International retail banking: results of the 3rd quarter and the first 9 months of 2020

International retail banking revenues fell by -5.1% to €657 million in third quarter 2020. Underlying expenses decreased less (-1.5%) to €415 million. Hence, the gross operating income decreased by -10.6%. Provisions increased +47.9% this quarter to -€124 million (notably due to the provisioning of performing loans). In the end, net income Group share of International retail banking was €63 million, down -34.9% compared to third quarter 2019.

For the nine months, underlying revenues decreased -5.6% to €1,967 million. Underlying operating expenses excluding SRF were down -1.8% to €1,255 million, resulting in a -2.5 percentage point deterioration in the underlying cost/income ratio to 63.8%. Gross underlying operating income is down -12.4% to €686 million. Excluding SRF, the drop in gross operating income is lowered to -11.6%. Provisioning increased by +71.0% to €438 million for the first nine months. This translated into underlying net income Group share of €155 million for first nine months of 2020 (down -43.4%).

Italy

Crédit Agricole Italia’s revenues were unchanged in third quarter 2020 compared to 2019 at €462 million (-0.1% compared to third quarter 2019). The net interest margin was supported by the refinancing conditions and fee and commission income returned to pre-crisis levels. Expenses were likewise unchanged year-on-year (-0.5%) and down compared to the second quarter of 2020 (-2.3%) reflecting the specific efforts made in relation to external expenses and mobility and making it possible to absorb the additional costs related to the crisis. Underlying cost/income ratio excluding SRF stood at 61.0%, which was a slight improvement (0.3 percentage points compared to 2019). Provisioning increased by +40.6% to -€86 million at a well-controlled level. It results both from provision of performing loans (-€8 million) and a significant increase in provisions for non-performing loans in order to prepare for the disposal of non-performing loans. The annualised cost of credit risk on outstandings for the first nine months was therefore 92 basis points. The non-performing loans ratio improved to 7.3% this quarter (-0.6 percentage points Sept./Sept.) and the coverage ratio was +2.1 percentage points higher, at 62.9%.

For the first nine months, revenues were down -4.3% to €1,337 million. Operating expenses excluding SRF were down by only -1.6%, resulting in a deterioration in the underlying cost/income ratio excluding SRF, which stood at 63.5%, an increase of +1.8 percentage points Sept./Sept. The Gross operating income decreases by -9.8% , standing at €462 million (-8.8% excluding SRF). All in all, the business-line’s contribution to net income Group share was down -31.6%.  The underlying RoNE (return on normalized equity) of CA Italia stands at 5.7% for the first nine months of 2020, compared to 9.3% for 2019.

Crédit Agricole Group in Italy

The Group’s results in Italy were €423 million in the first nine months of 2020, i.e. a -14% decrease from the first nine months of 2019 due to the increase in the cost of risk.

International Retail Banking – excluding Italy

Underlying revenues declined in third quarter 2020 compared to third quarter 2019 (-15.1%), mainly due to a net interest margin impacted by the fall in key interest rates in Egypt, Poland, Ukraine and Morocco, and fee and commission income affected by the sharp slowdown in commercial activity. Underlying expense excluding SRF were also down -3.5% this quarter and unchanged or declining in all subsidiaries except Crédit du Maroc (+3%). As a result of expenses declining less than revenues, the underlying cost/income ratio excluding SRF of IRB excluding Italy deteriorated this quarter to 68.5%, up +8.2 points. Underlying gross operating income thus decreased by -32.6%. Provisioning increased (+67.9%) to -€38 million in third quarter 2020 from the provisioning of performing loans. The coverage ratio was up +4 percentage points compared to the end of the second quarter 2020 at 104%. In the end, underlying net income Group share was €11 million, i.e. a sharp decrease of -69.3%.

By country: 

- CA Egypt(1): underlying revenues were down -15% in third quarter 2020 compared to third quarter 2019, penalised by lower rates. The risk profile remained good with a low NPL ratio of 2.5% and a high coverage ratio of 187%. 

- CA Poland(1): underlying revenues recorded a decline this quarter (-16%), penalised by the drop in reference interest rates. With expenses unchanged, underlying gross operating income decreased by -65%. The NPL coverage ratio rose to 108% resulting in a lower net income Group share, which was negative in the first nine months of 2020 (-€4 million).

- CA Ukraine(1) : underlying revenues were down this quarter (-9%). The NPL ratio was 2.3% and the coverage ratio was high at 242%.

- Crédit du Maroc (1): revenues were slightly down this quarter by -2% and expenses remained under control (+3%). Provisioning remained prudent, with the coverage ratio reaching 91%.

- CA Serbie : increase of revenues this quarter, expenses are under control and rise of provisioning. Loans up in all segments, in particular due to moratoria.

In the first nine months, revenues were down by -8.1% to €630 million. Operating expenses excluding SRF decreased only by -2.1%, which resulted in a deterioration of the underlying cost/income ratio excluding SRF to 64.5%, up by +3.9 percentage points Sept./Sept.. Underlying gross operating income excluding SRF was down 17.3% at €224 millions. All in all, the business-line’s contribution to net income Group share was down -60.6%. 

The underlying RONE (return on normalized equity) of other IRB excluding Italy stands at 10.8% for the first nine months of 2020, compared to 19.3% for 2019.

The International retail banking business line contributed for 5% to the underlying net income Group share of Crédit Agricole S.A.'s core businesses (excluding the Corporate Centre division) for the first none months of 2020 and 13% to underlying revenues excluding the Corporate Centre.

The entire Retail banking business line contributed for 17% to the underlying net income Group share of Crédit Agricole S.A.'s core businesses (excluding the Corporate Centre division) for the first nine months of 2020 and 30% to underlying revenues excluding the Corporate Centre.
As of 30 September 2020, the capital allocated to the division is €8.7 billion including €4.9 billion for French retail banking, €3.9 billion for International retail banking. Risk weighted assets are €92.0 billion including €51.2 billion for French retail banking and €40.9 billion for International retail banking.

(1) excluding the currency impact