Amundi : Transcript de la conférence téléphonique (en anglais)

1Q 2019 Results

Wednesday, 26th April 2019

Amundi | 1Q 2019 Results

Wednesday, 26th April 2019

Introduction

Anthony Mellor

Head of Investor Relations, Amundi

Yes, it's Anthony. Good morning to everyone. So with me in the room are Nicolas Calcoen, who will present the Q1 results, Domenico Aiello and Thomas Lapeyre. We will open the Q&A session after the presentation of the results. Nicolas, over to you.

Q1 2019 Results

Nicolas Calcoen

Group CFO, Amundi

1Q 2019 Results

Introductory Remarks

Thank you, Anthony and good morning to all of you and welcome on this call to present the results of Amundi for the first quarter of 2019. As an introduction, I would just say that overall they are good results, marked by a new increase in our net results, in our profitability. We turned to positive flows in long-term assets and we can confirm the ongoing finalisation of the Pioneer integration.

Market environment and risk aversion

So to enter into the details, starting with the activity. Maybe just a word before that on the market environment. I'm on the page seven of the slide show. As you all know, we benefited in this first quarter from a significant improvement in the market environment with equity markets sharply up compared to December. So recovering from the inverse evolution in the fourth quarter of 2018. Interest rates are declining, explaining a positive market impact.

Maybe one point, which is nevertheless important to notice, is the fact that the equity market went up sharply during the first quarter of 2019. However despite this, if you compare the average level of the first quarter 2019 to the average level of the first quarter of 2018, we are still a little bit below. Overall, the market environment, is clearly improving but a persistence of risk aversion from investors, particularly in retail, probably in connection with both macroeconomic and political uncertainties still exists. This is reflected by the fact that consumer investments are heavily geared towards traditional life insurance or deposits in many European countries.

Assets under management

In that context, page 8. Assets under management increased by 3.6% over the quarter, up to €1,476 billion at the end of March. A strong market effect of €58 billion contributed to a significant increase in the AuM.

Net inflows

And regarding net inflows, page 9. As I indicated a rebound in long-term asset flows, which came back into positive territory were offset by outflows in treasury products especially at the end of the quarter. Regarding medium to long-term assets, we had positive inflows of €8.4

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Amundi | 1Q 2019 Results

Wednesday, 26th April 2019

billion if you exclude the impact of the re-internalisation of an institutional mandate in Italy for a bit more than €6 billion.

To be clear, it's a mandate from the Italian Post, which decided to re-internalise this relatively low-fee mandate. So clearly it has nothing to do with the performance of the mandate or the relationship with Amundi. If you exclude this effect, we had positive net flows of €8.4 billion in the first quarter. Overall, net flows for the first quarter were negative by €6.9 billion, but with a positive underlying trend for long term assets.

MLT inflows and treasury product outflows

If I go a little bit more into detail - slide ten. Regarding retail, we had positive inflows on long-term assets of €2.4 billion. So, a recovery from the last quarter despite risk aversion which is still very strong. This inflow was driven mainly by the international networks and especially in Italy, thanks to the development of the discretionary portfolio management, in particular for the UniCredit network and also, by some positive flows in long-term assets in the joint ventures. And again, all this against the backdrop of persistent risk aversion, especially in France where flows were slightly negative. At the industry level, the percentage of Unit Link gross inflows in life insurance products has continued to decrease this quarter, per Fédération Française de l'Assurance data. Remember, they were up until last summer and since then they have been decreasing. Overall for the French market, it came down to 24% compared to 28% last year.

Overall for the retail business, we saw positive inflows on long-term assets and negative outflows on treasury products in French Networks, Third-Party Distributors and in our Joint Ventures. Maybe one point to specify, the outflows were especially significant in the French Networks' treasury products. This is due to the corporate clientele of these networks, to the main part.

Institutional and corporate business lines

Regarding the institutional and corporate business lines, page 11. Same overall position. Buoyant activity in the long-term assets, despite the reinternalisation of a mandate in Italy, but some outflows coming from the corporate clients on Treasury Products.

So long-term assets, if you exclude the Italian mandate, recorded net inflows of €6 billion, with a lot of turnover. And we have seen of course this reinternalisation of the Italian mandate, so some outflows. But more than compensated by strong inflows with new clients - new mandates. Positive, also, contribution from the CA & SG mandate due to in particular strong inflows going to a traditional life insurance contract. But significant outflows in Treasury Products coming from the corporate clients at the end of the quarter.

By Region

On page 12, just to complement the vision. If you look at what assets classes of expertise contributed to these inflows. Again, if I exclude Treasury Product on the Italian mandate, other asset classes contributed positively with the good inflows coming from several expertise.

In terms of geography, again, excluding money market funds and the Italian mandate, net inflows came from outside France, which is relatively similar to what we have seen over recent years.

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Amundi | 1Q 2019 Results

Wednesday, 26th April 2019

High level of net income

If I come now to page 14, as I indicated earlier, a good first quarter with a high level of net income. The accounting net income bottom line increased by 6%, compared to the first quarter of 2018 and by 22% compared to the last quarter. And the adjusted net income - so net income excluding the amortisation of the distribution contract and the integration cost increased by 3% compared to first quarter 2018 and 10% compared to the last quarter. So the difference in terms of evolution between, I say, accounting net income and the adjusted net income, is coming from the fact that we no longer have any integration costs in 2019. They were all booked in 2017 and 2018.

Revenues

To page 15. In terms of revenues, total revenues are almost stable compared to the first quarter of 2018. With our core revenues - net management fees being slightly up compared to the first quarter of 2018, thanks to the good level of activity, especially on the long-term higher margin product. Performance fees with €20 million are at the same level as the fourth quarter of 2018. But don't compare to the first quarter of 2018, because you have to remember that first quarter of 2018 was exceptionally high. Lastly, we had a good level of financial income in Q1 2019, €18 million, in connection with the market recovery. Remember that most of these revenues are coming from the mark to market change in the valuation of the investment portfolio. The markets were up during the first quarter, especially the equity market. So, we have a positive financial income, to be compared to the fourth quarter of 2018 where we had negative financial income due to the decrease in the market.

Improved cost/income ratio

Overall good resilience of our revenues. The costs are kept under control. They are stable compared to the first quarter 2018. The impact of the synergies related to the Pioneer integration, especially the decrease in the staff headcount compared to the first quarter of 2018. So these synergies offset the gross investment that we made in the targeted recruitment, to support development, as well as the negative foreign exchange effect and the impact of the usual increase in price.

So in total, our cost income ratio is almost stable compared to the first quarter of 2019. And improving by 1.6 basis point compared to the first quarter 2018. At 50.9%, it remained one of the lowest in the industry.

Income statements

Continuing with the P&L elements, to continue also with the contribution of JVs. We continue to increase the contribution from our joint ventures. As I indicated, our adjusted net income was €247 million, so increasing by 3% compared to the first quarter of 2018. And the net income, accounting net income at €235 million, is increasing by 6% compared to the first quarter of 2018.

Conclusion

So to conclude, page 18 now. Just to reiterate that we see this first quarter as encouraging and clearly the continued improvement of profitability in the first quarter, which is in line with the roadmap and the target for the net income which we stated last year for 2020.

Thank you very much.

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Anthony Mellor: We can switch to Q&A.

Operator: Thank you. Ladies and gentlemen, we will now begin the question and answer session. As a reminder, if you wish to ask a question, please press star and one on your telephone keypad and wait for your name to be announced.

The first question comes from the line of Jaques Henri Gaulard from Kepler Cheuvreux. Please ask your question.

Jacques-HenriGaulard (Kepler Cheuvreux): Yes, good morning. Basically, two questions for me. The first one on French retail, it seems that the inflows are now slowing a little bit and you mentioned the risk aversion, Nicolas, in your presentation. Is it a trend which you believe is sustainable or are we going to see a little bit of recovery within that? And the second question would be on your gross margin trends, which actually are actually very solid. It was probably the big surprise of your result this morning. Again, are you confident about the level of long-term assets and that you can actually maintain this level going forward? Thank you.

Nicolas Calcoen: Okay, thank you. So first point on the French retail. Yes, on this first quarter - again, excluding the money market Treasury Funds, which- I would say, follow a different path. We had slightly negative flows due to this risk aversion environment, as illustrated by the increase in the share of Euro-contracts in France. Also reflected by the strong level of new money going into Livret or LDD, which I believe for the French total market were close to €10 billion on the first quarter, probably higher…

Jacques-Henri Gaulard: But -

Nicolas Calcoen: So I give you again this background. Going forward - and this is important to notice that especially in France and especially when you look at mass market, we have always a significant lag between, I would say, the evolution of the market environment and saving behaviour. So going forward, I would say we would expect progressive recovery. But again, especially for this mass market retail, there is caution because the change in behaviour is always a bit slow.

Jacques-HenriGaulard: Sorry, just a little bit of a follow-up. Would you correlate maybe - that really risk aversion with the political situation in France at the beginning of the year?

Nicolas Calcoen: No - I mean I have clearly no evidence to make a connection between the two. I would really more relate that to the fact that the market went down last year. Investors received at the beginning of the year their statements on their investment of last year and they realised that yes, when investing in on the market it went down. So we would really more relate that to market environment, but not specifically on the political environment in France

Jacques-Henri Gaulard: Thank you.

Nicolas Calcoen: And regarding your second question on margin trend.

Jacques-Henri Gaulard: Yeah.

Nicolas Calcoen: As always, I would say that we shouldn't focus too much on the way the margins can change from one quarter to a quarter. We had a good level of revenues due to the fact that the activity in the long-term assets in high-margin products is relatively good.

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