Cacei Ready to Purchase Royal Bank of Canada Investor Services Business in Europe – 10/17/2022 08:37 AM

(AOF) – Caceis, a subsidiary of Crédit Agricole SA specializing in the provision of financial services to institutional investors, and Royal Bank of Canada (RBC) signed a memorandum of understanding on 14 October which offers Caceis the opportunity to acquire the asset servicing of Royal Bank of Canada in Europe. This transaction would allow the subsidiary Crédit Agricole to strengthen its position among the global players of asset servicing in Europe and in the world.

This would represent approximately 4,800 billion euros of assets under administration and 3,500 billion euros of assets under administration (data as of 31.03.2022) after the completion of the operation, which could take place by the end of the third quarter of 2023.

This acquisition would be in line with the group’s development objectives and would respect its profitability criteria with an expected return on investment of more than 10% in 3 years thanks to the creation of synergies. It would have a negative impact of less than 10 basis points on the CET1 of Crédit Agricole SA and the Crédit Agricole Group (data as at 30.06.2022).

The signing of the agreements between Caceis and RBC is subject to prior consultation with the employee representative bodies and the completion of the transaction will be subject to the usual conditions precedent including applicable regulatory approvals

AOF – FIND OUT MORE

Key points

– Listed vehicle of the mutual group of the same name, 1

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French bank and 8

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Worldwide;

– Bank margin of € 22.7 billion, generated by retail banking at 65%, specialized financial services at 12%, wholesale banking at 14% and asset and insurance management;

– 3-point business model – relational excellence by becoming the bank of choice for individuals, entrepreneurs and institutions, local responsibility in support of digitization and social commitment by amplifying mutual commitment;

– 55.3% capital held by regional mutual societies, hence the strong presence of their representatives on the Board of Directors (10 out of 21 members) chaired by Dominique Lefebvre, of which Philippe Brassac is CEO;

– Solid financial position – CET 1 ratio of 11.3% at the end of June and liquidity reserves of € 468 billion.

Challenges

– New “Ambitions 2025” plan: net profit of more than 6 billion euros and return on tangible equity of more than 12% / acceleration of technological and digital transformation with 20 billion budget for IT and digital, of which 1 billion for technological transformation / cash distribution of 50% of the result;

– Innovation strategy, one of the 3 levers of the business model: internally: 90% of the Group entities that have a “data-centric” architecture in 2022 and 300 million euros in IT efficiency gains, 100% of IT employees trained on new technologies at the University of Information Systems and tested 100% of emerging technologies on new services to businesses / customers: expansion of the range of leading applications (Ma banque Pro, Pro & Entreprises LCL, etc …), offer of solutions digital and mobile cash for small / medium merchants, a European e-banking offer for large retailers and a full range of e-commerce;

– Environmental strategy aimed at carbon neutrality in 2050 for its own footprint and for investment and financing portfolios; Target 2025: reduction of oil exposure to oil extraction to 20% / for Amundi open funds under active management, energy rating higher than that of the competition and € 20 billion committed to impact / growth funds 60% of exposure of the non-carbon energy investment bank and development of the platform dedicated to hydrogen projects / 50% increase in the financing of renewable energy in France / Target 2030: launch of two new activities, Transitions & Energies for the accessibility of accessible energy transitions and Health & Territories for access to care and “age well”;

– Benefits from the penetration of Chinese markets (1

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foreign asset management company) and Indian (cash management offer);

– Strengthening the financing of mobility through 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 increased cost of risk in the Ukraine and Russia area, resulting in a 16.1% drop in net profit from 1

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semester;

– Difficult market prospects for 2

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half year, excluding the United States: sharp decline in growth and increase in inflation in Europe, stagflation in emerging countries and rise in reference rates.

The negative effects of rising interest rates

Rising interest rates usually cause bank income to increase through loans. In Europe, according to a survey conducted by S&P of 85 banking institutions, the sector expects on average an 18% increase in its interest margin. However, this new inflationary environment also has undesirable effects, notably an increase in refinancing costs. It is also accompanied by the fear of a new recession, which would then affect all the bank’s activities, from loans to asset management, whose income is correlated to market valuations. Reassuring element: euro area banks are strong enough to cope with a deteriorating environment.

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