Published on December 14, 2011
Crédit Agricole meets the challengesFocusing its strengths on serving the economyImproving its financial strength by reachinga CET1 ratio of 10% in 2013Capitalising on the market-leading position of its retailbanks and associated business lines14 December 2011
DisclaimerThis presentation may include prospective information on the Group, supplied as informationon trends. This data does not represent forecasts according to the meaning of EuropeanRegulation 809/2004 of 29 April 2004 (chapter 1, article 2, §10).This information was developed from scenarios based on a number of economic assumptionsfor a given competitive and regulatory environment. Therefore, these assumptions are bynature subject to random factors that could cause actual results to differ from projections.Likewise, the financial statements are based on estimates, particularly in calculating marketvalue and asset impairment. As a consequence, this information has not been audited.Readers must take all these risk factors and uncertainties into consideration before makingtheir own judgement.This document includes information based on works and analyses in progress. Theirimplementation would imply the respect of legislation in force, mainly regarding employeerepresentative bodies.Only the French version of this presentation is binding by law.2
Key messages The plan to reduce funding needs by €50bn was announced on 28 September 2011, with €9bn already achieved at end-October A new Corporate and investment banking model focused on serving major clients In Q4-11, exceptional write-downs of €2.5bn with no impact on the Basel 3 CET1 ratio but a negative impact of €0.5m on net profit linked to the plan’s implementation. As a result, Crédit Agricole S.A. will not deliver a profit in 2011 Under current market conditions, Crédit Agricole Group will post a profit in 2011 Crédit Agricole Group will reach a Basel 3 CET1 ratio of 10% at end-2013 Crédit Agricole confirms its role as the leading financier of the French economy3
Contents 1 Turbulent economic and financial climate 2 Crédit Agricole adapts and meets the challenges 3 Financial and accounting impacts 4 Capital adequacy: Crédit Agricole Group will meet requirements in 2013 5 Crédit Agricole fully mobilised to serve its clients and the economy4
1 Turbulent economic and financial climate5
Turbulent economic and financial climate Climate early 2011 New climate 1 A debt crisis which was to be In the United States, an unexpected slowdown, restricted to Greece governance problems for the budget and debt. Forecasts lowered Crisis spread to all of EuropeSovereign Rating agencies downgrade or place on watchlistdebt European states and banks 2 In France, GDP growth of 0.9% In the United States, following fears of a observed in Q1, which was to recession, the outlook has improved slightly but continue, even at a slower pace the eurozone is affected. Growth is curbedEconomic In the longer term, the United States In France, GDP growth of 0.3% in Q3 has led togrowth were to grow by 2.8% in 2018, Europe two government plans to cut the budget deficit by 1.8% and emerging markets were to continue to expand 3 Bullish markets, expecting weaker High level of nervousness on the bond and equity growth but which was to last markets, particular concerns about the financialFinancial nevertheless sectormarkets6
Agitated financial and regulatory environment Environment early 2011 New environment 1 Common Equity Tier 1 (CET1) Basel 3 CET1 ratio requirement: 9% as of 2013 requirement under Basel 3 : 7% in – More restrictive definition of capitalCapital 2018 – More severe weighting of capital marketadequacy Wide available range of capital activities instruments Impact of the sovereign debt crisis on banks’ and insurance companies’ capital 2 Significant recourse to transformation Scarcity of the USD and higher cost of liquidity Resources still abundant and relatively Requirements to reduce debt and diversify inexpensive sources of funding Uncertainties regarding the application of newLiquidity ratios – LCR to meet short-term requirements – NSFR to manage transformation – Leverage ratio to limit balance sheet size 3 Profitability mainly measured by ROE Higher costs of liquidity and capitalProfitability Financing of activities through debt Financial impact of plans to reduce funding needs7
Change in market conditions further deteriorated by an unprecedented regulatory shock Acceleration of the timetable and tightening of regulatory requirements Crédit Agricole Group Timetable for application of the full Basel 3 CET1 ratio (at 31/12 of each year) 9% Anticipation by 5 years +2 points 7% Ratio required at 1 January 2019 Timetable at early 2011 New timetable (new requirements by both French authorities and markets)8
2 Crédit Agricole adapts and meets the challenges9
Structural reduction in funding needs and a new corporate and investment banking modelTwo parts to the adjustment plan1. Structural reduction in funding needs of €50bn between June 2011 and December 2012 announced on 28 September 2011 €9bn already acheived at 31 October 2011 Pro-active management of RWAs Rebuilding of liquidity reserves underway (lowest point on 30/09/11 at €103bn, Impact on RWAs* for €118bn on 28/11/11) CIB and Financial Crédit Agricole S.A.: MLT market services: programme of €12bn in 2012 compared to ~ -€23bn at end-Dec. €22bn in 2011 2012 vs June 2011 2. A new Corporate and investment banking model, servicing major clients* Impact of measures, not taking into account regulatory reforms10
Measures by business line Corporate and investment banking (1/2) Announcement of target to reduce funding needs by €15 to 18bn, of 28 Septembre 2011 which €9bn by end 2011 and 75% in USD A new Corporate and investment banking model for Crédit Agricole A strategy aiming to limit assets retained on the balance sheet – Adjustment towards a « Originate to Distribute » model Origination and structuration of financing Increase in bonds solutions Increased development of syndication and securitisation Early-stage partnerships with investors likely to participate in our syndications – Increase advisory and M&A capacities: Investment banking and brokerage A strategy servicing the Group’s major clients adapted to a new framework of banking disintermediation 3 means of adaptation : – Refocusing on major clients – Geographical refocusing, with the closing of offices in 21 countries. CA CIB remains present in 32 countries which together represent 84% of global GDP – Withdrawal from some business lines: Equity derivatives Commodities11
Measures by business line Corporate and investment banking (2/2) 1 Reduction of the balance sheet 2 Aligning of the cost base to the reduction of the balance sheet Adjustment of number of positions, Reduction of liquidity need by about €18bn by representing a 13 % reduction of CIB end-2012, mainly in equity derivatives and headcount financing activities – Closing of operations in selected countries and decrease in activities – Additional initiatives targeting back office functions Further cost reductions (procurement, reduced use of external service providers) Impact on RWAs of approximately Adaptation of the model to generate €30bn* by January 2013 3 revenues in a difficult environment – Cutbacks in operations – Disposals of loans and portfolios Support targeted clients Adapt pricing to the new funding framework Increase weighting of commission and fee income in the revenue mix* Including CRD3&4 regulatory impacts on disposals and excluding regulatoryimpacts on the remaining scope12
Measures by business line Financial services: consumer finance, leasing and factoring 28 September 2011 Announcement of the target to reduce funding needs by €9 to 11bn CACF: four actions to reduce liquidity needs by ~ €8bn 1 Organic decrease of 3 actions to reduce activities Going forward,outstandings 2 by ~ €8bn Loan disposals 40% of the full-year impact on revenues covered by cost 3 savings (adjustment of Activities disposals targeted number of positions)Additional to 4 the plan: Diversification of €4 to 5bn funding sources While maintaining CACF’s position as a key player in the consumer finance market CAL&F: reduction in customer assets by ~ €1bn at end-2012 as a result of two initiatives – Disposal of leasing operations and portfolios – Reduction in production13
Measures by business line Retail banking 28 September 2011 Announcement of the target to reduce funding needs by €21 to 23bnConfirmation of the target to reduce funding needs: -€23bn Retail banking in France: balanced development – Accelerated growth in customer deposits against a backdrop of a higher savings rate in France Refocusing new inflows on customer deposits Priority given to client satisfaction Conquering new deposit markets Special focus on high net-worth individuals – Steady growth in lending In a context of lower demand With pricing taking into account the cost of liquidity International retail banking: strategies adapted to local environments – Emporiki Enhanced efforts to boost deposits and continued increase of our market share Reduction in outstanding loans due to natural attrition – Cariparma Growth in inflows with refocusing on customer deposits Controlled growth in lending14
Will to limit the impact on employment Job cuts in two business lines (Number of jobs) France International Corporate and investment banking ~ 550 ~ 1,200 Consumer finance ~ 300 ~ 300 Staff transfers and employability encouraged, voluntary redundancies favoured – A full support system encouraging jobs transfers, namely geographically, with optimisation of the companys natural staff turnover and in agreement with the employee representative bodies. – Staff adjustment plans favouring voluntary departures in the relevant companies in due compliance with the social procedures in force in the various countries involved. The Group will actively continue to hire in 2012 – Over 3,500 new recruitments in France, primarily in retail banking, and 3,000 additional staff hired on work-based training contracts.(In accordance with work legislation in force in the countries concerned)15
3 Financial and accounting impacts16
Financial and accounting impacts in 2011 1 In Q4-11, impact of the adjustement plan on net income Group share ~ -€500m – Provisioning of all staff adjustment costs – Impact of portfolio disposals on revenues and cost of risk2011 impact of the adjustment plan (in €m) (240) Impact on CIB (70) (500) Impact on Financial (350) services +265 Impact on CASA (105) 2 In Q4-11, impact of goodwill impairment for Crédit Agricole S.A., taking into account the adjustment plan : -€1,300m – Decrease in earnings expected in 2011 and in subsequent years, resulting in the impairment of goodwill: Impact of -€1,053m for Corporate and investment banking Impact of -€247m for leasing and factoring No impact on capital adequacy ratio under Basel 317
Financial and accounting impacts in 2011 3 In Q4-11, other non-recurring impacts on Crédit Agricole S.A.s net income Group share due to the severe deterioration of the environment, with no impact on liquidity nor on the Basel 3 capital adequacy ratio: -€1,234m – Write-down of the value of minority stakes recognised under the equity method for a total of -€981m: Bankinter: -€617m BES: -€364m – Technical impairment of goodwill on foreign subsidiaries for a total of -€253m Italy: -€191m Ukraine: -€62m Expected income for the year 2011: – Taking into account these elements and deteriorated conditions in Q4-11, Crédit Agricole S.A.s consolidated result will be negative. Its Board of Directors will propose to the AGM to not pay a dividend – As a reminder, Crédit Agricole Group generated net income Group share of €3.3bn for the first 9 months of 2011 – Under current market conditions, Crédit Agricole Group will post a profit18
Financial and accounting impacts of the adjustment plan in 2012Estimated cost of disposals planned in 2012 within the framework of the adjustment plan(in €m) (470) (650) Impact on CIB Impact on Financial + 240 services (60) Impact on CASA 2012: impact on net income Group share: -€470m – Impact of planned portfolio disposals on revenues and cost of risk19
Financial and accounting impacts medium and long termFull-year impacts of the adjustment plan(in €m) ~ (250) (700) ~ +150 to (750) ~ +350 Going forward, impact on net income Group share estimated at ~ -€250m – Decrease in recurring revenues of approximately €700 to 750m – Decrease offset for up to ~ 50% by cost savings Going forward, total impact on RWAs for CIB and Financial services of - €35bn** Including CRD3&4 regulatory impact on disposals and excluding regulatory impacts on the remaining scope20
Crédit Agricole confirms the major strategic decisions of the Group Strategic Plan and the Commitment 2014 plan: Focus on universal customer-focused banking Accelerated reengineering of CIB activities and financial services The implementation of this strategy will proceed. The current economic context and the adjustment plan will have an impact on the timing of the implementation of the Commitment 2014 plan, and as a result we expect a phasing of our 2014 targets.21
4 Capital adequacy: Crédit Agricole Group will meet requirements in 201322
Capital adequacy: Crédit Agricole Group will meet requirements in 2013 Capital adequacy is assessed by regulators at the level of Crédit Agricole Group EBA stress test results published on 8 December 2011 – No additional capital requirement at June 2012 on the basis of EBA stress tests carried out on Crédit Agricole Group 10 % of CET1 ratio at end-2013 for Crédit Agricole Group – Decrease in RWAs of €60bn for Crédit Agricole S.A.* – Policy of income retention within Crédit Agricole Group – Crédit Agricole S.A. will systematically propose the option of scrip dividend to its shareholders from 2012 onwards – Treatment of insurance activities under the financial conglomerate Directive and optimisation of Crédit Agricole Assurances capital composition – Strengthening of the Regional Banks’ capital through the issuing of mutual shares* Change between June 2011 and December 2013 of the risk-weighted assets calculated under full Basel 323
Capital adequacy: Crédit Agricole Group will meet requirements in 2013 (0.3%) + 0.6% + 0.6% (0.8%) Target + 1.6% CET1 (0.9%) Basel 3 fully loaded 9.23% ~ 10% Core Tier 1 Total Insurance Retained Adjustment Methodological Business Target EBA Basel 3 impact (conglomerate) income and plan gains develop- end 2013 excl. insurance mutual shares ment issues24
Crédit Agricole will reach a Basel 3 CET1 ratio of 10% at end 2013 by drawing on its internal resources Crédit Agricole Group is committed to carrying out the adjustment plan The Group confirms its full capacity to capitalise on its internal flexibility and solidarity, based on its mutualist structure25
5 Crédit Agricole fully mobilised to serve its clients and the economy26
Crédit Agricole Group centered on universal customer-focused banking One year after the announcement of the Group Strategic Plan, Crédit Agricole Group confirms universal customer-focused banking as its core model, a tight combination between retail banking and associated business lines such as asset management and insurance. Retail banking and associated business lines represent a predominant share of the Group’s revenues, approximately 80% of the business lines’ global net banking income. Crédit Agricole continues to play the role of the leading financial partner to the French economy: – €477bn outstanding loans – 6.4% year-on-year increase in outstanding loans at end September 2011 Crédit Agricole is mobilised on a day-to-day basis to support French people in their plans: – 2,500 home loans granted each day to individuals – 1,100 loan applications per day for small businesses and agricultural businesses – 3,200 individual vehicles financed each day – 4,800 household equipment loans granted each day – 1,800 new car insurance policies written each day – 440 new individual health insurance policies each dayCrédit Agricole Group has over 100,000 employees in France working daily to serve its clients.27
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