Amundi : 08.02.2023 - Transcript - Amundi's Q2 2023 Results

Amundi

Second Quarter &

Half Year 2023

28 July 2023

Amundi: Second Quarter & Half Year 2023	28 July 2023
List of MAIN speakers	Company	Job title
Valérie Baudson	Amundi	CEO
Nicolas Calcoen	Amundi	Deputy CEO

OPERATOR

Good morning. This is the conference operator. Welcome and thank you for joining the Amundi First Half and Second Quarter 2023 Results conference call. As a reminder, all participants are in a listen- only mode. After the presentation, there will be an opportunity to ask questions. Should anyone need assistance during the conference call, they may signal an operator by pressing star and zero on their telephone. At this time, I would like to turn the conference over to Cyril Meilland, head of Investor Relations. Please go ahead.

Q2 & H1 2023 results

Cyril Meilland

Head of Investor Relations

Good morning to all and thank you for attending this conference call. So, welcome, if only by video or audio call, to Paris, where unfortunately it is rainy. We do hope that you will find the message from our top management more appealing than the weather. Today I am with Valérie Baudson, CEO of Amundi; and Nicolas Calcoen, Deputy CEO. Valérie, the floor is yours.

Q2 & H1 2023 results

Valérie Baudson

CEO

Thank you very much, Cyril, and good morning to all of you. I'm very happy to introduce you to our results for the second quarter end of the first semester of 2023.

As usual, I will start with the highlights of the quarters that we want to emphasise and I'll let Nicolas Calcoen run you through the details of our performance and figures.

Highlights

So, three points I would like to underline.

Q2 2023: robust net income amid persistent risk aversion

First, the very good profitability of Amundi in, as you know, an uncertain environment. Second, the strong commercial drive in medium long-term assets, as well as in treasury products during a period when the asset management market in Europe posted net outflows in active management and very limited inflows globally. And third point, our sustained growth in our strategic pillars.

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Amundi: Second Quarter & Half Year 2023	28 July 2023

So let me start first with our high profit level. As you know, bond markets were down by 6% and equity markets were up by only 4% and, despite this context, Amundi posted a good financial performance with a Q2 net profit up by 19% compared to Q2-22 and up by 7% compared to Q1-23. It means that it reached exactly €320 million. This performance is actually due both to our growth, the growth of our revenues and the tight control of our costs in the context, of course, where we still have strong inflation.

Speaking about revenues, they increased by close to 2% and we also benefited from a favourable client mix on our margins. And speaking about our costs, you will see that we have delivered the synergies from Lyxor ahead of the plan.

Now, let me speak about our commercial drive - point number two. During this quarter, investors remained risk adverse but Amundi has successfully adapted its product offering as we are used to, to match their needs, when we speak about retail investors, especially capital protection and yield. So, I would like in order to illustrate that point, to give you three examples of significant success during this second quarter: cash products, structured products, and buy and watch bond solutions.

In cash products, as some of you probably know, we are among the leaders in Europe. We have a very long experience, a very comprehensive offering. From day to day, overnight money market fund to ultra short-term bonds with duration less than one year. We have funds which are very large, from 2 billion to €50 billion, which provides best-in-class liquidity, of course. Globally we have close to €200 billion and we have a market share of 10%. Our net inflows during this quarter represent 20% of the net flows of the market.

In structured products, we have a very long experience as well. We spoke about it already and you know that we distribute these products in particular in France, in Spain and in Austria.

And regarding the buy and watch bond solutions which are managed by our bond investment teams, we have launched actually a record 15 funds in more than ten distribution client networks since the beginning of the year.

Maybe two last points about the commercial drive, the strong commercial drive this quarter. First, I would like to highlight the very strong momentum in our Employee Savings and Retirement scheme, which gathered record inflows at around 4 billion. And also, the very good performance of our French partner networks because they posted net inflows in medium long-term assets at around €1.5 billion.

So, all in all, our total asset management grew by 2% over one year and we have exactly €1,961 billion under management.

Now, the third and last point I wanted to stress: our sustained growth in the strategic pillars, which we presented and announced in our medium-term plan. So let me stress the nice development of Amundi Technology during the second quarter with three new clients and revenues increasing by 31% compared to the second quarter of last year. I would like to stress as well the very good momentum of our SBI FM joint venture, our Indian joint venture with SBI, which is confirming quarter after quarter the very strong dynamic inflows and profitability of this company.

And third, I also would like to stress the fact that, as usual, we continue to enhance, and develop our responsible investment range, which is, as you know, a key asset of Amundi. And this quarter in particular, we increased our net zero trajectory range of funds, as well as our ESG ETF range, which now represents 30% of our ETF range globally.

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Amundi: Second Quarter & Half Year 2023	28 July 2023

So, in a nutshell, a good profitability, a nice commercial momentum and a continued development on our strategic pillars. Now I let the floor to Nicolas.

Activity & Results in Q2 and H1 2023

Nicolas Calcoen

Deputy CEO

Thank you very much, Valérie, and good morning to all.

Activity

I will start with some element of context as usual, starting with the market environment in which we operated.

Q2/Q2: equities on the rise, bonds on the decline

As we all know, equities and bonds were down very significantly in 2022, quite a rare period of downward correlation of this magnitude. Since the last quarter of last year, equity is recovering and the rates have stabilised, but we still consider that the market environment remains highly uncertain. And by the way, our investment teams continue to recommend caution to our clients when it comes to risky assets.

When looking more precisely at the quarter. On the equity side, the markets continue their upward trends since the fourth quarter of last year. And on the second quarter, indices were up by, on average, 4% compared to the second quarter of last year if we look at the mix of the Euro Stoxx and the MSCI World indices, which is a good a good reflection of our business mix. As far as bonds are concerned, when we are looking at the same period, long-term rates rose by approximately 130bps due, of course, to the hikes in central bank interest rates, and this resulted in a decline on the average aggregate index by 6% in Q2. So overall, it should be noted that according to the sensitivity of revenues to market movements, both equities and fixed income, this variation has globally a neutral impact, again, when we compare this second quarter to the second quarter of 2022.

However, the rise in the equity market has not resulted in a lower risk aversion for investors, in particular in the retail segment, because the rise appears uncertain

European asset management market: modest inflows in Q2 and continued risk aversion

And it is well reflected on the following slide, with the low level of inflows we are seeing in the global asset management market, in particular in Europe, where net inflows in open-ended funds were only, as you can see, €23 billion, much less than 1% of total assets under management on an annual basis. And moreover, this was driven mainly by treasury and passive products, while active funds suffered from outflows during this quarter, like it was the case in the first quarter.

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Amundi: Second Quarter & Half Year 2023	28 July 2023

AUM at 30 June: €1,961 bn

Coming to Amundi, in this context, the assets we manage took advantage of the rise in equities over the last quarters and the past 12 months, with positive net inflows of €3.7 billion during this quarter, which is a good performance. And as Valérie indicated, our total AUM reached almost €2 trillion, to be precise, €1,961 billion.

Return to positive MLT inflows despite high risk aversion

These positive net inflows of €3.7 billion in the quarter were roughly balanced between treasury products, €2.4 billion, and long-term assets, €2.2 billion. This figure excludes JVs, whose outflows were entirely attributable to ABC-CA in China, but I will come back to their performance later on.

So again, long-term assets in positive territory. By the way, it is their best quarterly performance since the first quarter of 2022, when the market environment had only started to deteriorate following the invasion of Ukraine. And it should be noted that this was achieved despite the continued outflows from the mandates we manage for our insured partners, Crédit Agricole Assurances and Société Générale, which totalled -€2.4 billion outflows in the second quarter. And as far as the treasury products are concerned, the performance on the quarter is all the more remarkable, I would say, considering the fact that usually for this kind of expertise, the second quarter is a weaker quarter because it's the time when corporates pay their dividends and therefore cash out from their money market funds.

Liquidity Solutions: recognized, differentiating and profitable expertise

Good transition to make a focus on treasury products - Valérie already mentioned them. To remind that we manage close to €200 billion, €192 billion to be precise. Our assets increased by 11% over one year. In terms of size, we have a market share in Europe of around 10%. But on flows in the first half of the year, it's 20% of the inflows we managed to capture. So, we are clearly a market leader benefiting from a very large, very diversified customer base. And you can see that these solutions are, of course, favoured by corporates and insured clients, but also retail clients that come back to this expertise.

Valérie already mentioned the key feature of this business. I just wanted to outline that given the large size of assets we manage, it's clearly a very profitable business for Amundi despite the lower margins. And it's something where Amundi has key differentiating expertise given, again, the size and the breadth of the funds we manage.

Retail: continued risk aversion

Coming now to the retail activity, more specifically in retail. We can see that here again, the net flows this quarter were also balanced between retail and institutional. And coming to retail, the nature of the business and the evolution we have seen on this quarter obviously reflects the high level of risk aversion I already mentioned with treasury products, structured products and bond products, all posting strong inflows to the detriment, of course, of equity and multi-asset strategies.

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