Good day and thank you for standing by. Welcome to the Credit Agricole Q1 Results 2021 Conference Call. At this time, all participants are in a listen only mode. After the speaker presentation, there will be a question and answer Please be advised that today's conference is being recorded. I would now like to turn the conference over to your CFO, Jerome Gribeis.
Thank you. I'm happy to present to you the results of the group and of Credit Agricole SA for this Q1 of 2021. Let me go to the slideshow quite as rapidly as possible in order to leave your time for your questions. So we can start on Page 4. You can see that the group is posting a net profit of €1,750,000,000 which is almost double as compared to Q1 2020.
When we stated from the traditional specific items, And I'll go back on this one just afterwards. The underlying net income we restate our contribution for the last 5 years from 2016 to 2020, and this represents a positive one off for the Quote that we booked on this quarter that represents €185,000,000 for the group And €130,000,000 for Credit Agricole SA. This element being, of course, non recurring, It's restated and it's not integrated in our underlying figures. If I go a little bit down on the P and L of the group globally, what you can see is that these the cost of risk is down 42%. So this is leading to this €1,600,000,000 net profit at group level and to a solvency ratio CET1 ratio at 17.3%.
If you go on the next page With CASA's figures, the same trend can be identified. Net income group share stated above €1,000,000,000 for this first quarter, it's up 63%, 64%. This specific item that is restated and deepened compared to Q4 2020. The cost base excluding the contribution to the Single Resolution Fund is flat and it's even slightly down as compared to Q4 last year minus 0.5 percent and the cost of risk is down 38% compared to Q1 and also minus 23% compared to Q4 2020. I can go directly maybe on Page 8, and I'll just give you some elements on What happened during this Q1 of 2021.
I think what is important to keep in mind is that Back in 2020, the Q1 was still for the biggest part of it, a quarter of normal And all the restrictions to the activities to the economic activities started only end of March. This Q1 of 2021 has been indeed earmarked with the continuation of some significant restrictions measures. And despite that, we've managed to continue to develop our activities across the board and you can see that we've Successful in attracting new customers this quarter, significant number of new customers, 469,000 New retail banking customers in France and Italy, and we've managed also to increase the main activity indicator, loans outstanding, Customer asset, consumer credit outstandings and also the number of non life insurance policies. So it means that we've learned how to continue to operate under restrictions and we've been quite Active from this viewpoint. If I go now on page 9, just to take a look On the way the revenue line has been built at CASA in this Q1 of 2021, you can see that All business lines contributed to this increase in the top line of our P and L.
It's been very much the case For the Asset Gathering division and also for the Large Customers Business division, but you can see that also in the Retail Banking A business division, we've managed to post an increase in the top line. It's only with the specialized financial services that we have. And you can see that steadily year after year, we've managed to increase the level of revenues. It's been also the case for The next quarters of the year in Q2, Q3 and Q4, we'll see if we manage to continue this trend for the rest of this year. If I take a look at the evolution of the cost base, so I told you that the cost base was globally flat On Q1, if you exclude the contribution to the single resolution fund, It's been more or less the case in every business division with a Slight increase in the asset gathering and large customers business divisions, which were the ones that posted the highest increase In the evolution of their revenues, when the cost base continued to decline in the Specialized Financial Service division and in the Retail Banking division.
You can see that, of course, the cost to income ratio continues to significantly decline. It's now at 58% excluding the contribution to the Single Resolution Fund. Maybe one last point on this issue of the Single Resolution Fund, I wanted to raise this quarter, as I said, we've booked one positive element, which is restated and not included in the underlying figures and we've booked the traditional contribution, yearly contribution of €510,000,000 this year. This figure compares to a published and underlying figure of €360,000,000 in Q1 2020, but actually in 2020, We have had to book a complement to this contribution in Q2 of €79,000,000 So actually The €510,000,000 that we booked this quarter, which is going to represent The whole of the contribution for the full year, no complement is expected in Q2, has to be compared With actually a level for last year, which was globally €439,000,000 but it was booked over Q1 and Q2. If I go now on Page 11, So coverage ratios continue to slightly improve 72% for Credit Agricole S.
A. And 84.4 percent for the Group Globalist. So the quality of the loan books remains very, very solid. When it comes to the cost of risk itself on this quarter, What you can see is that both for the group and for the SA, the cost of risk globally declined. You know that the cost of risk is made of 2 different elements.
The first one is the Additional provisions that we booked regarding Stage 1 and Stage 2 loans. And this quarter, you can see that this Components of the cost of risk has decreased as compared to last year, be it Q1, be it Q4 or be it the average across the full year. It's simply because we've made a significant effort of provisioning Performing loans last year, but this quarter, we don't see any reason to strengthen or To make more severe our macroeconomic scenario and so the additional Stage 1 and Stage 2 provisioning that we've booked are only related either to the natural evolution of our credit portfolios or to some Additional prudential approaches on certain specific sectors. And it's the same at the level of the group and at the level of Credit Agricole SA. The second element of the cost of risk is made of The provisioning of non performing loans and what you can see is that again both for the group and for Credit Agricole SA, The S3 provisioning is significantly below what we booked in Q1 2020 and more or less stable as compared to Q4 2020.
So no sign of deterioration of the credit quality of our loan book again. This is leading to a very positive evolution of the net income group share globally. On Page 13, it's the case business division by business division, where you can see that in each business division, we've managed to increase The bottom line, quite significantly, the only exception being the corporate center, but it's mainly and it's only due to a base effect in 2020. And when you look differently Across the P and L globally, what you can see is that the net profit increases by around €280,000,000 It's fueled by a very significant increase in revenues, plus €370,000,000 And a significant decrease in the cost of risk minus €240,000,000 and the two negative elements are the increase in the contribution The Single Resolution Fund plus €150,000,000 and the increase in corporate taxes and other elements plus around €180,000,000 On page 14, maybe rapidly Some elements on 2 events of the quarter. The first event Is Amundi entering into exclusive negotiation to acquire Lixir?
So this is going obviously to make to not only to reinforce globally Amundi's positioning in the field of Asset Management in Europe, but it's also leading to a very Strong improvement of its positioning in the European ETF market. And the second element is Of the tender offer that we have launched in Italy on Creval, it's been a success because we've managed To get more than 90% of the capital of Creval for this tender offer, so this is going to enable us to delist Creval and we have just reopened the offer in order to squeeze out The remaining shareholders in order to own 100 percent of the capital of Creval to facilitate the integration process later on. Let me go now on Page 16. Just some elements regarding The mobilization of the group to support and to protect the economy during the crisis, I'm not going to comment in-depth The process of state guaranteed loans because you're now quite familiar with that. But just to mention that it continued this quarter.
We have granted an additional close to €1,000,000,000 of additional state guaranteed loans this quarter. When it comes to payment holidays, it's now coming to an end. And in most cases, in 98% of the cases, to a positive end because the payment are resuming completely normally. And we've been also we remind here that we've been So active in protecting vulnerable customers. On Page 17, what is important is what is now ahead of us.
What is ahead of us is that the economy is picking up. It's picking up in France, in Italy, in Europe, in the rest of the world, And we absolutely must take part in that because all our competitors are active. And so we're working now on the next steps of this picking up of the economy and we're ready to participate massively in the PPR initiative in France, With our life insurance company being the biggest Last point on page 18. During this period of time, we've continued to Environmental and social preoccupation in our group project and we are accelerating on those Let me now go rapidly through the different businesses, starting with the Asset Gathering and Insurance Business Division. Just to mention on Page 20, Just to mention on page 20 that we've managed to grow quite significantly the volume of assets that we manage And that the profit of this business division has significantly rebounded this quarter plus 43.7%.
When it comes to strictly insurance activities on Page 21, what we can say is that we have had a very positive Commercial activity in this beginning of the year and with an acceleration in March, We've seen that especially in the inflows in life insurance policies. The leadership positioning of Credit Agricole Assurance has been strengthened further this year Last year on the French market and it continues to be the case with the continuation of market share gains in the non life insurance activities. The net profit of this business increases by 45% this quarter as compared to Q1 2020s. On Page 22, Amundi. Amundi has published Last week, its results, so you know them perfectly.
I think 2 elements are worth mentioning. The €1755,000,000,000 And the second element is that Amundi is posting this quarter a record level of profit an increase of 54.4 percent for the contribution of Amelie to our own P and L. On Page 23, large customer division, so CACIB plus CACES. I think that what we can mention on page 23 is that globally the activity was very dynamic. It's been notably the case at CACES where we've seen a significant increase in assets under custody and assets under administration and a significant increase in the contribution of CACES outside the Single Resolution Fund contribution.
When it comes to CACIB on Page 24, simply to illustrate The situation, this quarter, the Q1 of 2021, has been the 2nd best quarter in 5 years in terms of Revenues for CACIB and this performance has been reached both for capital market activities where we see a significant increase, but 13% and for financing activities with a good level of the credit demand coming from customers. The cost base remains very, very much under control excluding again an increase in the contribution To the Single Resolution Fund, the cost of risk significantly decreases and thus the net income group share of CACIB is growing by 37.6% this quarter. Specialized Financial Services division with The consumer credit business, we have had a good level of production of new loans this quarter. It's an increase of more than 4% Q1 on Q1. So this is protecting more or less the level of Loan outstanding at CACF end of March as compared to end of March 2020.
The NBI is more or less stable excluding scope effect, The scope effect being the deconsolidation of CACF NL, which is under the process of being sold. And the cost of risk at CACF is declining quite significantly, leading to a strong improvement of the contribution to CACF to the profit of the group. It's more or less the same story for the leasing and activities with a good level of commercial activity in the quarter, a good level of revenues too, a significant decrease in the cost of risk and a doubling of the contribution to our profit. Retail Banking activities, starting with LCL. LCL, despite the restrictions, managed to grow its customer base and grow its Loans and deposit outpending, the revenues is quite resilient with an increase of close to 2%.
The cost base continues to decline by around 2% and the cost of risk is also significantly declining. It is spread more or less evenly between S1 and S2 provision and S3 provision. So in this context, the lockdowns in 2020 and so the comparison in terms of activity between Q1 2021 and Q1 2020 shows a very significant increase in the level of activity and in the number and the amount of products sold to our customers. So in this context, the top line is increasing quite significantly. The cost line is stable And the cost of risk declined by around 14%.
So the net contribution of Credit Agricole Italia is up quite significantly plus 76.6%. For the rest of the International Retail Banking activities, The lowest point in terms of revenues was reached in Q2 last year. So it means that the comparison Q1 and Q1 is still challenging. Nevertheless, as we've managed to control the cost base And also to decrease a little bit the cost of risk, the evolution of the net profit is only slightly down minus 13% and would have been stable without ForEx effects. So it's A resilient quarter for this activity.
I'll finish with the Corporate Center. The Structural improvement of the costs of the corporate center continues to operate. There is a base Which is quite challenging because you remember that in Q1 2020, we have had very significant intra group Restatements that generated within the Corporate Center €175,000,000 of Revenues, which we don't have any longer this quarter, but restated from this element, the improvement is very solid. Just maybe one additional comment. In the corporate center, since the beginning of this year, we are now booking The contribution of Bifor Bank, which is now held with a stake of 50% plus one share by And so it's equity accounted and it's generating a loss this quarter of €5,000,000 and we expect this to continue in the coming quarters and probably for some years before we reach the breakeven.
So you'll have now to take that into account. On Page 31, the regional banks of Credit Agricole, They have had a very good beginning of the year with good levels of activity, good customer attraction too and a net Level of revenues that was also boosted by the effect of the improvement in the market on their portfolio of The cost base is Stable, the cost of risk declined significantly and so the contribution of the regional banks to the net profit of the group is doubled as compared to Q1 2020, which was much more difficult. Let me go now to the Solvency, starting with the level of Credit Agricole SA, there is a significant increase in the level of RWA this quarter plus around €12,000,000,000 but actually €5,000,000,000 is explained by the dismantling of an additional 15% of the switch mechanism on the quarter. And then we have had around €5,000,000,000 or €6,000,000,000 of increase in the level of RWAs that are due either to ForEx effect Rating migration or TRIM. So the real organic increase in RWAs is much more Moderate.
The CET1 ratio of credit recall, let's say, stands at 12.7%, which is of course very significantly above any requirement. At the level of the group, The ratio stands at 17.3%. It's above the spread level by 8.4 percentage points And it's up 10 bps this quarter €152,000,000,000 of TLTRO, which are allocated to the different businesses of the group And the liquidity reserves are at their highest level. Last point regarding the financial management of the group, The advancement of the market funding program is completely on track. Maybe just one Other elements we can mention is that we've announced just 2 days ago the call of an 81, which is going to take place in June and which is going to produce its effect in terms of 81 coupons starting in Q3 This year.
I think I can stop here in order now to try to answer to your questions.
And your first question comes from the line of Jacques Henri Gaulard from Kepler. Your line is open. Please ask your question.
Yes. Good afternoon, Jerome. Just two questions. The first one would be on Creval maybe. Can you confirm that the synergies that were mentioned in the offer document Will remain more or less the same and there's no particular change.
And I mean in that document what was maybe a little bit surprising was the amount of restructuring charges which were If you can comment, that would be lovely. And the second question would be on the perimeter of the group who've been super active with tons of initiatives.
Thank you, Lacanri. Treval, you know that for the time being, we've based our assumptions and every element that was in the Tender offer document only on publicly available information because obviously this was a listed entity and we couldn't of course access So we have no reason because of the offer has been successful Change our assumptions, but of course we'll have to fine tune those assumptions and it's also the case for the cost of The restoration, once we have really vote to be changed in accordance with the new shareholding of the company and we will of course conduct some audits within Creval in order to again fine tune the capacity of generating cost and revenue synergies and to fine tune the cost of Putting in place those restructurations. So up to now, no reason to change These figures, but we'll have to fine tune them and we'll have to do that In the process of purchase price allocation, which is going probably to be made into 2 steps, 1 very rapidly, but very rough and very conservative and probably a second step before year end with more precise figures. When it comes to the perimeter of the group, you know that We've always said that the strategy of the group is not based on M and A.
It's not based on Acquisitions that we would target well in advance and that we would try to realize in order To reach our strategic goals, the strategy of the group is really an organic one, but We have said that with some very precise financial criteria, we would be ready to take advantage of Opportunities if they arise. So it's been the case lately and you were referring to 2 important transactions that We're announced more or less at the same time in the last few months, LiXor and Treval, but We may perfectly leave several quarters in a row without announcing anything. It's not a must.
Thank you.
Thank you.
And your next question comes from the line of Delfin Lee from JPMorgan.
Yes. Good afternoon. Thanks for taking my questions, Jean. So the first one, I would like to ask on the payout ratio. Just trying to understand a little bit your 50% policy, Which you said you would top up with a little bit of the full year 2019 dividends.
I think you mentioned $0.40 I just wondered how quickly we could see those Extra, let's say, dividends and would they come in the form of specials or would be would they be part of your normal dividend policy? And more broadly speaking, I mean, given you're still targeting 11% CET1, I assume. Just wondering How you get there and given the level of capital you have now? And would you Consider accelerating a little bit to switch to reimbursement in that context. And then the second question is on Cost of risk, I think you mentioned you still mentioned that cost of risk is supposed to come down this year.
And the question is How much given the start of the year and you've booked in the 37 basis points on Stage 1, Stage 2 provisions as well. So should we expect No more of those stage 1, stage 2 provisioning again in the next few quarters or should that normalize and Would you have a guidance for us for 2021? Thank you.
Well, I'll start with the dividend. You're Quite in a hurry to have some information. We are still in the process of Building 2021 results and so we'll assess by year end what is the normal dividend coming from the normal 50% cash payout policy and what kind of top up we can think of. But this is going to be an issue that We'll address only in Q4. So please do not urge too much On this question, we still have to pay the 2020 dividend that is going to be voted by the General Assembly meeting next week.
So we'll have time To think of this year dividend policy a little bit later on. But definitely we continue to have 11% as a target. So of course, considering the 12.7% ratio where we stand now, the margin is quite wide. Please take into consideration that we will have to finance somehow the Creval acquisition, which is going to represent maybe close to 20 bps The LiXor acquisition, which is going to represent maybe 15 bps of ratio for credit article, let's say, We still have some probably €4,000,000,000 €5,000,000,000 of TRIM RWA to take this year, which is also going to represent a significant Impact on our CET1 ratio. And we have, as you said rightly, the remaining 50% of the switch to unwind before And 2022.
So definitely, this is a commitment that we've taken and this commitment will be fulfilled So this is all the main moving pieces that will take place regarding Our capital and impacting, of course, definitely our dividend policy. Then regarding the cost of risk, it's Very, very difficult to tell in advance where we are going to stand in terms of cost of risk for the full year. What I can tell you is that this quarter we've seen a significant decrease in the additional S1 and S2 provisions, as I Explained. What I can tell you is that also this remaining S1 and S2 additional provisions that we booked this quarter We are linked to, I would say, additional prudence, I. E, either sectorial Provisions that are taken either by LCL or by CASTIB On certain sectors or simply the pure result of the natural evolution And modification of the breakdown of our assets between S1 and S2.
But it's really Very tiny and we don't expect to have to modify the macroeconomic scenario this year, which would be The main driver of a significant movement on S1 and S2 provisioning. We are very prudent in terms of provision. This is demonstrated, I would say, by the level of provisioning that we have in our books. We have close to €20,000,000,000 provision at group level and close to €10,000,000,000 at CASA level. Inside those provisions, We have €2,700,000,000 of Stage 1 and Stage 2 provisioning at CASA level and close to €7,000,000,000 S1 and S2 provisioning at group level, we don't intend to write back those amounts of provision going forward.
And they are here just to attest and to confirm our very prudent approach in terms of cost of risk. But definitely what we see in the macroeconomic environment is not showing Any sign of deterioration in the credit environment as of now.
Great. Thank you very much.
Thank you.
And your next question comes from the line of John Muiz from Goldman Sachs. Your line is open. Please ask your question.
Hi there. Hi, Jerome. Good afternoon. I just wanted to ask about The French retail revenues and the Italian retail revenues, because compared to the domestic Italian peers that have reported up until now And also in France compared to BNP and SocGen, your revenue seem to be doing quite a fair bit better. I noticed in some securities gain in Italy, but nonetheless up 5% year over year is a big number, Because I don't think you have many trading revenues, I don't think in there.
And the same infant. So I remember you unwind some swaps back in a few years back. I just wanted to try to understand, firstly, in Italy, what was your net interest income trends? And also what you attribute the resilience on net interest margins to in those businesses?
Well, in Italy, as you said, in the top line evolution, you have a one off that we've mentioned. We have also very good behavior of What is called the managed savings for the account of our customers that generate a significant volume of fees this quarter. So of course, the level of fees can be on a floating rate, but so they don't renegotiate the rate, but they renegotiate the spread. And so we feel a real pressure on net interest revenues in Italy as well as in France. But We managed, thanks to the volume effect and thanks to the development of the fees to offset that and to have a dynamic evolution of the top line.
In France also, we always say the same. We have the volume effect that is positive and that is helped indeed by the decrease in interest rates. We have the development of fees and commissions And we have, I would say, the will that we have to Continue to attract new customers in order to develop our customer base. So the P and L of LCL is a very simple one because it's a pure retail bank in France. It has no other Activities, it has no other gimmicks in its P and L.
So I think that it's quite straightforward.
Okay. It's just that it's slightly different compared to the peers. I mean, quite a few
You should ask the peers.
We asked them too. Today your call.
Thanks, Joao.
And your next question comes from the line of Giulia Aurora Miotto from Morgan Stanley. Your line is open. Please ask your question.
Hi, good afternoon. My first question is about deposits and the fact that they keep growing more than loans. So I was wondering what are you seeing on the ground? And do you think There is potential for an acceleration of a move from deposits onto investment products, especially on your retail networks and what's the potential from this revenue opportunity? So that will be my first question.
And then the second question goes back to the EUR 5,000,000,000 2022 guidance for net income group share. I was wondering if you have any updates for us on that one and whether it would include also the recent acquisitions? Thank you.
Well, thank you. It's true that the deposit the customer deposit is evolving very, very rapidly. And actually, it's been the case at LCL. It's also the case within the regional banks of wish to keep Big liquidity buffers, everyone at his or at her level. So of course, Once the situation is going to be completely clarified, once the pandemic will be considered Completely under control.
All these people, be it the household or the businesses, I'm going probably to make decisions regarding their cash position and these decisions can take different directions. We think, we expect and to be frank, we wish that a significant part of the savings accumulated by the household On their site deposits are going to be transformed into consumption, because this is going to help Significantly, the pickup in the economic activity and this is going to be good overall for the country. So we are not going to try and induce them, I would say, against their will to transform these savings into All these deposits into long term investment products. Of course, if part of this cash is Relevant to be invested long term, we are here and we are ready to do so and to help our clients To find the solution because we precisely have the whole range of solutions. We have The life insurance solution, we have the asset management solution, we have also the real estate proposition.
So we have the capacity to propose our customers the whole range of long term investments if they wish. But clearly, we are not going to actively Try to force them to go into this direction rather than consuming if they wish to do so When they will consider that the confidence is here and the Stability of the environment allows them to consume more. And it's more or less the same for businesses. Then your second question was about our €5,000,000,000 of net profit target for 2022. What we've seen in Q1 2021, of course, Q1 is not making the full year, but what we've seen in Q1 2021 is not discouraging us to continue to target this level of profit for next year.
Let me put it this way.
Great. Thank you.
Thank you.
Next question comes from the line of Guillaume Debergen from from BNP Paribas.
I've got some questions on the CIB. In your medium term target, you had costincome ratio of below 55%. We are now at 50. You're not going to give a new target presumably before the end of 2022, but can you just give us a feel as to whether you think You can continue to operate around 50, and therefore, the previous target was a little bit optimistic or you think you're over earning a little bit at the moment in CIB. The second one relates to the CIB RWA in financing activities.
They've gone up quite a lot. What is the outlook for that, please? And the last one is on the capital target. You have not changed the target since CRD 5 Article 104A. So does it mean you won't change the targets and therefore you're not taking benefit of this opportunity Or that you wait before cutting it to 10%, you wait until the environment has improved?
Thank you.
Thank you, Guillaume. First, the cost to income ratio at the CIB. We have always thought that having a low cost to income ratio in the CIB activities is a key element in the stability of the CIB. Because when you have High cost to income ratio in this business, you more or less used to take the risks whatever they are In order to generate revenues, and this is the moment when you take the bad risks. So clearly, we have designed our CIB to be Operated with a low cost to income ratio.
55% is the target, and we think that 55% is all Very competitive as compared to most of the other CIBs operating in Europe and in the world. So it happens that this quarter we managed to go below 55 and we are around 50, which is All the best. Of course, we are not going to change for the time being the target. We have to reassess That in a steady exercise when we will We frame our medium term plan and so on and so forth, but we're happy to be below the target for the time being. No doubt about it.
RWA and the financing activities, well, it's always a little bit volatile, because if I take a series back last year, we started at €74,000,000,000 in Q1. We went up to close €75,000,000 in Q2. We went down to 72 in Q3 and we are now at 78 including ForEx effect and including The effect of negative migration and partially the effect of TRIM. So many, many pieces that were not linked to, I would say, the organic growth of the portfolio. So every time we have some strength of the regulatory requirement in terms of RWA calculation, we try then after to optimize and to Stabilize the level of RWA, so we'll try to do that in the coming quarters.
But I prefer to have a CIB with this level of RWA and this level of cost to income ratio Than trying to be too aggressive in terms of taking market risks, for example, and taking Risks that are not completely taken into account by RWAs. I think we have a stable CIB and this is exactly what we want to have. Last point on the capital target. We perfectly have in mind that Article 104A is allowing us to reduce our target all things being equal. The calculation that you can make as well as I can do that would lead us to somewhere around 10.5% rather than 11%, all things being equal.
But as we are presently at 12.7%, I don't really see the point in really modifying the official target. So you've seen that we still have ahead of us a significant number of Elements that may impact our CET1 ratio, I think it's a little bit early To modify formally the target, but we haven't forgotten about Article 104A.
Thank you.
Thank you.
And your next question comes from the line of Omar Fall from Barclays. Your line is open. Please ask your question.
Hi, good afternoon.
Good afternoon, Michelle.
So just firstly on insurance, You normally tell us, Tony, look at the net profits and not the rest of the P and L. So is this €300,000,000 a normalized base after the pandemic disruptions last year. I ask because there's You quoted like a lower C3S social contribution charge, and I can't tell if that's a one off or not and how that's accounted. So in other words, usually it used to be that Q1 for insurance is the lowest quarter and net profit improves Throughout the year, is that kind of what we should still expect now? Then second question is on LCL.
If I look at loan growth ex Guaranteed Loans. In the last three quarters, that's been plus 5 Plus 4% and plus 3% this quarter. Why should that improve when the economy reopens? Because Businesses have tons of liquidity and will spend time getting rid of the guaranteed loans. Mortgages aren't
It's been quite a satisfying quarter in terms of profit generation. Let me start with 2 technical elements that are going to impact going forward the profitability of the insurance business. The first one, which is a negative one, is that, as you know, since the middle of last year, we booked The RP1 coupons in the P and L are no longer against equity and this represents around €20,000,000 The quarter of costs, which is accounted for in the non controlling interest line. The second element is Q2 before the next step of unwinding the switch mechanism, which is supposed to take place before end 2022. Then you have the normal course of business.
Q1 2020 was weak before because of market effect, Q1 2021 is good. It's not exceptionally high, but it's Good in terms of volumes of premium and it's good in terms of market evolution That is leading to a preservation of the value of our assets. So Of course, there is going to be some volatility, but I guess that this quarter 11 is not completely irrelevant. LCL and the evolution of the credit demand and And the loan outstanding at LCL, well, what we know for sure is that many, many of our business customers Have the intention to invest and to launch projects as soon as the sanitary situation is stabilized. So of course, for some of them, they have at least partially the cash on their accounts because they have secured the cash.
For some of them, they are going to need to borrow money from their bank. So we are ready to do so. And this is going to be the case for the SMEs and also for the self financial stability has put in place some constraints that May refrain some household to access to a home loan, but the appetite Of the household to buy their homes continues to be significant in the present period of time and clearly we've seen Good level of activity for home loans again this quarter. So I don't see any reason why we should see a negative evolution of the It's about 30
months. Got it. Got it. Perfect. Thank you.
Thank you.
Next question comes from the line of Tariq El Mejjad from Bank of America. Your line is open. Please ask your question.
Hi, good afternoon, Jerome. Just two questions, please. So first of all, follow-up on the review of minimum Capital, I mean, do you think that running a bank with such a large balance sheet would be acceptable to run the bank at below 11%. I know there is Requirement ratios, but also what's the acceptable to run the bank at SunocoFortibil. I mean, at the time, we were talking all about 10%, which became 11 and 12, but so let's just have your view on that.
And would you when you revised the and apply the Article 104.5, Would you probably just put it in connection with Basel IV and basically give a new target under Basel IV, which will be then 10.5 absorbing Basel Would that be some kind of logic you would have? And then second question, maybe it's too early, but what's your take on the discussion on the resolution fund Contribution, I mean, as a large bank, again, it impacts you materially. And so what's the latest on that? And What do you think? I mean, a few banks are definitely lobbying on how it stopped by end of 2023, But what's your take on that?
Thank you.
Thank you, Tarek. First question, we don't intend to Here a large balance sheet as ours as you say at 10.5% or 11%, and there's no reason why we shouldn't continue to build up the capital Robustness of the group globally. And CASA is inside the group benefits from the high solvency of the regional banks and do not need to be steered at such a high capital level. This is precisely, I would say, The attractive feature of the structure of the group that is really helping us to generate and to deliver a good return on equity for CASA's minority investors with being on the safe side globally in terms of solvency, thanks to the group's Solvency. So I don't see any reason why we shouldn't Translate Article 104A exactly as it should, thus leading to a reduction by around 50 bps The official target of CASA, as long as CASA continues to be part of Credit Agricole Group.
Of course, it's True that going forward, there is another important moving piece, which is Basel IV, and this is also, you're right, another reason why We are in no hurry to modify formally our target because we don't know exactly how and when Basel IV is going to be transposed. But what we've heard is that we should access to potentially A draft directive somewhere after the summer. So we'll see at that moment exactly How to handle that? Then your second question was, excuse me, The single resolution fund, excuse me. Yes, well officially the single resolution fund We'll be completely ramped up end of 2023.
And after that, We should only contribute to maintain the single resolution fund amount to this level of 1% of the covered deposit. So normally, this is what is going to happen. So it's too early to tell if this is really going to be the case, but You can count us amongst the bank that will try to, I would say
Thank you.
And next question comes from the line of Pierre Chadibele from CIC.
One question regarding per fees at Amundi. It seems to it seems that it was quite important this way, this quarter. So yes. And I know that there is a reform which is prepared by the ESMA Regarding the calculation of per fees, not on 1 year, but on 5 years. And I wanted to know if you had Any idea of the impact that could have on Amundi revenues In the coming years, if this reform is applied?
First question. 2nd question, we have seen some articles recently Regarding, I don't know the term in English, fragmented payments, payment fragmente, And I wanted to know what is the view of CACF Regarding this business, are you present in this business? And if not, would you like to be? And my last question is regarding shipping. As one of the major player in the world, could you give us Any color regarding shipping, not only from the point of view of risk, but also from the point of view of revenues.
Thank you, Gerald.
Thank you. Starting with Amundi and the performance fees, we are You're aware of course of this potential modification of the regulation regarding performance fees calculation. Amundi is already quite significantly in line with the new requirements of this regulation. So This may have a negative impact going forward, but quite moderate and really phased in across 5 years. So it's not Something which is going to significantly modify things regarding performance fees.
But performance fees are much more exposed Simply to the volatility of the market because between Q1 2020 and Q1 2021, The evolution of performances explains €70,000,000 of difference in terms of revenues at Amundi. So It's around 40% of the revenue increase at Amundi. So it's very significant and it's by definition volatile because it's linked to the performance achieved by the portfolio managers at Amundi. CACF and the fractioned payments, It's clear that it's a developing trend on the market and that more and more Consumer credit operators are proposing this to their customers, their customers being not only The final customer, but also the retail partners. And so CACF is definitely working on that.
I'm not able to tell exactly where they stand in terms of development of the offer, but they are perfectly aware of that and they're working on it. Well, shipping, you know that it's one of the businesses in which CACIB is Very active. It's a business that is that has had last year some significant downs. Prices on the shipping market are very significantly up since several months With not only the global pickup in the economic activity, but also you know that this incident in the Suez Canal has triggered A very sharp increase in the pricing of shipping. So it's a business in which we have A significant exposure, it's around €12,000,000,000 to 13 €1,000,000,000 of exposure at default, so it's important, it's significant, it's not massive And it's one of the several sectors of activity in which CACIB is active and it's A component of the balanced business model at CACIB.
And inside the shipping activity, we are exposed to several sub segments, be it leisure shipping, be it All the categories of carriers plus Also the ship makers and so on and so forth. So it's a very diversified exposure that we have.
And regarding leisure and carriers, Are you worried about the situation?
Well, it's within globally the shipping. You know that The Commercial Shipping segments are performing very well. It's true that the leisure segment is almost completely on heart, but it's not
Next question comes from the line of Kiri Vijayarajah from HSBC. Your line is open. Please ask your question.
Yes. Good afternoon, Jerome. First question on capital. Just very quickly, I wanted to clarify any of the negative effects that you're flagging this quarter Potentially unwind in the coming quarters. It doesn't it feels like they're all pretty permanent on that slide, but just wanted to check that.
I wasn't missing anything There. And then turning to the second question on those government backed quasi equity loans in the pipeline. Because you own a large insurance company, you've also got Amundi, I just wondered if your eventual exposure to that vehicle is going to be bigger than, say, Yes, your natural market share, your natural banking market share in France because of the way that particular fund is being structured. So Really just some guidance on where you think your aggregate exposure might eventually end up taking account for the various entities within the wider Credit Agricole Group? Thank you.
Okay. So starting with the capital headwinds that we have had this quarter. As I said, The increase in RWAs was around €12,000,000,000 out of which we have had €5,000,000,000 linked to the switch dismantling. Of course, this is here to last. We have had close to €2,000,000,000 of ForEx effect.
This is perfectly reversible and It's going to vary across time. We have had €1,200,000,000 of negative rating migration of And it's only a part of the €5,000,000,000 that we have had on the last 4, 5 quarters. So this is Definitely a trend for the time being, but if the economic recovery is operating as we expected, This is going to revert progressively. Then of course, we have had this TRIM effect that represented close to €3,000,000,000 of negative evolution of RWAs. This is here to stay Until we found some ways of optimizing the RWA calculation which is regularly the case.
So you see there that I don't know what can be qualified as steady and what must be qualified as volatile, but Here are the main elements explaining the evolution of the RWAs. And then we have had a reduction linked to the increase in interest rates, triggering a decrease in the value of the equity stake in our insurance operation. So this can also vary across time depending on market parameters. But definitely, We are absolutely not worried at all by this movement on a quarter where usually There is always a depletion in the CET1 ratio because generally Q1 is a quarter where we booked significant Regulatory effects, negative regulatory effects and Q1 is also the quarter of IFRIC 21, so it's a quarter where we generate Less results than on a normal quarter. Then the equity loans that you were referring to Part of the new mechanism put in place by the French government, it's true that we are going to represent a significant part Of the investors within the fund that is going to fund these loans 2,250,000,000 Euros that is going to be invested by Credit Agricole Assurance in the fund.
At the same time Amundi is going to be the Fund manager operating with another French bank. And what is important for us is that we are going to work hard in order to make sure that Our bank networks are going to originate a significant proportion of these equity loans for their and for our customers, Because when we are talking about the €2,250,000,000 that Predica is going to invest in that, it's I would say the liability side of the fund, but what is important is the asset side of the fund, who is providing loans, These equity loans and we are going to be very active in order to make sure that we provide a significant part of them. And then at the end of the day in terms of risks, As you know, there is a 30% government guarantee on these loans, which is really protecting the investors.
Great. Thank you, Joao. Thank you.
Once again, if you wish to ask
A couple of questions, please. So firstly, can I just come back to the Insurance division and The top line, I mean, should we read anything into the level of revenues compared To the insurance assets under management there, which seem to be a bit lower than they have been in the past? Or is this really is that red herring and we should be looking at some other metric in order to gauge the revenue power of that division. So any guidance or thoughts there would be appreciated. And then second question is just on cost of risk And that maybe there would be a chance for them to drop down to 0 and you just see the defaults come through only Stage 3 provisions So why are you still taking them and will you keep taking them in coming quarters?
Thanks.
Integrating insurance revenues into the P and L of Banking Group is always quite complicated actually. And so The level the top line in the insurance activities is always somehow hard to read across through the lens of Banking Group. But nevertheless, what we've seen this quarter in the top line of the insurance This activity is partially the reflect of a good level of activity and a good level of Risk in the non life activities plus in the life activities some positive effects coming from The recovery in the valuation of certain assets that we had To provision in Q1 2020 because of market movements and that we could write back I would say in Q1 2021. So this is the combination of those elements. What is important in the Life Insurance business is the capacity of continuing to generate the level of The capacity of maintaining for the euro part of the book.
And by the way, You may have seen that we've continued to increase the unit linked part of the book. But for the euro part of the book, what is important It is the capacity of continuing between the yield of the asset book that we manage and the profit sharing rate That we intend to pay to our customers. And this quarter, the yield continues to be quite significant between both. It's a little bit less than 100 bps, which is very reassuring. And this allowed us not only to generate the level of profits that we post here, but also to continue to increase this provision that we've progressively booked in order to protect our capacity to pay the profit sharing rate 2 of the Outstanding in euros of credit card.
So this is the situation of the insurance activity. In the cost of risk, as I've said, the additional provisions in S1 and S2 Can be justified by different reasons. It can be justified by a strengthening of the macroeconomic scenario if We deem it necessary. It's not the case and we've not modified the macroeconomic scenario because we are confident We've embedded into it. It can be justified by the evolution of the loan portfolio that we have.
So either we have an increase in new loans and so this is increasing the S1 category and so this requires some ECL, 1 year ECL, so it's a very tiny amount or we have migration between S1 and S2. And so this needs an increase in provisioning because the level of provisioning when a loan goes from S1 bucket to S2 bucket Needs an increase in provisioning. It's not been very much the case this quarter either. So the last reason, which is very important Because of our, I would say, DNA is the prudence that we add up for the top up On the provisions that we regularly book because LCL, because the regional banks, because CACIB deems it necessary to book An additional provision on a specific sector are taken locally, but this is not the result of the central Forward looking scenario that we've embedded in our models.
Okay. Thank you.
There are no further questions at this time. Please continue.
Well, thanks very much all of you for attending this meeting and I hope to meet you in person someday. Take care in the meanwhile. Bye bye.
And this concludes today's conference call. Thank you for participating. You may now disconnect.