Half Year 2020 Credit Agricole SA Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Delphine Lee - JPMorgan Chase & Co, Research Division - Analyst : So I just have 2 questions. First of all, just going back to capital. I just want to understand a little bit your priorities in terms of usage of excess capital. I mean you do have quite a bit of buffer over MDA. Is the plan, if you have excess capital to, first, reimburse Switch entirely and then consider potentially buybacks or paying a special dividend? Or would it be small bolt-on transactions? Just to understand a bit the thinking on capital management. My second question is on TLTRO. So you have the EUR 90 billion you mentioned. Can you just help us a little bit understand what's the benefit that we should expect in terms of net interest income for the second half of this year, I assume in LCL, mainly? And then my last question is on cost of risk. When I look at your Slide 15, we can see from the Stage 3 that there's been some increases, obviously, from low levels. But are you expecting these trends to continue? Or is the second half levels in terms of Stage 3 provision going to be much lower?

Question: Pierre Chedeville - CIC Market Solutions (ESN), Research Division - Analyst : Yes. I have one question on the insurance. I was listening to the con call of AXA this morning. And they explained that their combined ratio, the impact of business interruption claim was balanced for RV amount by the better claims on motor. So my question is, could you give us any color on that, the balance between business interruption and better claims on motor? And also, you mentioned that you have paid EUR 143 million -- I guess EUR 1 million to professionals for business interruption. But you mentioned that it was a volunteer act, a mutualist act. But I guess that you have also paid because it was in the contract, so I wanted to know if...

Question: Pierre Chedeville - CIC Market Solutions (ESN), Research Division - Analyst : And concerning motor because the ratio remains quite low, actually.

Question: Pierre Chedeville - CIC Market Solutions (ESN), Research Division - Analyst : But was it due to motor claims? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 06, 2020 / 12:00PM, CAGR.PA - Half Year 2020 Credit Agricole SA Earnings Call

Question: Pierre Chedeville - CIC Market Solutions (ESN), Research Division - Analyst : Okay. But there was less robbery also, I guess.

Question: Pierre Chedeville - CIC Market Solutions (ESN), Research Division - Analyst : And my second question is just technical, a very quick question. Your buffer against threat is 410 and your buffer against MDA, as far as I understand, is 380. So the difference is 30 basis points, what exactly is 30 basis points? Is it P2G? Or is there something I don't...

Question: Kirishanthan Vijayarajah - HSBC, Research Division - Analyst : So my first question is on costs. So at group level, you've done really well on cost. But I just want to better understand the cost outlook in Large Customers. And I appreciate there's been some perimeter effect distorting the first half. But really, are you working on kind of cost efforts within large corporate as you seem to be doing elsewhere in the group? Or is it more a case that, look, you've got this revenue windfall in the first half so, you know what, there's no pressure to really tackle the cost base in large corporate? So really, the first question on the large corporate cost outlook. And secondly, in car finance, was there any kind of impact from second-hand car residual values? It doesn't look like you've taken anything. You've not flagged anything. So I wonder if that's something you might need to do at the back end of the year. So what's your kind of outlook for car residual values in the car finance segments?

Question: Omar Fall - Barclays Bank PLC, Research Division - Analyst : Just 2 for me. So the first one, sorry to come back to the top line in French retail, but might I just really understand the NII dynamics there at all? If I simply take net interest income ex PEL/CEL divided by loans, it's like a marginal decline in the quarter. It's basically not that much different to Q4. Yet you've had the high-volume growth on the deposit side, which is higher than the asset side, including current accounts, up 30%. So that's negative. You've got the state-guaranteed loans, which should be negative. And then you've had lower swap rates, which are also negative. So how is net interest margin is so stable? If you can maybe just give us some more color. And then secondly, could you just discuss GAC Sofinco specifically, please? Because, I guess, that business is like 2 to 3 months ahead of the rest, how do you call it, of consumer finance in navigating the crisis given where China is, and it's a different market. But like, how recovered is that? Is it basically back to a normal run rate of the top line in asset quality? I know you gave, like, some volume changes between June and March, but it's hard to understand those because we don't really know the base. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 06, 2020 / 12:00PM, CAGR.PA - Half Year 2020 Credit Agricole SA Earnings Call

Question: Omar Fall - Barclays Bank PLC, Research Division - Analyst : Understood. Sorry, just a quick follow-up. So I guess the second half of the quarter would have had much better loan growth than the first half, implying that that net margin -- that's actually negative to the net margin because of the averaging effect. And so are you -- you seem quite confident in the outlook. Does that then mean that you need volumes to really rebound very significantly from here to offset that margining effect?

Question: Jonathan Matthew Balfour Clark - Mediobanca - Banca di credito finanziario S.p.A., Research Division - Analyst : So a couple of questions. First one, could you just help me understand the economics of the government guaranteed loans in France. I think you said clients were paying around 0 for the loans. If you can fund yourself at 100 basis points below, using the TLTRO 3 as your marginal funding source, does that mean that you're earning a percentage point of interest margin net on these volumes? Or am I missing something? In which case, please tell me where I'm going wrong there. And then next question on the tax rate. Was there anything else this quarter that led to the low tax rate because the Affrancamento, EUR 39 million, would seem to only be explaining part of the reason that it's so low. So anything going on there? And then finally, on rating migration within risk-weighted assets, do you have any expectations there for headwinds in coming quarters? Or do REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 06, 2020 / 12:00PM, CAGR.PA - Half Year 2020 Credit Agricole SA Earnings Call you think it's not really an important effect for you? Or if it happens, would that be a next year effect, kind of timed with the end of government support measures? Just any thoughts there on -- in terms of magnitude or timing?

Question: Jonathan Matthew Balfour Clark - Mediobanca - Banca di credito finanziario S.p.A., Research Division - Analyst : Can I just check the -- how do you assess the counterparty rating there? Is it your internal assessment based on, like, interest coverage? Is that the kind of metrics? Or are you relying on external parties to -- external ratings process as well?

Question: Jonathan Matthew Balfour Clark - Mediobanca - Banca di credito finanziario S.p.A., Research Division - Analyst : And then on tax. Sorry, I interrupted.