BPI : Results for the second quarter and first half of 2020

International Retail Banking

International retail banking revenue fell by -10.5% to €640 million in second quarter 2020. The underlying expenses excluding SRF are down, albeit contained (-4.0%), to reach €418 million, and there was an additional contribution to SRF of €9 million.

Hence, the gross operating income decreased by -22.0%. Provisioning multiplied by 2.4 to -€146 million this quarter (in particular due to the provisioning of performing loans). All in all, the net income Group share of International retail banking stands at €37 million, down -62.8% compared to second quarter 2019.

For the first half year, underlying revenues decreased -5.8% to €1,310 million. Underlying operating expenses excluding SRF are down -1.9% to €840 million, resulting in a 2.6 percentage point deterioration in the underlying cost/income ratio, to 64.7%. Provisioning increased by 82.3% to reach €314 million for the half year.

This translates into a net income Group share of €178 million for first half 2020.

Italy

Revenues fell -10.8% to €431 million in second quarter 2020 as a result of the decline in activity during the lockdown. Net interest margin was impacted by the renegotiations and the decline of rates, affecting both floating-rate loans outstandings and new loan production. Fee and commission income was also down this quarter (-15%). Underlying costs excluding SRF were down -2.3%, due in particular to savings on external expenditure and mobility. As this decline was less rapid than the fall in revenues, the underlying cost/income ratio excluding SRF was 67.0%, deteriorating by +5,8 percentage points compared to 2019.

Provisioning multiplied by 2.4, reaching -€146 million, as a result both of provisioning of performing loans (-€30 million) and a significant increase in provisions for proven risks in order to prepare for the disposal of non-performing loans. The annualised cost of credit risk on outstandings for the half year was therefore 102 basis points. The non-performing loans ratio improved to 7.4% this quarter (-0.6 percentage points June/June) and the coverage ratio was +2.5 percentage points higher, at 62.9%. Also noteworthy this quarter was a capital gain (on net income on other assets line of the income statement) for the disposal of a building for €65 million before tax.

For the first half year, revenues were down -6.4% and settled at €875 million. Operating expenses excluding SRF were down by only -2.1%, resulting in a deterioration in the underlying cost/income ratio excluding SRF, which stands at 64.8%, an increase of +2.9 percentage points June/June. Lastly, the sub-division contribution to net income Group share was down -41.8%.

The underlying RoNE (return on normalized equity) of CA Italia stands at 4.2% for the first half year 2020, compared to 9.3% for 2019.

Crédit Agricole Group in Italy

The Group’s results in Italy were €257 million in first half 2020, i.e. a -25% decrease from first half 2019 due to the increase in the cost of risk.

IRB - excluding Italy

Underlying revenues declined in second quarter 2020 compared to second quarter 2019 (-9.8%), mainly due to NII impacted by a fall in key interest rates in Egypt, Poland, Ukraine and Morocco, and fee and commission income that was affected by the sharp slowdown in commercial activity. Underlying costs excluding SRF were also down -7.7% this quarter and were declining in all subsidiaries except CA Egypt (+5%). The underlying cost/income ratio excluding SRF of the IRB outside Italy therefore declined by only 1.5 percentage points to 62.1% for second quarter 2020. Underlying gross operating income thus decreased by -13.1% and the provisioning increased (x2.3) to -€52 million in second quarter 2020. Lastly, underlying net income Group share was €12 million, i.e. a strong decrease of -70.3%.

Crédit Agricole Egypt: underlying gross operating income was down -16% in second quarter 2020 compared to second quarter 2019, with underlying revenues (-13%) penalised by lower rates. The risk profile remained good with a low NPL ratio of 2.6% and a high coverage ratio of 169%.

Crédit Agricole Poland: underlying revenues recorded a decline this quarter (-10%), penalised by the drop in reference interest rates. This drop was partially offset by a fall in expenses of -10%. Underlying gross operating income fell by -9% and provisioning increased, resulting in a lower net income Group share, which was negative in first half 2020 (-€4 millions ).

Crédit Agricole Ukraine: underlying revenues were down this quarter (-11%), mainly due to the drop in the reference interest rate, as well as the fall in fee and commission income (-30%). The NPL ratio was 4.4% and the coverage ratio was high at 180%.

Crédit du Maroc: revenues were slightly down this quarter by -3%, but expenses remained under control (+1%). Provisioning remains prudent, with the coverage ratio reaching 96%.