRF* *977* *(**139**)* *1,115* *1**,**201* *(28)* *1**,**229* *(18**.**7%)* *(**9.2**%)*
**Results**
*In third quarter 2020*, Crédit Agricole S.A.’s *stated net income Group share* amounted to *€977 million* versus €1,199 million in third quarter 2019. This quarter, *specific items* generated a *net negative impact of -€139 million on net income Group share*.
Excluding these specific items, the *underlying net income Group share*^11 was *€1,115 million*, down -9.1% compared to third quarter 2019. This was due to the current economic climate and the negative market impact on revenues of the Asset Gathering business line as well as the increased cost of risk related to outstanding loan provisioning.
*Specific items* this quarter, amounting to -€139 million, include the reclassification under IFRS 5 of CACF NL, an entity held for sale. This reclassification comprises a goodwill impairment impact of -€55 million on the Corporate Center’s net income Group share along with an impact of -€69 million on Specialized Financial Service’s net income Group share resulting from IFRS 5 treatment. The recurring accounting volatility items are to be added to the above. These had a net positive impact of +€8 million in revenues and +€6 million in net income Group share and comprised the DVA for +€14 million (Debt Valuation Adjustment, i.e. gains and losses on financial instruments related to changes in the Group’s issuer spread), the hedge on the Large customers loan book amounting to -€5 million, and the change in the provision for home purchase savings plans amounting to -€3 million. Specific items also included integration costs for entities recently acquired by CACEIS (Kas Bank and Santander Securities Services) for ‑€4 million in operating expenses and -€2 million in net income Group share. The adjustment on the activation of the Switch 2 guarantee accounted for -€28 million on Asset gathering’s cost of risk and -€19 million in net income Group share. *In third quarter 2019*, specific items had had a *net negative impact of ‑€28 million on net income Group share*; they included only recurring accounting volatility items such as the Debt Valuation Adjustment (DVA, i.e. gains and losses on financial instruments related to changes in the Group’s issuer spread) amounting to -€2 million, the hedge on the Large customers loan book for -€1 million, and the changes in the provisions for home purchase savings schemes in the amount of ‑€25 million.
The business lines demonstrated good resilience in third quarter 2020 given the public health and economic context. At €2,156 million, underlying *gross operating income* was up +5.3% compared to third quarter 2019, thanks to increased revenues (+1.4% to €5,143 million) and tight cost control by the business lines (-1.2% to €2,988 million). The business lines once again demonstrated their excellent operational agility this quarter: expenses were down in all business lines that recorded a drop in revenues. As a result, Crédit Agricole S.A.’s underlying cost/income ratio in third quarter 2020 was 58.1%, up +1.5 percentage point from third quarter 2019 and with a positive jaws effect of 2.6 points in third quarter 2020. *Underlying net income Group share* was, however, down by -9.1%. This decline was due to the increased cost of risk, which stood at €577 million in third quarter 2020 (x1.7 versus third quarter 2019). Of that rise, 71% was due to increased provisioning for performing loans, primarily related to prudent provisioning in sensitive sectors (such as aviation, hotels, tourism, restaurants and certain professionals). Consequently, the Large customers business line, despite strong growth in gross operating income during the quarter (+16.9%), was impacted by the 4.8-fold increase in the cost of risk, resulting in a -28.4% decline in net income Group share. Excluding scope effect,^12 Specialised financial services reported a -1.5% drop in gross operating income, with good overall resilience in sales revenues and strict cost control. However, the business line turned in a weaker performance in factoring. The Asset gathering business line was impacted by an adverse market impact on revenues which led to a -8.5% decline in its net income Group share, despite excellent cost control. For its part, Retail banking generated a +3.7% increase in its gross operating income, driven by strong growth in revenues, particularly at LCL, and by proven operating efficiency (underlying cost/income ratio excluding SRF of retail banks in third quarter 2020 of 62.4% (improvement by 1.6 percentage point as compared to the third quarter 2019). Consequently, despite a 1.5-fold increase in cost of risk compared to third quarter 2019, the retail banks’ net income Group share held firm with a decline of -4.7% versus third quarter 2019.
In third quarter 2020, *underlying revenues* stood at €5,143 million, up from second quarter 2019 (+1.4%). Revenues of the Asset gathering business line recorded a decline of -6.4% due to an adverse market impact. By contrast, Retail banking revenues increased over the quarter (+2.6% versus third quarter 2019), driven by strong growth in interest and fee and commission income at LCL. This offset the decline in revenues of International retail banking, which were impacted by a fall in reference interest rates in Egypt, Poland and Ukraine. Revenues for Specialised financial services also held firm, with a decline of -8.5% on underlying scope, and -3,4% excluding scope effect.^13 Meanwhile, capital markets business in the Large customers segment was especially buoyant this quarter as a result of the high volume of bond issues and strong revenue growth (+24.8%) compared to third quarter 2019. Financing activities were steady, recording a moderate decline in revenues of -3.4% but an increase of +6.6% excluding foreign exchange impact and BSF dividends paid in third quarter 2019. Lastly, asset servicing activities were up +23.1% thanks to a scope effect related to the latest acquisitions (Kas Bank and Santander Securities Services). Recurring revenues, i.e. revenues attached to an inventory item (outstanding loans/customer assets, assets under management) or an insurance policy (property and casualty insurance, death and disability insurance), accounted for 76% of Crédit Agricole S.A.’s underlying revenues.
*Underlying operating expenses* were down -1.2% for the period, resulting in indicators that showed excellent levels of operating efficiency: the underlying cost/income ratio was 58.1%, an improvement of +1.5 percentage point compared to third quarter 2019, while the jaws effect was positive at 2.6 percentage points. In a reflection of Crédit Agricole S.A.’s operating efficiency, this quarter all business lines whose revenues had declined compared to third quarter 2019 had reduced their expenses from the same period in 2019. Expenses for the Large customers business line were up +8.0%, primarily due to a scope effect on Asset servicing. The Asset gathering business line recorded a drop in expenses of -6.8% compared to third quarter 2019, driven by Asset management (down -4.1% thanks to a decline in variable compensation), and stable expenses in Insurance (-0.1%). Retail banking expenses decreased in the quarter (‑3.3%), largely due to operating efficiency within French retail banking. Specialised financial services reported a decline -15.3% under underlying scope, of -2.2% in their expenses excluding scope effect,^14 thanks mainly to tight cost control at CA Consumer Finance (-19.1% under underlying scope and -2.6% compared to third quarter 2019 excluding scope effect^14).
*Underlying gross operating income* thus rose to €2,156 million, an increase of +5.3% from third quarter 2019. This was due to a strong and increased contribution from the Large customers and Retail banking business lines and the resilience of the others: Large customers +16.9% versus third quarter 2019, Retail banking +3.7%, Asset gathering -5.9%, and Specialised financial services -1.5% under underlying scope and -4.5% excluding scope effect.
As at 30 September 2020, risk indicators confirmed the h*igh quality of Crédit Agricole S.A.'s assets and risk coverage level.* The loan book is diversified and mainly geared towards corporates (46% of Crédit Agricole S.A.’s gross outstandings) and home loans (27% of gross outstandings). The NPL ratio was still low at 3.4% (+0.2 percentage point compared to 30 June 2020), while the coverage ratio^15 was 69.7%, down -3.7 percentage points for the quarter largely due to the impact of the change in regulations pertaining to the new default calculation increasing the scope of outstandings in default. Loan loss reserves totalled €10.0 billion. Of these loan loss reserves, 25% were for provisioning for performing loans. Government measures have stabilised the environment and created conditions for a stable cost of risk. Provisioning levels were based on *several weighted economic scenarios*, of which, notably for GDP in France: a more favourable scenario (+7.3% in 2021 and +1.8% in 2022) and a less favourable scenario (+6.6% in 2021 and +8.0% in 2022)^16, and included additional provisioning for the retail banking portfolios and corporates portfolios and specific additions for some targeted sectors, of which tourism, restaurants, and aviation.
The increase in *cost of risk* was kept under control (x1.7/-€243 million compared to third quarter 2019, at ‑€577 million, versus ‑€335 million in third quarter 2019 and ‑€908 million in second quarter 2020). 71% of the increased cost of risk versus third quarter 2019 was due to additional provisioning for performing loans (Stages 1 & 2), related for the most part to prudent provisioning in sensitive sectors (such as aerospace, hotels, tourism, restaurants and certain professionals) and the entry into force of the definition of default. The charge of ‑€577 million in third quarter 2020 consisted of provisioning for performing loans (Stages 1 & 2) totalling -€165 million (versus a write-back of €7 million in third quarter 2019 and an allocation of -€236 million in second quarter 2020) and provisioning for proven risks (Stage 3) amounting to -€425 million (versus -€331 million in third quarter 2019 and ‑€667 million in second quarter 2020). In the first nine months of 2020, the cost of risk relative to outstandings for financing activities was 67 basis points on an annualised basis (59 basis points over a rolling four-quarter period and 55 basis points for the third quarter 2020 annualised). Cost of risk in the four main contributing business lines was up from third quarter 2019 but down from second quarter 2020. LCL’s cost of risk stood at ‑€83 million (x1.4 compared to third quarter 2019 and -29% compared to second quarter 2020), with cost of risk relative to outstandings stable at 30 basis points on an annualised nine-month basis (27 basis points over a rolling four-quarter period and 24 basis points for the third quarter 2020 annualised); CA Italia recorded a cost of risk of -€86 million in third quarter 2020, or 1.4 times the level of third quarter 2019, and a decrease of -41.1% over second quarter 2020, with its cost of risk relative to outstandings increasing to 92 basis points on an annualised nine-month basis (83 basis points over a rolling four-quarter period and 74 basis points for the third quarter 2020 annualised); Crédit Agricole Consumer Finance returned to the level of its cost of risk in the third quarter of 2019, with an increase of +4.5% under underlying scope, +6.7% excluding scope effect compared to third quarter 2019 (and a decline of -43% at constant scope compared to second quarter 2020), with a cost of risk relative to outstandings of 188 basis points on an annualised nine-month basis (173 basis points over a rolling four-quarter period and 142 basis points for the third quarter 2020 annualised). Lastly, in financing activities, the cost of risk for the quarter stood at -€225 million, versus an allocation of just -€40 million in third quarter 2019 but was down -27.9% compared to second quarter 2020. The cost of risk relative to outstandings for financing activities was therefore 76 basis points on an annualised nine-month basis (versus 640 basis points over a rolling four-quarter period and 72 basis points for the third quarter 2020 annualised).
The contribution of *equity-accounted entities *was up *+19.9%* to €98 million, reflecting, in particular, the strong joint-venture performance in Asset management (x2.1 in third quarter 2020 versus the same period in 2019).
*Net income on other assets* showed a negative impact of -€3 million in this quarter versus a positive impact of +€17 million in third quarter 2019, which was due to a one-off real estate transaction at the time in Wealth Management.
*Underlying income^17 before tax, discontinued operations and non-controlling interests was therefore down -7.6% *to €1,674 million. The *underlying effective tax rate* stood at *22.5%*, down -2.8 percentage points compared to third quarter 2019, while the underlying tax charge fell -19.0% to -€354 million. The 2020 third quarter tax rate was impacted in particular by the decrease in the tax rate in France effective 1 January 2020 (32.02% instead of 34.43%) and by the positive effect of international subsidiaries being subject to a lower tax rate than in France. The *underlying net income before non-controlling interests was therefore down -4.0%*.
*Net income attributable to non-controlling interests* was up +38.0% to €204 million. This was due to a change in the recognition methods used for subordinated (RT1) debt coupons, these debts being issued by Credit Agricole Assurances. It had no impact on earnings per share.
*Underlying net income Group share* was down *-9.1%* from third quarter 2019 to *€1,115 million*.
*Credit Agricole S.A. – Stated and underlying results, 9M-20 and 9M-19*
*En m€* *9M-20
publié* *Eléments spécifiques* *9M-20
sous-jacent* *9M-19
publié* *Eléments spécifiques* *9M-19
sous-jacent* *9M/9M
publié* *9M/9M
sous-jacent*
*Revenues* *15,248* *(217)* *15,465* *15,034* *(120)* *15,155* *+1.4%* *+2.0%*
Operating expenses excl.SRF (9,226) (68) (9,158) (9,161) - (9,161) +0.7% (0.0%)
SRF (439) - (439) (340) - (340) +29.1% +29.1%
*Gross operating income* *5,583* *(285)* *5,869* *5,534* *(120)* *5,654* *+0.9%* *+3.8%*
Cost of risk (2,068) 38 (2,106) (917) - (917) x 2.3 x 2.3
Cost of legal risk - - - - - - n.m. n.m.
Equity-accounted entities 277 - 277 275 - 275 +0.5% +0.5%
Net income on other assets 84 - 84 39 - 39 x 2.1 x 2.1
Change in value of goodwill - - - - - - n.m. n.m.
*Income before tax* *3,876* *(248)* *4,124* *4,931* *(120)* *5,052* *(21.4%)* *(18.4%)*
Tax (692) 63 (756) (1,302) 38 (1,340) (46.8%) (43.6%)
Net income from discont'd or held-for-sale ope. (125) (124) (1) 8 - 8 n.m. n.m.
*Net income* *3,059* *(309)* *3,368* *3,637* *(83)* *3,720* *(15.9%)* *(9.5%)*
Non controlling interests (490) 4 (494) (454) 1 (455) +8.0% +8.5%
*Net income Group Share* *2,568* *(305)* *2,874* *3,183* *(81)* *3,264* *(19.3%)* *(12.0%)*
*Earnings per share (€)* *0.79* *(0.11)* *0.89* *0.94* *(0.03)* *0.97* *(16.2%)* *(7.7%)*
*Cost/Income ratio excl.SRF (%)* *60.5%* * * *59.2%* *60.9%* *60.5%* *-0.4 pp* *-1.2 pp*
*Net income Group Share excl. SRF* *2,961* *(305)* *3,266* *3,498* *(81)* *3,579* *(15.4%)* *(8.8%)*
*In the first nine months of 2020,* stated net income Group share amounted to €2,568 million, compared with €3,183 million in the first nine months of 2019, a decrease of -19.3%.
*Specific items in the first nine months of 2020* had a negative impact of *-€305 million* on stated net income Group share. Added to the third-quarter items already mentioned above were first-half 2020 items that had had a negative impact of -€167 million and also corresponded to recurring volatile accounting items. These were the DVA for -€19 million, hedges of the Large customers' loan book for +€32 million, and changes in the provision for home purchase savings plans for -€10 million at LCL and -€31 million in the Corporate Centre business line. The non-recurring items comprised integration costs of Kas Bank and Santander Securities Services at CACEIS totalling -€4 million, support for SME and small business policyholders totalling -€97 million in Asset gathering and -€1 million at LCL, Switch activation totalling +€44 million, the Liability Management cash adjustment at Corporate center totalling -€28 million, and COVID-19 solidarity donations totalling -€38 million in the Asset gathering business line, -€4 million in the International retail banking business line and -€10 million in the Corporate Centre. *Specific items for the first nine months of 2019* had a negative impact of ‑€81 million on *net income Group share.* Compared to the specific third quarter 2019 items mentioned above, these items had an impact of -€53 million on net income Group share in first half 2019 and corresponded to recurring volatile accounting items, specifically the DVA for -€9 million, hedges of the Large customers loan book for -€20 million, and changes in the provision for home purchase savings plans for -€7 million at LCL and -€18 million in the Corporate Centre business line.
Excluding these specific items, *underlying net income Group share stood at €2,874 million*, down* -12.0%* compared to the first nine months of 2019. The underlying net income group share excluding SRF stands at €3,266 million, i.e. a -8.8% decrease as compared to the first nine months of 2019.
*Underlying earnings per share for the first nine months of 2020 came to €0.89*, a decrease of *-7.7%* compared to the first nine months of 2019.
Annualised *underlying ROTE*^18 net of annualised coupons on Additional Tier 1 securities (return on equity Group share excluding intangible assets) was 9.5% in the first nine months of 2020. After IFRIC 21 was isolated, it stood at *10.0%* *for the first nine months of 2020*, down compared to 2019 (-1.9 percentage point as compared to 11.9% 2019 ROTE). Annualised RoNE (Return on Net Equity) was down for the first nine months, in line with the decline in income, compared to 2019 and the increase in capital, with the Tier 1 equity capital ratio standing at 12.6% at 30 September 2020.
*Underlying revenues* were up *+2.0%* from the first nine months of 2019, due to significant growth in revenues in the Large customers business line (+13.9%). Retail activities, on the other hand, were hit by the public health crisis (Retail banking -2.3% and Specialised financial services -8.4% under underlying scope -5.4% excluding scope effect) and revenues of the Asset gathering business line were heavily impacted by a negative market impact (-5.0%).
Underlying *operating expenses* excluding SRF were stable (-0.0%), the contribution to the SRF having increased significantly. It was up +29.1% to €439 million in the first nine months of 2020 compared to €340 million for the first nine months of 2019. Expenses were stable thanks to the tight grip on expenses by all business lines: Asset gathering reduced expenses by -2.8% compared to the first nine months of 2019, Retail banking by -2.9% and Specialised financial services by -6.2% under underlying scope and -1.3% without scope effect. The Large customers business line reported a +7.5% increase in expenses over nine months, but this was mainly due to a scope effect (with Kas and S3 integrated to Asset Servicing perimeter). The *underlying cost/income ratio excluding SRF stood at 59.2%, *an improvement of +1.2 percentage points compared to the first nine months of 2019. Excluding the SRF contribution, underlying gross operating income rose to €6,308 million, a +5.2% increase compared to the first nine months of 2019.
Lastly, *cost of risk* increased significantly during the period (x1.3/-€1,189 million to -€2,106 million versus ‑€917 million for the first nine months of 2019).
**Activity **
*Business remained buoyant throughout the quarter, thanks to the positive performance of assets under management (+6.4%), life insurance outstandings (+0.9%) and loan outstandings in Retail banking (+5% at LCL excluding state-guaranteed loans and +5.9% at CA Italia). Consumer finance managed loans were down slightly from September 2019 but rebounded in the last quarter (+0.9% compared to the second quarter). Inflows increased at LCL (increase in on-balance sheet deposits of +12.6% and stability of off-balance sheet deposits at -1.3%), and at CA Italia (increase in AuM of +6.4% and on-balance sheet deposits of 6.7%). The share of UL products in gross inflows was up (+7.1 percentage points from third quarter 2019 to 36.2%), as was the share in outstandings, which rose to 23.1% (+0.7 percentage point from third quarter 2019). Revenues from personal protection insurance increased significantly (+9.7% compared to third quarter 2019), as did those from property and casualty insurance (+8.7% compared to third quarter 2019). Gross customer acquisition momentum was strong (+227 500 small businesses and individual customers in 2020 at LCL and +85,800 customers at CA Italia) and the customer base continued to expand (+22,800 customers at LCL in 2020 and +7,700 at CA Italia). Commercial production in consumer finance was up (+3% versus third quarter 2019). Lastly, business in the Large customers segment was buoyant, especially in capital markets (revenues up +24.8% from third quarter 2019), with financing activities holding firm (-3.4% versus third quarter 2019). Risk management was prudent, with moderate VaR at €12 million at 30 September.*
· *In Savings/Retirement*, Credit Agricole Assurances continued, with success, to pursue its new inflow policy initiated in 2019, with a reorientation towards unit-linked (UL). UL contracts accounted for 36.2% of gross inflows in third quarter 2020, an increase of +7.1 percentage points compared to third quarter 2019. Net inflows were negative in euro-funds (-€0.7 billion) but up in terms of unit-linked contracts (+€1 billion). Total net inflows stood at +€0.4 billion, down -€2 billion compared to third quarter 2019. However, they have increased +€1.3 billion since second quarter 2020. Outstandings (savings, retirement and death and disability) reached €304.1 billion, up +0.9% from September 2019. Unit-linked contracts accounted for 23.1% of outstandings at September 2020, up +0.7 percentage point compared to September 2019. Premium income amounted to €4.8 billion in the third quarter 2020 (a decline of -29.8% compared to third quarter 2019). Lastly, the Policy Participation Reserve (PPE) stood at €11.8 billion at 30 September 2020, i.e. 5.7% of total outstandings and an increase of +€1 billion year-on-year. Recall that the average annualised rate of return on assets for euro-denominated contracts was 2.50%^19 at 30 June 2020, i.e. still significantly above the average guaranteed minimum rate (0.28% at end-2019).
· *In Property and casualty insurance*, business rebounded strongly in the third quarter 2020. The monthly number of new accounts reached a record level in September (+278,000 new accounts, a year-on-year increase of around +30%). The number of property and casualty insurance policies increased in the third quarter 2020 by around +196,000 policies to almost 14.4 million at end-September 2020. Premium income was up +8.7% since third quarter 2019 to €1.0 billion. The equipment rate for individual customers^20 continued to increase in the networks of the Regional Banks (41.5% at end-September 2020, i.e. a +1.0 percentage point increase since September 2019) and LCL (25.5% at end-September 2020, i.e. a +0.6 percentage point increase since September 2019), as well as at CA Italia (16.2% at end-September 2020, i.e. a +1.2 percentage point increase since September 2019). The combined ratio continued to be well managed at 96.7%, a slight increase of +1.2 percentage points year-on-year and includes the cost of the voluntary extra-contractual support mechanism for small businesses insured for business interruption. Lastly, Crédit Agricole Assurances continued to strengthen its international positioning during the quarter by increasing its equity interest in GNB Seguros to 100% and signing a distribution agreement for non-life insurance in Portugal with *Novo Banco *for a 22-year term. A strategic partnership agreement was also signed with *Europ Assistance* to provide assistance services in the French market. Crédit Agricole Assurances will now be able to tailor its services to the needs of customers in the Crédit Agricole Group.
· In *death & disability, creditor and group insurance*, premium income reached nearly €1,079 million this quarter, a significant increase of +9.7% versus third quarter 2019.
· *Asset management (Amundi)* reported a sharp upturn in business this quarter with net inflows once again in positive territory (+€34.7 billion). This was due to a major rebound in treasury products (+€18.8 billion). Retail net inflows (excluding joint ventures) on medium- and long-term (MLT) assets were up compared to second quarter 2020 at +€2.4 billion, thanks to a strong recovery among third-party distributors (+€2.8 billion). In the France and International networks, retail inflows (excluding joint ventures) on MLT assets remained balanced in a context of risk aversion. Amundi reported a strong performance in the institutional investors and corporates segment (+€21.4 billion), driven by treasury products (+€19.2 billion). Net inflows remained solid on joint ventures (+€8.1 billion) thanks to buoyant business in China (+€7.2 billion). Assets under management rose to €1,662 billion at end-September 2020 (+4.4% since 30 June 2020). The market/foreign exchange impact on assets under management was +€15.2 billion compared to June 2020. Also of note this quarter was the integration of the assets of Sabadell Asset Management in the consolidated scope of Amundi for an amount of +€20.7 billion and the granting of a licence by the China Banking and Insurance Regulatory Commission to the new Amundi BOC WM joint venture in China, which specialises in wealth management products. Amundi also launched a bond fund this quarter with exposure to green project financing in emerging markets.
· *In wealth management, *inflows were stable and outstandings remained unchanged in third quarter 2020.
·
· *Retail banking* remained very customer-centric, with an improving customer satisfaction rate, notably in Italy where it is has become the No. 2 Italian bank in terms of customer satisfaction with an 8-point increase in Net Promoter Score compared to 2019*. *At end-September, there was an uptick in home loan production (€11.6 billion for LCL ie -18.0% year-on-year; €2.1 billion for CA Italia ie +0.6% year-on-year), and a return of consumer finance to pre-crisis levels for LCL (production at €2.1 billion ie -15.1% year-on-year), and in Italy, (production at €140 million up +4.0% year-on-year). Loans outstanding to SMEs, small businesses and corporates remained at high levels, €48.9 billion euros for LCL, up 23.8%, and €21.9 billion for CA Italia up +8.3%, notably through State-Guaranteed Loans. LCL granted 35,000 State Guaranteed Loans representing €7.5 billion euros and CA Italia €1 billion euro. Overall, excluding State-Guaranteed Loans, loans outstanding for LCL totalled €134.1 billion at 30 September 2020 (+5%) and €44.1 billion for CA Italia (+1.7%).
· In France, renegotiations on LCL home loans were down this quarter to €0.3 billion outstanding for the quarter, compared with €0.6 billion in second quarter 2020, i.e. a difference of €0.3 billion euros, and remained well below the high point of €5.2 billion of fourth quarter 2016. The new housing loans production rate is moreover up this quarter.
· Lastly, for all International Retail banking excluding Italy, loans rose +0.5% at end-September 2020 compared to end-September 2019, notably driven by Egypt (+18.0%^21) and Morocco (+2.7%^19), despite a drop in Ukraine (-2.7%^19) and Poland remaining unchanged (+0.8%^19).
· Off-balance sheet deposits remained stable for LCL (-1.3%), affected by a still negative market impact, despite an upturn this quarter, and were up for CA Italia (+6.4%), primarily linked to the hike in life Insurance (+11.3%). On-balance sheet deposits were up in all markets, +12.6% compared to September 2019 for LCL in France notably due to an increase in personal savings driven by demand deposits by individuals (+14%), demand deposits by SMEs, small businesses and corporates (+43%) and passbook accounts (+11%); it increased by +6.7% for CA Italia, notably driven by an increase in deposits since the beginning of the year, reflecting the accumulation of liquidity by corporates and consumers’ precautionary savings. Lastly, customer deposits increased by +3.8% for all International Retail banking excluding Italy, driven by Ukraine (+35%^19), Morocco (+6%^19) and Poland (+4%^19). The equipment rate in automotive, multi-risk household, healthcare, legal or accident insurance was up for LCL at 25.5% (+0.6 percentage point compared to end-September 2019) and for CA Italia 16.2% (+1.2 percentage points compared to end-September 2019).
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· The upturn in the *Specialised financial services* business activities was confirmed this quarter. *The sales production of CA Consumer Finance exceeded the pre-crisis levels* and reached €10.9 billion, up +3% compared to third quarter 2019, driven by the Regional banks’ activity (+16% Q3/Q3) and GAC Sofinco’s activity (+32% Q3/Q3). *The production margin returned to a good level*, corresponding to that of the last quarter of 2019 and of the first quarter of 2020, thanks to a more favourable product mix, driven notably by a general increase of the share of short-channel activity at Agos. *Gross managed loans* also increased compared to second quarter 2020 (+0.9% and +1.1% excluding CA Consumer Finance NL) but remained slightly lower compared to third quarter 2019 (-1.5% and -1.2% excluding CA Consumer Finance NL). In line with this momentum, *CAL&F's commercial production* benefited from the robust leasing activity this quarter, up +3.8% compared to third quarter 2019, at €1.5 billion. By contrast, *factored revenue* recorded a slight drop of -1.4% compared to third quarter 2019, intensified by a *lower share of turnover subject to* *factoring*, in the context of lesser liquidity requirements for corporates considering the economic support measures rolled out since March (such as the State-guaranteed loans), but the trend became positive again in September with a strong rebound in France and internationally (+6%).
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· The activity of the Corpora