Good afternoon, and good morning, everyone. Welcome to Crédit Agricole S.A. Fixed Income Q3 Results Call. I am Romain Beillard. I'm heading the FIDCM business in Paris, and I have the pleasure to have two representatives of Crédit Agricole S.A. with us today. Cécile Mouton, she's heading the Investor Relations and Financial Communication for Crédit Agricole S.A.
Hello, everyone.
Olivier Bélorgey , Deputy CEO and CFO for Crédit Agricole CIB, and Group Head of Treasury and Funding for Crédit Agricole Group.
Hello.
So thanks again, everyone, for joining the call. I think you are all familiar with this exercise. I will very shortly leave the floor to Cécile to give you the highlight, obviously, of the results. Olivier will comment later on the financial management numbers, and we will obviously open the floor for questions at the end of the presentation. Some of you already sent some questions, and thanks again for that, and many thanks for being here today. Cécile, the floor is yours.
Yes, thank you, Romain. So I'm going to start with this first slide, which is really all the main key messages of the quarter. And maybe my first global message would be to say that this quarter is really the continuity of the previous quarters. And globally, if we look at all the characteristics, they are very similar to Q2 in terms of activity as well as in terms of financials. So I'm going to start with the first figure. This is the net income group share for the first nine months of the year, amounts to EUR 6.5 billion. This is the figure that you can see on the bottom left of the slide. It is stable compared to the same period last year. This quarter, and the figure is just on the next slide, but I'm going to give it right now, it's EUR 2.1 billion.
It is a decrease if we compare to the same quarter last year, but because we had last year, and this is really important to understand that to appreciate properly the evolution of our results. Last quarter, last Q3, so Q3 2023, we had several reversals on the home purchase savings plans provisions. It was quite significant, and if we exclude this effect, in fact, the evolution is stable over the year in terms of net income group share. It is really driven by high revenues. You see the figure here, EUR 9.2 billion of revenues this quarter for the group. Stable compared to last Q3, but for the same reason, the same base effect that I've just explained, it is in fact increasing by + 4.1% over- the- year. This is for the revenues.
Now, we will detail all the revenues on the activity, maybe in a nutshell, having in mind also that this quarter we can still show a very solid asset quality. The cost of risk out of outstanding stands at 26 basis points, so it's still completely in line with our assumption target of 25 basis points for Crédit Agricole Group. Solvency is still very high, 17.4%, increasing a little bit compared to end of June, and still with a very significant distance to the SREP requirement. Liquidity positions, we will see that in more detail, are very good, and maybe a word on Crédit Agricole S.A., since we published our earnings yesterday for Crédit Agricole S.A.
The net income for the first nine months of the year is EUR 5.4 billion, so it's very close to the EUR 6 billion that we said we would achieve this year, and we can then confirm this guidance of EUR 6 billion of net income group share for 2024 for Crédit Agricole S.A. Moving maybe, so I'm going to not present all those figures, but I am going to move directly to the activity trends that we are seeing this quarter, so as I mentioned, they are roughly the same as the ones that we had during Q2, and we can divide it into two different sets, I would say. For retail banking and consumer finance, the performance is solid. We have a good customer acquisition.
All the figures are on the right-hand side of the slide, and I can just mention the + 100,000 new customers, and this is a net figure this quarter, which is a little above what we had seen during Q2. On-balance sheet deposits are increasing in France, and they are stable in Italy. Home loan activity, which is always something of very big interest for everyone. We talked last quarter of a stabilization of this activity compared to the beginning of the year. And this quarter, we can even talk of a gradual recovery because what we've seen is volumes that have increased again this quarter compared to Q2, and it's + 30%. This is a figure gathering both regional banks and LCL, so Q3 compared to Q2. The production rate, on average, was at 3.4% on those two networks. Increase also in corporate loan production in France.
This is essentially true for LCL. International loan activity is still very dynamic. This is something that we are seeing quarter after quarter. It's + 24% in terms of volumes, and it's positive in all the countries where we operate, so Italy, Poland, and Egypt, and consumer finance, the activity is stable, but still at a high level. We have a production of credits, which we have loans, which is really evolving between EUR 11.5 billion and EUR 12 billion each quarter, and it's true again this quarter. In CIB, in asset management and insurance, same messages than last time. The activity is very strong. Insurance, all the KPIs are very well oriented with gross inflows, which are high in life insurance, net inflows, which are positive and positive both on unit-linked and on euro-denominated contracts. Good momentum also in property and casualty and personal insurance.
There, we can see an increase of +5 .5% on those activities compared to last year. Very good level of inflows and record level of assets under management for Amundi. Inflows were positive around EUR + 15 billion, excluding an exit of a mandate. And CIB, it's again a record for this quarter, a record for the first nine months of the year. Revenues, here you can see the evolution of the revenues and evolution split between the different business lines compared to last Q3. Again, in retail banking, so same base effect, which is explaining the essential of the evolution that is negative on the graph, but if we exclude this effect of the home purchase savings plans provision reversal, it is in fact, it would be positive.
Asset gathering is very strong, so benefiting notably from a scope effect with the integration of the Degroof Petercam, which is now fully integrated this quarter, so it accounts for two-thirds of the increase on asset gathering, meaning also that even without this scope effect, it would be significantly positive thanks to the very good increase in revenues, notably for Amundi. Large customers, so I mentioned it for CIB already, very good quarter, and again, Agricole also really contributing to this increase, but it's also true for CACEIS, where we do not have any more scope effect. We used to have one for the previous quarters. Now, it's not anymore the case, so it's even more satisfactory to have this EUR + 166 million. For specialized financial services, where we have essentially consumer finance and mobility activities, it is stable.
We still have some pressure on the margins, but it seems that it's stabilizing at the moment. And corporate center, so the main effect is this base effect, always the same ones that I already mentioned. So globally, revenues, looking at stated figures that are stable, but looking at underlying figures, and it's again, in fact, excluding this base effect, it's an increase by 4%. I move to the expenses, and maybe what we see, and maybe we can concentrate on the graph on the right to see that there are some exceptional items. Those exceptional items, they are scope effects, again, the same one, and it's the Degroof Petercam this quarter. We have some integration costs because of the integration of the Degroof Petercam and also of ISB, which is the European activities of RBC that CACEIS acquired one year ago.
We have also a base effect on taxes. We mentioned it last year, and it accounts for EUR 30 million, so it's not insignificant. When we exclude all those exceptional items, the evolution of the expenses, which we can consider as recurring expenses, is + 2.9%. So it's really something which is normal, I would say, and normal and not anymore impacted significantly by the inflation that we had in the past quarters. Cost of risk, so again, same trends. Overall, it is globally stable. It's globally stable in terms of amounts, so EUR 800 million this quarter. It has increased compared to last year, but if we look at the average on the past quarters, it's really in line with what we have seen in the past quarters. It's also globally stable in terms of composition, so it's essentially stage three, again, that we are seeing this quarter.
It's also stable in terms of mix among the different business lines, with French retail banking representing a big half of the cost of risk and also linked to the size of the French retail banking activities, and consumer finance representing roughly a quarter of the cost of risk. Out of outstanding, so 26 basis points, I already mentioned it this quarter, so globally in line with the 25 basis points that we think is normal for us and that we had in the past quarters. Maybe to dive a little bit more in the different business lines, it's interesting to notice on the right-hand side that it is improving again this quarter for consumer finance.
This is something that we have commented a lot in the past quarter, but again, we see this quarter that it is improving after the increase quite significant that we had seen in the beginning of 2023. It is still extremely low for the CIB and its financing activities, with only one basis point out of outstanding this quarter, and it is deteriorating a little bit more on French retail banking and on leasing and factoring, with the same trends that we had previously, meaning that it's essentially on professional and small and medium corporates that we are seeing some additional deterioration, defaults. No specific sector to mention. It's very granular. Maybe a little bit more on agriculture, but it's not really the core of the increase, even if it was not mentioning it, and finally, combining all of that, you see the evolution of the net income group share.
I'm not going to comment on all the figures because everything has been mentioned essentially, except maybe detail, but in Ukraine, we had a change in the corporate tax rate this quarter, and it weighs also on the net income for minus EUR 40 million. What is interesting, more interesting, I think, is to look at the chart on the right and to see that if we exclude again this base effect on reversal of provisions, in fact, we have a gross operating income increasing by + 1.1%, and we have a net income group share, so that is stable. I mentioned it already at the beginning. It's all for me, and I leave you the floor.
Thank you, Cécile. And I will go directly to the slide concerning our capital position.
As Cécile was mentioning, the keyword of this quarter is continuity, and this is also true for our capital position, which remains very strong, clearly one of the strongest among European banks and the strongest among the European G-SIB. The evolution is even slightly positive, to be honest, due to rounding effect at 17.4%. Despite some headwinds coming from the evolution of the rating, essentially from the French retail banking on the SME world and professional, that's what you can see on the evolution of the RWA, EUR +7.3 billion. This is not really due to the increase of the loan book, which remains roughly stable, but this is due to the increase of our RWA due to rating evolution in coherence with what Cécile was saying concerning the cost of risk. It's not unusual.
It's just, I would say, coherent with what you can read in the newspapers concerning the macroeconomic environment in France and in Europe. Except this impact on our CET1, of course, we retain earnings quite with a significant amount, and there are two other elements that offset more or less each other this quarter, which are temporary and which will continue to offset each other in Q4, which is on the one side the fact that our insurance activity is making profit every quarter. They do not distribute dividend every quarter, of course. So the value of this activity is increasing, meaning through the Danish Compromise, more RWA. You can see that on the right-hand side, + 3.2 billion for the asset gathering division.
The main part, almost all this evolution comes from this effect, increase in the value of our insurance company, so minus five basis points, offset in Q3 by the fact that we have launched a capital increase for reserve for salaries. Both effects will revert on Q3 because there will be an intermediary dividend in Q4 from our insurance activity, and we are committed to the equity shareholders to offset the dilution of this capital increase reserved for salaries through a buyback of some shares. So at the end of the day, 17.4% CET1 ratio, slight increase versus last year, very strong position.
Except that, as you can see also on the right-hand side of the slide, the evolution of the RWA from the business lines, so the fact that from the dynamic activity that we have is nevertheless done with a very strict steering and control of our RWA, which remains more or less stable for all the business lines. For Crédit Agricole S.A., messages are exactly the same, to be honest, with, of course, difference in terms of magnitude due to the scope effect, but messages are exactly the same, so I won't comment further. Next slide is about all the buffers that we have versus distribution restriction. I think it's not really worth commenting the figures left-hand side at Crédit Agricole Group levels. Buffers are really very, very high, the highest between CIBs in Europe, like for the CET1.
If we look more closely at Crédit Agricole S.A., where did we stand end of June? End of June, if we look at the Tier 1 ratio, for example, the buffer were at almost 300 basis points. Since then, as we announced in August, the fact that we will call an AT1 in September, every single call we should have less than 30 basis points. Since then, the CET1 ratio, the capital or retained earnings at Crédit Agricole S.A. have provided 10 basis points. And since then, but this is not yet in these figures, we have issued an AT1 in September, but the settlement is in October. So every single call versus this 280 basis points buffer for the Tier 1 ratio at the Tier 1 ratio level, we should be, let's say, at 308 basis points buffer.
So anyway, and despite the fact that we have called an instrument before issuing another one, we have never got below 280 basis points in terms of buffer, while our commitment is to keep a 250 buffer for all these kind of measures. Now, if we look at the next slide, the story is exactly the same for several years, I would say. Very strong capital position and ratio for the CET1 for Crédit Agricole S.A., which operates under the umbrella of the group and through the internal support mechanism commitment to be above 11%. The Tier 1 ratio is managed at Crédit Agricole S.A. level because at group level, anyway, retained earnings at regional banks level are cheaper than AT1. So it's only worth managing it at Crédit Agricole S.A. level, which is a listed company for which AT1 are cheaper than CET1.
For the leverage ratio, this is really for us a backstop ratio. As you can see, at group level, the ratio is very high, so we do not really steer it accurately because through our natural capital structure and business mix, we have this kind of very high ratio and thus very high buffer. In terms of TLAC and benefiting from our strong CET1 position, we manage the TLAC ratio with a commitment to be above 26%, but in practice, in line with our competitors, so in practice, around 27%. We are actually at 27.3%. And subordinated MREL is equivalent to TLAC. And for the total MREL, once again, due to our business mix, we are naturally with a very high excess in terms of total MREL ratio versus requirement.
Now, if we go into some more details, if I once again start with the right-hand side of the slide, customer deposits overall remain stable versus last quarter, EUR 1,128 billion versus EUR 1,131 billion last quarter, so really something very stable. What is important as well is to notice that the split between sight deposits and term deposits remains stable, which means that we think we have more or less reached the equilibrium point between sight deposits and other types of placements that our customers can do, and that the switch from sight deposits towards savings accounts and term deposits is now behind us. It allows us as well to maintain a very high LCR and NSFR ratio. In terms of LCR, once again, I repeat, commitment not to gold plate anything in terms of regulation to be above 110%. In practice, once again, managing in line with competitors.
LCR ratio at group level, 147% versus 146% last year. Once again, it's a continuity. No more TLTRO or almost no more, and still a very strong, stable resource position. In terms of, sorry, liquidity reserve, very high liquidity reserve, EUR 466 billion , sorry.
And the very important point in this figure or in this composition of our reserve for me comes from the fact that on top of all what is included in the LCR calculation and LCR ratio, which is in this graph in blue, we have in green EUR 150 billion , which is already pledged to ECB, not taking into account the LCR ratio, already pledged to ECB, so we can have overnight access to EUR 150 billion . And on top of that, we have some non-HQLA securities, not eligible to central bank, nevertheless, that we can pledge with repo in the repo market if needed.
In terms of liquidity structure, still very strong, and I would say above our steering target. This is due to the fact that on the asset side, the loan production has been perhaps a little bit below our expectation, while on the liability side, as we have mentioned, the growth of our deposit base has been positive over the year, even though it was stable between June and September. The slight decrease versus last quarter essentially comes from the asset side, where on some areas, we have generated a little more assets with our clients.
In terms of split of our medium and long-term issuances, we have benefited from last quarter from the very strong market appetite in September and take the opportunity to issue the remaining part of our funding plan in terms of Tier 2 and senior non-preferred, and even issued in advance an AT1 end of September, which means in terms of funding plan that with EUR 24 billion of issuances over the year, and despite the fact that we have announced a funding plan of EUR 26 billion, we consider, given all the metrics I gave you in terms of liquidity position, we consider that we are done, that we do not have real need to go above this kind of level. And among these EUR 24 billion, as you can see, in terms of, I would say, instruments, it's very well balanced between the senior unsecured, senior secured, senior non-preferred, and Tier 2.
More importantly, perhaps on this line, the fact that for the unsecured part, in terms of currency split, we have a very good diversification. We have only tapped the euro market for a little bit more than, sorry, I put my glasses, 36%, so a little bit more than one-third. What is very interesting also to see is the diversity of the market that we can access either through our Samurai program in Japan, our Panda program in China, our Kangaroo program in Australia, and through our EMTN program in the U.K. At group level, we also manage diversification, and we steer, of course, all the issuances that are made through our different entities, one of them being the CIB through the issuances of EMTN for the benefit of their clients, essentially private banks.
There has been a push this year on these products because the rise in interest rate has made those products more attractive for the clients. And of course, we have the insurances at Crédit Agricole Personal & Mobility Finance, ex-CACF consumer finance level, because we impose this division to be self-funded at 80%. And we also have some insurances in Italy at Crédit Agricole Italy level because we also impose our Italian entity to be not self-sufficient in terms of liquidity, but not to rely too much on liquidity coming from the head office. That's what I wanted to say about the funding plan. And last word, perhaps, about our commitment in the ESG topics.
Crédit Agricole is a leader in ESG in many areas, leader in the green bond issuances through the CIB, where we are very well positioned in terms of league table, leader in the way we accompany our clients in their energy transition, leader in financing the energy transition and renewable energy with EUR 22 billion of financing in new energies, green energies, of course. But also, and because energy transition can only, and reduction in CO2 emission can only be achieved through production of alternative energy and green energy. That's why we are so involved. We are also, of course, very involved in order to finance this energy transition as an issuer in the bond issuances, either green or sustainable. You can see the figures, EUR 22 billion of ESG bonds outstanding across Crédit Agricole Group at the end of September.
Of course, you can see also the asset allocation of these funds. If we stick or if we restrict it or restrain it to public issuances, we are this year, year to date, the first issuer of ESG and green bonds with EUR 3.6 billion. We were also the first issuer last year with full year, EUR 2.5 billion. In terms of outstanding of green and social bonds, we are once again the leader and number one with EUR 13.3 billion. This is for public issuances. Thank you. Now the floor is yours, open for questions.
Thank you, Olivier. Thank you, Cécile. As mentioned by Olivier, please feel free to ask your question. We have received some of them. I think we will try to take the time to try to answer all of them. Obviously, we will start with the first question.
I'll let you, Olivier or Cécile, take the question and maybe read it quickly.
I think I will take it. So the question is, it seems that you are done in sub-debt and that you have 3.5 more to do in senior and covered. How should we look at the split of this? In fact, I think I answered the question during my presentation, given our strong liquidity position, either in terms of LCR, either in terms of stable resources position, either in terms of reserves. We think that given the evolution of the business that we've seen this year, of course, as Cécile was mentioning, there is more dynamism in this third quarter than during the first quarter this year. But still, overall, the needs are slightly below what we expected when we published the funding plan end of last year or beginning of the year.
We consider that overall we are done in terms of funding plan for this year. Saying that, you cannot exclude the fact that if there are extraordinarily exciting market conditions, we could issue something just in order to be even more secure, but more or less consider that we are done for this year. Then there is a second part in the question. Could you please give us an indication how we should look at 2025 funding? So 2025 funding plan is not yet finalized, not yet validated by the board because the budget process is still ongoing. So we do not have all the elements to finalize the plan because we do not know exactly. Of course, we know the amortization of the outstanding, but we do not know exactly. We have not yet finalized exactly the business needs for next year.
That being said, more or less, and starting from the very high liquidity position that we have today, the plan should be perhaps a little bit lower than this year. The probability that the plan will be a little bit lower than this year is higher than equal or above. In terms of split, I would say, because there is a question with a lot of sub-questions. In terms of split, once again, it's perhaps a little bit too early to answer the question, but let's say that nothing very different from this year.
Next one. I think we can do it together. So please. What trends do you observe in France due to the political uncertainty? Is it more wait and see from corporates? How do you position the group in this current and somewhat uncertain environment? Maybe I can start with what we've seen on individuals before corporates.
Because since, I would say, June and during all the summer when this context began, in fact, we had a task force within the group, of course, to monitor very closely the behaviors of our clients to see if there was any move on their savings, etc., etc. And the fact is that we saw almost nothing. So I would say there was no specific behavior of individual clients linked to the political uncertainty. On corporates, maybe, but you maybe.
Yes. So on corporates, perhaps I will, if you want to complement on SME, you will perhaps on big corporates for which I have a bit of view. Of course, there are some of our clients that can, I would say, postpone some of their projects. But big clients, first of all, at CIB level, we do not have only French or European clients.
More or less, our business comes for 30% from France, 30% Europe out, excluding France, and 40% rest of the world. So we are not, I would say, 100% sensitive to France situation. Anyway, even our French big corporates, they are themselves very international. So the sensitivity, I would say, is not so great, at least if we refer to the situation in France. After that, there can be some events outside France that can impact their behavior. But I would say that I cannot say there is no impact, but the impact so far, or the impact we can perceive so far is not material, I would say.
And now on SMEs, or I would say on the clients of LCL and regional banks, I mentioned earlier the fact that we saw an increase on the loan production with corporates in French retail banking.
In fact, this increase; it's a significant increase for LCL. It's a small decrease for regional banks, but globally, it seems that it's resilient. And during Q2, I remember very well that we had the same trend. So nothing massive that can be linked to the political context at that moment.
The next question is about ratings. So French sovereign ratings and potential impact on GCR ratings. So we have a slide in the credit update which displays the rating of France and Crédit Agricole. So you can refer to it in the credit update. It's Slide 13, 1.3. Well, perhaps let's start with the easiest Fitch. So Fitch has downgraded France, at least through a negative outlook, and has then released a note describing the impact on French banks. And clearly, for Crédit Agricole, given the interesting strengths of our balance sheet and business model, there is no impact.
For S&P, they will review the rating of France the 29th of November. Don't know what happened. But if they follow their competitors, the probabilities that France will get a negative outlook, I think, is important. For S&P, I would say the story is exactly the same since the beginning of the year, meaning if they downgrade France because of budget deficit. First of all, if they downgrade France, there is no direct impact on our rating. Second, if they downgrade France because of budget deficit, normally it doesn't change the fundamental economic outlook they can have on France. In that case, normally there is no impact for Crédit Agricole.
If they consider that the overall global economic environment of France is deteriorating significantly, then if this is the rationale for the downgrade of France, then we could be impacted because if the big crowd of France in S&P methodology is downgraded, then of course, it can have an impact for Crédit Agricole, so for that, I think the story is very clear. It will depend on S&P decision and/or the rationale of their decision. For Moody's, to be honest, we had an unpleasant news when they downgraded France with a negative outlook. Unpleasant because, to be honest, and perhaps it's my fault, but when we were discussing with Moody's in spring, we didn't feel that kind of impact, and obviously, they have strengthened their position since then.
The rationale of Moody's when they have downgraded Crédit Agricole alongside with BNPP and Crédit Mutuel in France, so alongside the highest rated banks in France, is the following. If France is downgraded, France will have the same rating than our senior unsecured debt. Then if the rating is equal, the rating of our senior unsecured can no more benefit from the government support. That's their view. So they have linked, and it was not what we had understood previously. They have linked now the evolution of the rating of France with the evolution of the rating for our senior unsecured debt. Clearly, for all the other debts, they are not concerned because the rating of the other debt is still below the rating of France. So no other impact than a potential impact for our senior unsecured debt.
What is also very reassuring is that for Moody's, clearly, the fundamental strength of Crédit Agricole is not under question. And for example, our additional tier one remained investment grade for Moody's as well for the other rating agencies. But yes, for the senior unsecured, it was an unpleasant outcome of the strengthening of Moody's, I would say, implementation of their methodologies.
I can take the next one. Do you have an update on Solvency II and the sensitivity of the OAT bond spread? We don't usually give an update at the end of September on Solvency II, but we had published the ratio end of June. And if I remember well, but we will have to check after that. It was still above 200%, and it was not very different to the level that we had end of 2023.
As the widening of spreads was essentially concentrated in June, if I remember well also. I'm looking at my colleagues, but no reason why it should have moved significantly between end of June and end of September. Now, if you want to know all about our exposure to the French sovereign, all the figures are in the appendices of the credit update. The credit update that we have just published, it's Page 59 and it shows that, yes, of course, insurance is carrying significant amount. It's EUR 50 million, so it's OATs and assimilated bonds, so for example, CADES, etc., etc. All what is linked to the French sovereign risk. It's EUR 50 billion that we have in the balance sheet of insurance activities. If you want to have all the information on the sensitivities, it is in their universal registration document.
You have sensitivities that are published on the Solvency II ratio linked to any move in spreads. So it's not specifically OAT spreads, but it's all spreads on all bonds. Of course, it is sensitive, but it is not that huge. I don't remember the figure, but we will all have a look after.
Where are the supply targets removed?
On funding?
On funding. I'm not sure to understand the question. I will read it, and perhaps you can rephrase because why were the supply targets removed? How has the euro swap spread tightening affected the bank? Does it affect your thinking on wholesale issuance or any of your bond holding? On wholesale, I'm not sure to understand fully the question because the swap spread tightening, if you refer to asset swap versus bond, there is an impact.
There is a certain sensitivity of our liquidity portfolio, of course, to the asset swap spread because almost all our liquidity portfolio is asset swap. So there is, of course, a certain sensitivity. We have already indicated that the main part, around 60%, is accounted HTC, so without any impact on our OCI, and 40% HTCS, so with an impact. But as you can see, the sensitivity, it's on asset swap and only 40% of the portfolio. So sensitivity is pretty small. Concerning our issuances, once again, we also asset swap any of our issuance, and the tightening does not really affect us. What we look at is our issuance spread versus swap. So I'm not sure I've totally answered your question because I'm not sure I've captured everything of your question.
Maybe the question is also about it has disappeared, but M&A and any use of the Danish Compromise that we could think about in M&A operations since maybe for everyone already. We had this summer BNP that announced that they were working on the acquisition of AXA Investment Management and that they would do it through their insurance subsidiary and using the Danish Compromise, and that it would then cost not that much on the CET1 ratio, and this today, maybe, I don't know if you've seen, but BAMI announced also that they wanted to acquire Anima and that they would use also the Danish Compromise, so this is why a few banks have said that all those use of the Danish Compromise were maybe not exactly in the spirit of this dispositif that is confirmed by Basel IV, by the way.
But maybe what I can say on that, because it's something that we already had the question during the summer in September, etc. We are not thinking of anything through the Danish Compromise, nor internally, because you know that we already have Amundi and Crédit Agricole Assurances are both subsidiaries of Crédit Agricole S.A., and we are not thinking of changing all that in order to. Now that we see that some of our colleagues have had what they think good ideas, and this is now how we organize, and this is definitely not something that we are thinking of.
The next one, I think it was
and maybe on the next one, but I said already a little on that. Small rebound in lending at Caisse Régionale and to an extent LCL. What can you say about mortgages versus corporate demand tendencies?
So on mortgages, and here we have again the figures. Q3 compared to Q2, it's + 30%. Q3 compared to last Q3, it's still a little decrease, if I remember well. It was a very small increase. But so this rebound is really on home loan activity, what I mentioned just earlier. On corporate loan production, as we said, it's an increase this quarter compared to last quarter. It's more significant at LCL than for the regional banks, where it's still a small decrease on corporate this quarter, but it's not very big.
Perhaps to give you some context, I will take the next one. How confident are you that we have reached the bottom trough in H1 for the regional banks and French retail? It depends what you are talking about or which KPI.
If we refer to, I would say, the topic of the day, which is the net interest margin of LCL and regional banks, I don't think that we have already reached the bottom. What we were saying for several quarters was that we were forecasting more or less the inflection point in terms of net interest margin for our French network second semester this year. As Cécile has explained, effectively, the net interest margin, or as it is mentioned in the slide, the net interest margin of LCL is more or less stable versus Q2. It has increased a little bit Q2 versus Q1. So we continue to think that we should be, after that, still, of course, some uncertainties, but for LCL, we should be at the inflection point during H1 this year, second semester this year versus second semester next year.
For the regional banks, the net interest margin has still decreased a little bit versus Q3 last year, is still decreasing a little bit Q3 versus Q2. So regional banks, which have taken the opportunity when interest rates were low to take market share because they have no real constraint on their return on equities, or they have taken the opportunity of low interest rate to take market share, of course, are now a little bit more heavy, and the recovery could be a little bit delayed. So for regional banks, perhaps the inflection point should be a little bit delayed. We do not expect that this delay will be long, but could be delayed a little bit, perhaps for one semester. I don't know. We will perhaps give more flavor during our annual results. So this is the way we see it.
Despite that, anyway, the evolution of commission is pretty dynamic because on both networks, commission has increased by 5%, which is great, and commission represents today more than 50% of the total NBI of the region.
Yes. We used to say it's half-half, but now it's true that as it has increased progressively, it's more than half maybe for LCL, and it's not very different for regional banks.
What strategy will you adopt in light of the depositor preference, the risk of downgrade of the senior preferred? Can we expect more issuance of senior non-preferred? Thank you for the question, and thank you for expecting more issuances of senior non-preferred. Well, first of all, we lobby fiercely against this depositor preference.
We consider it's not a good idea because it, in a sense, destroys the level playing field because whether you have a very strong and sound balance sheet, which of course is costly, versus a balance sheet, capital position, liquidity position, which is less resilient, you can propose to a corporate customer the same price with the same kind of security. So for us, it's something which destroys the level playing field and perhaps more importantly than that, can help banks in bad shape to hide their potential liquidity problems with paying a little bit more through this kind of shield, I would say, of depositor preference. And then, of course, when the problem will appear, because at the end of the day, to hide a problem, do not cancel it, the fall could be more difficult to manage. So we think it's not a good idea.
That being said, if it happens, it will happen. But first of all, we think that we still have some time to manage it. And nevertheless, we have already this year, if you look at our figures, issued a lot, and our medium and long-term outstanding has increased. So the sensitivity to this element in Moody's methodology is lower than it was one year ago. So I would say it's too early to answer your question because the decision is not yet taken, and we think that we could manage it, but we'll see the elements when we will have more clarity on this topic.
Automotive sector. Are you worried about the automotive sector in light of ESG transition challenge and Trump election? So maybe several things I can say on this.
The automotive sector is maybe not doing very, very well at the moment for some actors, and we've seen some profit warning from some of them. So it's a concern. But so far, I was mentioning the productions that we had on consumer finance and mentioning that it was stable. So it's both, I would say, traditional consumer credit and automotive sector, but there is no change or shift in the speed of this production. So we still have a high level of production on the automotive sector. Yes, there are some challenges linked to ESG. And by the way, we really want to accompany those changes, and this is why we have also some targets in terms of electrified vehicles that we are financing or on which we are providing leasing. And so we really want to be part of this.
But yes, this is creating also challenges, and notably, I would say, in terms of residual values, because on electric cars, we do not have a long history, and it's not that easy to assess what is the right residual values of the vehicles that we are financing. But it's the opportunity for me to say that on this risk, which is really a new risk for us, we have set up a very strong teams and very strong processes in order to be as good as possible on that. We are reviewing the values very, very frequently. We have set up a marketing division in order to dispose of those vehicles in the most, I would say, smoothest way, benefiting from all the networks and entities that we have on those markets.
Maybe it's also the occasion because something that I've not mentioned, but we are pursuing the strategic projects that we have in the financing of automotive. And notably, this quarter, we announced two new partnerships, in fact, with the Chinese carmaker GAC, so on leasing in China and on car financing in Europe. So we are really continuing to develop. And last point for me, one of the key directions that we want to take on this activity is to develop also all the services that we can propose with those products. I'm thinking about delivery of car, maintenance contracts, lots of things, fleet management, etc., etc. This is something we think we will need one, two, three years to completely develop this offer. But in the end, we think that those services might represent roughly 40% of the revenues on this activity. So all I can say on that.
Perhaps one word to complement what Cécile is saying. At the CIB level, we are not worried, but of course, and essentially for traditional OEM, we look closely at the evolution of the sector. We look closely at our client that we will try to continue to accompany in that transition. Of course, we'll adapt themselves to this energy transition and ESG evolution. So this is not something for which we are worried, but this is, of course, something that we take care and we follow very closely in order to adapt our strategy if needed. Last question. One of your peers has decreased recently its LCR quite substantially. Would you also consider adjusting your LCR downwards, which is currently quite high? Thank you for this comment and qualification. I imagine it's dragging some profitability. So if you push us in that direction, why not? Of course.
As I was mentioning, our commitment is to be above 110. No gold plating the commitment. After that, we manage in line with peers. So we'll see. We could consider, but no urgency. No urgency, at least for one reason, because naturally, we drag and we collect some of the excess of liquidity of the system due to our very strong position, which creates or helps us to generate some LCR and marginally, marginally at very low cost, even sometimes with a gain. So we will reconsider or we will reassess the situation, of course, quarter after quarter.
This is it.
Thank you, Olivier. Thank you, Cécile. I think we are right within the hour. Many thanks, everyone, for connecting to this call. And we remain at your disposal should we have any further questions. And we're wishing you a very good day. Thanks, everyone.
Thank you very much.
Bye-bye.