(AOF) – Crédit Agricole SA has announced that Banco BPM (BBPM) and Crédit Agricole Assurances (CAA), a subsidiary of Crédit Agricole SA, have signed a memorandum of understanding for the establishment of a long-term bancassurance partnership. The latter aims to provide non-life insurance products and related services through BBPM’s distribution networks.
As part of this partnership, Banco BPM will bring its leading banking experience and distribution capabilities in Italy. CAA will bring its expertise in innovative insurance products and services, offering personalized non-life insurance solutions (casualty, health, etc.) and creditor insurance to Banco BPM’s clients in Italy, as well as the efficiency of the European leader in bancassurance.
Beyond the 20-year distribution agreement, the structure of the contemplated transaction provides that CAA will acquire from Banco BPM 65% of the capital of Vera Assicurazioni and Banco BPM Assicurazioni.
This operation would meet Crédit Agricole SA’s profitability criteria with an expected return on investment of more than 10% over 3 years and should have a very limited impact on Crédit Agricole SA’s core capital ratio (CET1) and on the Solvency ratio. 2 of CAA. The transaction is subject to the fulfillment of the conditions set out in the memorandum of understanding, and subject to the necessary regulatory approvals.
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Key points
– Listed vehicle of the mutualist group of the same name, 1
time
French bank and 8
th
worldwide;
– Net banking income of €22.7 billion, generated by retail banking at 65%, by specialized financial services at 12%, by wholesale banking at 14% and by savings management and insurance ;
– Business model in 3 points – relational excellence by becoming the preferred bank for individuals, entrepreneurs and institutions, local responsibility to support digitalisation and societal commitment by amplifying mutualist commitment;
– Capital held at 55.3% by the regional mutuals, hence the strong presence of their representatives on the Board of Directors (10 out of 21 members) chaired by Dominique Lefebvre, Philippe Brassac being Chief Executive Officer;
– Solid financial position – at the end of June, CET 1 ratio of 11.3% and liquidity reserves of €468 billion.
Challenges
– New “Ambitions 2025” plan: net income above €6 billion and return on tangible equity above 12% / acceleration of technological and digital transformation with €20 billion budget for IT and digital, including €1 billion the technological transformation / distribution in cash of 50% of the result;
– Innovation strategy, one of the 3 levers of the business model: internally: 90% of Group entities having a “data-centric” architecture in 2022, and €300 million in IT efficiency gains , 100% of IT employees trained in new technologies in the University of Information Systems and 100% of emerging technologies tested on new business services / towards customers: expansion of the range of leading applications (Ma banque Pro, Pro&Entreprises LCL , etc…), offer of digital and mobile checkout solutions for small/medium merchants, European electronic banking offer for major retailers and complete e-commerce range;
– Environmental strategy aiming for carbon neutrality in 2050 for the own footprint and the investment and financing portfolios; 2025 objective: reduction to 20% of oil exposure to oil extraction /for Amundi’s open funds under active management, an energy rating higher than that of the competition and €20bn committed to impact / growth funds 60% of the investment bank’s exposure to non-carbon energies and development of the platform dedicated to hydrogen projects / 50% increase in the financing of renewable energies in France / 2030 objective: launch of two new businesses, Transitions & Energies for the accessibility of accessible energy transitions and Health & Territories for access to care and “aging well”;
– Benefits from the penetration of Chinese markets (1
time
foreign asset management company) and Indian (cash management offer);
– Reinforcement in the financing of mobility via the partnership with Stellantis, operational in 2023 and the launch of a specialized internal entity.
Challenges
– Integration of Italian CreVal and Lyxor;
– High impact of provisions and the rise in the cost of risk in the Ukraine and Russia zone, resulting in a 16.1% decline in net profit as of 1
er
semester ;
– Difficult market prospects for the 2
n/a
semester, excluding the United States: sharp fall in growth and rise in inflation in Europe, stagflation in emerging countries and rise in key rates.
The negative effects of rising interest rates
The rise in interest rates normally causes an increase in bank income through the loans granted. In Europe, according to a survey conducted by S&P among 85 banking establishments, the sector expects an average increase of 18% in its net interest income. However, this new inflationary context also has undesirable effects, in particular an increase in refinancing costs. It is also accompanied by the fear of a new recession, which would then affect all the bank’s businesses, ranging from loans to asset management, whose income is correlated to market valuations. Reassuring element: the banks of the euro zone are sufficiently solid to face a deterioration of their environment.