goldman sachs conference - credit-agricole.com
TRANSCRIPT
Goldman Sachs Conference
Philippe Brassac
CEO
June 9th 2016
GOLDMAN SACHS CONFERENCE – JUNE 2016 2
This presentation may include prospective information on the Group, supplied as information on trends. This data does not
represent forecasts within the meaning of European Regulation 809/2004 of 29 April 2004 (chapter 1, article 2, § 10). This information
was developed from scenarios based on a number of economic assumptions for a given competitive and regulatory environment.
Therefore, these assumptions are by nature subject to random factors that could cause actual results to differ from projections.
Likewise, the financial statements are based on estimates, particularly in calculating market value and asset depreciation.
Readers must take all these risk factors and uncertainties into consideration before making their own judgement.
The figures presented are not audited.
The figures presented have been prepared in accordance with IFRS as adopted in the European Union and applicable at that date,
and with prudential regulations currently in force. This financial information does not constitute a set of financial statements for an
interim period as defined by IAS 34 “Interim Financial Reporting” and it has not been audited.
Throughout the document, data on 2015 results is presented pro forma: transfer of CACEIS from Asset Gathering to Large
Customers, transfer of Insurance Switch from the Corporate centre to Insurance and reclassification of the contribution of the
Regional Banks under IFRS5. Within Crédit Agricole S.A., “Retail banking” now covers only LCL and International retail banking.
Note:
The Crédit Agricole Group scope of consolidation comprises: the Regional Banks, the Local Banks and Crédit Agricole S.A. and
their subsidiaries. This is the scope of consolidation that has been privileged by the competent authorities to assess the Group’s
situation, notably in the 2015 Balance sheet assessment exercise
Crédit Agricole S.A. is the listed entity. It notably owns the subsidiaries of its business lines (French retail banking, International
retail banking, Asset gathering, Specialised financial services, and Corporate and investment banking). Crédit Agricole S.A. also
owns circa 25% of the Regional Banks up to the completion of the intragroup reclassification of CCI/CCAs held by Crédit Agricole
S.A. in the Regional Banks, expected in the third quarter of 2016.
DISCLAIMER
GOLDMAN SACHS CONFERENCE – PARIS, JUNE 9 2016
GOLDMAN SACHS CONFERENCE – JUNE 2016 3
A STRATEGIC AMBITION EMBEDDED IN FOUR PRIORITIES
Simplify the Group's capital structure
Roll out an ambitious
Customer Project,
enhanced by the digital
transformation
Strengthen the Group's
growth momentum in its
core business lines
Transform the Group to sustainably
improve our industrial efficiency
1
2 3
4
GOLDMAN SACHS CONFERENCE – JUNE 2016 4
(1) CASA holds at least one mutual share (or a limited number of mutual shares) in each of the Regional Banks, conferring it the status of mutual shareholder and therefore the right to hold CCAs
(2) RB of Corsica, fully owned by Crédit Agricole S.A., will also be a shareholder of SACAM Mutualisation
(3) As of December 31 2015
(4) The scope of the transaction includes all CCI/CCAs held by CASA except for (i) securities held by Predica, (ii) the portion of CCI/CCAs held in excess of 50% of the capital of 4 Regional
Banks (Brie Picardie, Loire Haute-Loire, Nord de France and Toulouse31). This excess part will be retained by Crédit Agricole S.A. to comply with regulations regarding the capital structure of
the Regional Banks, which authorise the issuance of CCI/CCAs above 50% only if they are held by the Central body (in total, residual value of €0.5bn) and (iii) CCIs potentially detained
through liquidity schemes
PROJECT TO SIMPLIFY THE GROUP’S STRUCTURE
Change in the Crédit Agricole Group structure
Float SAS
Rue la Boétie
100%
56.7% (3)
43.3% (3)
Crédit Agricole S.A.
Local Banks of
Crédit Agricole
and other
members
Holders of
CCI/CCAs
RB
1
RB
3
RB
38
RB
2
38 Regional Banks (excl. RB of Corsica)(2)
SACAM Mutualisation
100%(2)
~25%
(through
CCI/CCAs (4))
Current Crédit Agricole Group structure New Crédit Agricole Group structure
Float
100%
43.3% (3)
Mutual
share(s)(1)
25% of
capital
under the
form of
CCI/CCAs
(no voting
right) +
Switch
Guarantee
SAS
Rue la Boétie
Crédit Agricole S.A.
Local Banks of Crédit Agricole and
other members
Holders of
CCI/CCAs
mutual shares (with voting right)
and CCAs (no voting right)
CCIs
(no voting right) 75% of capital
RB
1
RB
3
RB
38
RB
2
38 Regional Banks (excl. RB of Corsica)(2)
56.7% (3)
4
GOLDMAN SACHS CONFERENCE – JUNE 2016 5
PROJECT TO SIMPLIFY THE GROUP'S STRUCTURE
Impacts on the financial situation of the Group and CASA
Positive impact of 41bps
Pro forma fully-loaded 2015 CET1 ratio ≥ 11%: target achieved one year
ahead of schedule, with better quality of capital
Immediate positive impact
on the capital position of
Crédit Agricole S.A.
Impact on net income, excluding one-time items, of around -€470m
Elimination of the dilutive effect of scrip dividend, around 5% annually1
Limited effect on net EPS
of Crédit Agricole S.A
On net income
On regulatory ratios
On liquidity position (Intragroup funding of the transaction)
No change in the scope of tax consolidation
Transaction overall neutral at
Crédit Agricole Group level
Regulatory situation sufficiently strong to largely absorb the impact of
the transaction (average pro forma 2015 CET1 ratio of 17.3%)
Limited impact for
the Regional Banks
1. Relative to a situation in which an option to pay a scrip dividend would have been proposed with respect to the 2016 annual result. Earnings-enhancement calculation based on the assumption that the take-up rate for the scrip dividend would be the same as that observed in 2015
GOLDMAN SACHS CONFERENCE – JUNE 2016 6
PROJECT TO SIMPLIFY THE GROUP'S STRUCTURE
Stability of Crédit Agricole S.A. business mix
A balanced business mix
which remained very largely dominated by retail banking activities until now
and this will not significantly change between 2015 (pro forma) and 2019
Revenues: CASA business mix
(excluding Corporate Centre) in %
(excluding Regional Banks1)
Net income Group share: CASA business mix
(excluding Corporate Centre) in % (including Regional Banks in 2015 underlying)
Specialised financial services Large customers (CACIB and CACEIS) Asset gathering Retail banking
1. The share of Crédit Agricole S.A. in the Regional Banks was equity-accounted until 2015
36%20% 22%
33%
38% 35%
22%29% 30%
9% 13% 13%
2019 2015 underlying
pro forma
2015 underlying
33% 34% 33%
26% 25% 26%
27% 27% 27%
14% 14% 14%
2019 2015 underlying
pro forma
2015 underlying
GOLDMAN SACHS CONFERENCE – JUNE 2016 7
Recognised ability to distribute products created by our specialised business lines
through our retail banking networks to meet our customer needs
THE GROUP'S DNA
A Customer-focused Universal banking model
1. Source: Regional Bank customer database
Large
customers
Specialised
financial
services
Asset
gathering
Retail
banking
€7.8bn of revenue synergies in 2015
for Crédit Agricole Group
An average of 9 products per
demand deposit account1 for
Regional Bank customers at end
2015
GOLDMAN SACHS CONFERENCE – JUNE 2016 8
A Customer-Focused Universal banking model
A model based on the expertise of all our business lines, on the excellence and the know-how required to
meet the financial and wealth management needs of our customers
A «Full Multi-Channel » distribution model
A model that enables our customers to choose how and when they interact with their bank and switch
easily between the various channels
A strategic investment in customer relationships
An acceleration of the digital transformation and foster innovation
A new wealth advisory approach with a renowned sales/advisory method of customer advisers
New products and services
ROLL OUT AN AMBITIOUS CUSTOMER PROJECT, ENHANCED BY THE DIGITAL REVOLUTION
MULTI-CHANNEL
Attached to the simplicity of digital for some transactions and the extra value
provided by an adviser
~70%
DIGITAL
Attached to the freedom and simplicity of digital banking
~20%
BRANCH
Prefers to have a face-to-face relationship with his adviser ~10%
% of customers1
1. source: McKinsey “Retail distribution 2015: full digitalisation with a human touch”; estimation of banking customer behaviours on complex operations
GOLDMAN SACHS CONFERENCE – JUNE 2016 9
Accelerate the pace of customer capture
Continue our multi-product strategy
Reinforce business in specialised markets
Digital transformation and branch network upgrade
Cost control
Retail Banking
STRENGTHEN THE GROUP'S GROWTH MOMENTUM
Business line strategies
Growth in the capital allocated to the Asset
gathering business line
Pursuit of value-creating acquisitions Primarily in asset management
And, to a lesser extent, in wealth management
Increase in costs to support growth, mainly in insurance :~
+2% p.a. business line costs
Asset gathering
Further integration with the Group's retail banks Support the Group’s networks
Increase sales of insurance product at CACF
Selectively relaunch profitable production in stand-
alone business Direct channel
Partnerships and car finance joint ventures
Operating optimisation with sustained cost-cutting
efforts
Specialised financial services
A coherent business line serving the Group
generating additional synergies Support the development of the Regional Banks and
Cariparma in the mid-corp segment
Develop market activities with corporate and local
authority customers of the Regional Banks and LCL
Servicing on market transactions for other Group entities
… whilst maintaining a low risk profile
Large customers
RONE 20191
>16%
RONE 20191
>11%
RONE 20191
>25%
RONE 20191
>13%
1. RoNE calculated as the net income (post tax) on normative equity, on the basis of a capital allocation tailored to the need and risks of each business line
GOLDMAN SACHS CONFERENCE – JUNE 2016 10
TRANSFORM THE GROUP TO SUSTAINABLY IMPROVE OUR INDUSTRIAL EFFICIENCY
A €900m operational efficiency programme for Crédit Agricole S.A.
An ambitious investment programme of €7.7bn over 4 years1 to prepare for the future
Total
7.7
Crédit
Agricole S.A.
4.4
Regional
Banks
3.3
Cumulative investment over the plan period (€bn)
Developing the
business line
and digital
transformation
Industrial
efficiency
Regulatory
1. Cumulative investments. Investments on a cash-out basis
€4.9bn
in developing the
business lines and
digital transformation
(of which ~80% for
Retail banking)
€1.8bn
in improving industrial
efficiency and cutting
costs in all business
lines
~ €1bn
in strengthening the
Group's compliance
and risk mitigation
10%
16%
11%
37%
26%
CASA cost savings
by business line
900
CASA cost savings
by lever
35%
36%
16%
13%
900
Large
customers
Asset
gathering
Corporate
Centre
Retail
Banking
Specialised
financial
services
Simplification
of organisation
structures
Control of non
IT purchase
IT
transformation
Operational
optimisation
and efficiency
- 6 pts of Crédit Agricole S.A.’s
cost/income ratio by 2019
i.e. a cost/income ratio < 60% in 2019
Annual cost savings by 2019 (€m)
GOLDMAN SACHS CONFERENCE – JUNE 2016 11
Crédit Agricole
Group
Of which
Crédit Agricole S.A.
>+1.5% >+2.5% Revenue growth1
<60% <60% 2019 cost / income ratio
<35bps <50bps Cost of risk / outstandings
>€7.2bn >€4.2bn 2019 Net income Group share
>10% 2019 RoTE
22% TLAC excl. eligible senior debt
50%, in cash Pay-out ratio
≥11% Fully-loaded CET1 16%
2019 FINANCIAL TARGETS
Q1 to Q3-2016 are impacted by the implementation of the project to simplify the Group’s capital
structure. These atypical quarters are fully taken into account in the financial trajectory of the MTP
1. 2019 CAGR vs 2015 underlying pro forma for Crédit Agricole Group simplification transaction
GOLDMAN SACHS CONFERENCE – JUNE 2016 12
Decrease of LCL revenues, expenses and cost of risk being well oriented
Strong business momentum in the last 2 years, with a deliberate policy to increase individual customer market share: growth in home
loans outstanding at LCL almost twice that of the market
Exceptional wave of renegotiations and early repayments since 2014: since the beginning of the decrease in interest rates in 2014,
almost half of home loans outstanding have been renegotiated or repaid early
• Strong impact on net interest margin, with pressure expected to remain in 2016; turnaround point expected in 2017
• Fees impacted in Q1-16 by market conditions, but healthy growth in insurance commissions and commissions on account
management, services and payment instruments
MTP targets confirmed: further potential to increase customer loyalty thanks to the implementation of MTP Group synergies
Underlying Q1-15* Retail Asset gathering SFS Large Customers Corp. Centre Underlying Q1-16*
Q1-16: Good resilience of the business lines in a difficult operating
environment, reflecting the relevance of Crédit Agricole S.A.'s business
model
394
(9.3%)
Change in Crédit Agricole S.A.’s underlying NIGS (€m)
(15) +36 +61 (175)
+52
435
Of which (41)
for LCL
Stable level of AuM
reflecting a satisfactory
commercial performance
in an adverse market
environment
Record
origination,
contribution to
NIGS almost
doubled
Market fall and strong increase in
volatility leading to wait-and-see attitude
of corporate clients
Fall in oil prices, reducing the volume of
trade finance operations
* Excluding balance sheet optimisation, Regional Banks’ dividend, accounting items (DVA running, issuer spread, loan hedges)
GOLDMAN SACHS CONFERENCE – JUNE 2016 13
OUR COMMITMENT TO INVESTORS
Clarify the Group’s organisation
Project to simplify the Group’s structure implemented in 2016
Immediately normalise our regulatory situation
A 2019 CET1 target already achieved January 1st, 20161
A TLAC-compliant Group
Implement a realistic, but ambitious Medium Term Plan
Main targets for 2019
• NIGS: €4.2bn for Crédit Agricole S.A.
• RoTE: >10%
Conservative assumptions within a controlled business mix
Affirm our dividend policy
50% pay-out (as of 2015)
In cash (as of 2016)
PRUDENCE and PERFORMANCE
1. On a pro forma basis
Appendix
GOLDMAN SACHS CONFERENCE – JUNE 2016 15
PROJECT TO SIMPLIFY THE GROUP’S STRUCTURE
(1) The scope of the transaction includes all CCI/CCAs held by CASA except for (i) securities held by Predica, (ii) the portion of CCI/CCAs held in excess of 50% of the capital of 4 Regional
Banks (Brie Picardie, Loire Haute-Loire, Nord de France and Toulouse31). This excess part will be retained by CASA to comply with regulations regarding the capital structure of the
Regional Banks, which authorise the issuance of CCI/CCAs above 50% only if they are held by the Central body (in total, residual value of €0.5bn) and (iii) CCIs potentially held through
liquidity schemes. This does not include the Regional Bank of Corsica, which is 99.9% owned by CASA
(2) Not taking into account the price adjustment. As an indication, based on the first half of 2015, the adjustment would have been ~+€0.5bn
Scope of the project to simplify the Group’s structure
One-off impacts for CASA Recurring impacts for CASA
The intragroup reclassification of CCI/CCAs(1) held by
CASA in the Regional Banks to an entity wholly owned by
the Regional Banks, SACAM Mutualisation
Capital gain:
+€725m(2)
Dividend on 2015
result: +€287m
Q3-16
Q1-16
mainly
Deconsolidation of the
contribution from
CCI/CCAs: -€1072m on
an annual basis
From
Q1-16
The unwinding of the guarantee mechanism ("Switch
1") associated with the holding of the CCI/CCAs
+€461m in revenues on
an annual basis
From
Q3-16
The initiation of a loan granted to the Regional Banks to
finance the transaction
+€261m in revenues on
an annual basis
From
Q3-16
Optimisation of the balance sheet -€683m in revenues Q1-16
In revenues:
+€160m in 2016
+€190m in 2017
+€128m in 2018
…
From
Q2-16
Total impact in Net income Group share ~+€560m(2) In 2016 ~-€470m on an annual basis
GOLDMAN SACHS CONFERENCE – JUNE 2016 16
2019 FINANCIAL TARGETS
Business line indicators
Revenues
2015-2019 CAGR1
2019
Cost / income 2019 RoNE2
LCL
Cariparma
Retail
banking
~+0.5%
~+3%
~65%
~55%
>16%
>16%
Insurance
Asset management
Wealth management
Asset
gathering >+3% <45% >25%
Consumer credit
Leasing & Factoring
Specialised
financial
services >+2.5% <46% >13%
Corporate & investment
banking
Asset servicing
~+2% <60% >11% Large
customers
1. 2019 CAGR vs 2015 underlying pro forma for Crédit Agricole Group simplification transaction and analytical transfer of the cost of the Switch 2 guarantee to Insurance activity
2. RoNE calculated on the basis of a capital allocation tailored to the needs and risks of each business line (see “Profitability - Risk weighted assets and capital allocated by business line”).
GOLDMAN SACHS CONFERENCE – JUNE 2016 17
SOLVENCY PLANNING
Fully-loaded CET1 ratio of Crédit Agricole S.A.
A capital planning reconciling a cash dividend policy in a constrained regulatory environment and
capital allocation favouring high profitability business lines
Fully-loaded CET1 ratio - Crédit Agricole S.A.
1. Regulatory impacts, including IFRS 9
50% dividend pay-out ratio, based on net income after AT1 coupon payments, paid in cash as of 2016 results
Downward trend in AFS reserves expected in the context of rising interest rates
Selectivity and optimisation actions, mainly on CIB
Expansion of business lines with strong added value driven mainly by retail banking
Leeway allowing flexibility in the solvency monitoring
1
-2.3%
31-Dec-15 Net income after
AT1 coupons
payment
Distribution
-0.7%
≥11% 11%
Flexibility
-0.6%
Regulatory
impacts1
Expansion of
each
business line
-0.7%
Selectivity &
optimisation
+4.6%
31 Dec
2019 Target
-1.0%
+0.7%
AFS reserve
GOLDMAN SACHS CONFERENCE – JUNE 2016 18
Readability of Q1-16 results is made difficult by
different specific items:
It includes non-recurring negative impacts of the project
to simplify the Group’s capital structure* (Liability
management) for -€448m
It does not include recurring positive impacts of
implementation of the project to simplify the Group’s
capital structure, for ~€150m per quarter*, which will be
accounted for from Q3-16
Includes the annual contribution to the Single
Resolution Fund (SRF) of €201m
Q1-15 Q1-16
Stated NIGS 784 227
O/w specific accounting items (15) +25
O/w Regional Banks +364 contribution
+256 dividends
O/w Liability management 0 (448)
Underlying NIGS 435 394
O/w SRF (175) (201)
Crédit Agricole S.A.
From stated NIGS to underlying NIGS (€m)
Crédit Agricole S.A.: Q1 impacted by the implementation of the project to
simplify the Group’s capital structure
GOLDMAN SACHS CONFERENCE – JUNE 2016 19
Reclassification of the Regional Banks' contribution under IFRS 5 as of 01/01/2016
Final approval obtained from the Autorité des Marchés Financiers (AMF) on 06/04/2016
Q1 impacted by the implementation of the project to simplify the Group’s
capital structure