Crédit Agricole S.A. (ACA) Earnings Call Transcript & Summary

Good morning. This is the conference operator. Welcome, and thank you for joining the Credit Agricole Second Quarter and First Half 2026 Results Conference Call. [Operator Instructions] At this time, I would like to turn the conference over to Mr. Olivier Gavalda, Chief Executive Officer of Credit Agricole. Please go ahead, sir.

Thank you. Good morning, everyone. It's a pleasure for me to share with you the strong results published this morning by Crédit Agricole S.A. Tile will present them extensively in a few minutes. But before, let me share with you a few key highlights, both on financials and on recent important developments illustrating the fact that Credit Agricole Group is on the move. Let me start with the results we released this morning. Crédit Agricole S.A. is posting high results of EUR 2.1 billion this quarter, up plus 1.4% on pro forma basis. This, thanks to 2 elements. First of all, a very strong growth in revenues, plus 7.7% quarter-over-quarter resulting from the dynamic activity observed in all business lines, revenues with their highest level this quarter, up EUR 7.4 billion. Secondly, high profitability as we are posting for H1 '26, a cost-to-income ratio below 55%, precisely 54.7% and a return on tangible equity of 14%, up 14.3%. Based on these very solid results in H1 '26, we will pay our first interim dividend amounting to EUR 0.57 per share on the 15th of October. This corresponds to 50% of H1 distributable results consistently with our distribution policy, as you know. Finally, CASA CET1 ratio is just about stable, up 11.3%, so still above the 11% target for Crédit Agricole S.A. even considering the impact of the recently increased position in Banco BPM Capital, up to 29.3%. Indeed, we continue to develop strategically in Europe, particularly we are developing in Italy. Italy, as you know, is our second domestic market and the strategic priority for the group. Over the years, we have significantly expanded our presence in Italy and we remain committed to investing and growing our financial units. Notably, since the beginning of the year, we have continued to strengthen our ties with Banco BPM. We increased our stake from 20.1% to 22.9% in quarter 1. This allowed us to obtain 4 seats in the Board in April. And we have now in July reached 29.3%. This increase in ownership is consistent with Credit Agricole's strategy as a long-term investor and partner of Banco BPM in its development. Having that said, as you know, there have been considerable market action being further consolidation in the Italian banking sector. Our position remains unchanged. Any transaction involving Banco BPM should create long term value for Crédit Agricole S.A. and the other Banco BPM shareholders. With our 29.3% position, we are now by far the first shareholders in Banco BPM. We will thus have a say on any transaction involving the company alongside the other Banco BPM shareholders. And we will analyze any solid project with respect to its strategic interest, execution risk and capacity to create value over the long term for all of Banco BPM shareholders. As always, there are many scenarios on the table. But at the time being, we are not aware of any concrete project regarding MPS, Monte Paschi and Banco BPM and we have not been approached by other party regarding any potential involvement in such a project. At this stage, it is very difficult to see how a combination between MPS, Monte Paschi and Banco BPM can be value accretive for Banco BPM shareholders. More generally, we are rolling out our plan. We continue to develop in Germany. Last quarter, we announced the launch of our European digital platform Credit Agricole fast. The initial phase in the success as we are onboarding 200 new clients per day already. This should accelerate with the upcoming launch of the app and be complemented soon by the launch of Credit Agricole Dutch cloud. We continue to develop in France, where our activity is very strong, and we have -- where we have also started integrated the Milleis Group since the end of April with LCL. And we continue to develop all over Europe, in Spain with new partnerships and in all the other geographies where we are present. We are innovating. We have launched a stablecoin in euro, CASA EURXT. We have lead new initiatives related to tokenized finance, and we are working on others unchanged settlement solutions for additional clients and for big corporates. We are also accelerating our AI transformation. Indeed, as you know, Crédit Agricole Group will allocate EUR 500 million of its investments, IT investment plan over fields to accelerate the industrial deployment of AI across the group. We are also creating a dedicated AI and data company and investing EUR 150 million in capital in it. This company will operate industrially the AI technology basis for all entities and create a shared data platform at the level of the group. These LLM agnostic infrastructures and private cloud solutions are essential for strategic economy -- autonomy and more importantly for the long-term management of our costs and the control for industrial. We will also deploy an industrial Agentic platform designed to enhance productivity and enrich customer interactions. Driven by principles of performance, European technological sovereignty and ethical AI, this initiative aims to make AI a collective lever to position and efficiency at the service of the entire group. I will stop here now and leave the floor to Clotilde. Thank you very much for your attention. And see you soon after the holidays. Bye-bye.

Thank you, Olivier. So I'm going to pick up on the slide -- following slide on the key figures. And I just wanted to take a step back from the listed entities, look at Group Crédit Agricole, which posted a very strong performance this quarter, with a strong increase in net income by 7.8% Q2 over Q2 and 22.4%, excluding the Amundi U.S. base effect. You know that we're, of course, looking at figures pro forma of Banco BPM, i.e., considering that Banco BPM was at 20.1% equity accounted in the Q2 of 2025 and this 22.4% excludes the around roughly EUR 300 million of the Amundi deconsolidation of last year. And so this strong performance is driven by revenues which grew 12.9%, which is a record level of EUR 10.9 billion this quarter. And the strong increase in revenues results from both scopes, CASA activities and revenues, of course, I will come back to that. But what we see this quarter is also the reiterated performance of the regional banks revenues, that 12.9% and thanks again this quarter to a spectacular upterm in net interest income plus 38% this quarter. And so gross operating income grew by 25.8% Q2 over Q2. And the cost-to-income ratio is well below 60% at 58.3%. We have very favorable jaws of more than 8 percentage points this quarter. The cost of risk is stable at 30 basis points in outstandings. And of course, we maintain a very strong position in terms of solvency with the CET1 ratio of 17.2% and very strong liquidity. Now if I come back to CASA, where we have, thanks to a strong growth in revenues and positive jaws, an increase in gross operating income by 11.4% this quarter. So this strong performance in revenues was driven by strong activity in all of the business lines. And on the next slide, you see that activity was dynamic ever because this quarter, we have strong customer capture, 580,000 new customers in the Q2 in retail banking, that is close to 1.2 million new customers since the beginning of the year. This customer capture again benefited from increased digital acquisition in France and in Italy. And if we dig a little bit by business line, in retail banking in France, credit production is strong. Home loans are growing by 10%, corporate by 8%. In Italy, credit production is dynamic, 8.5%, thanks to the recovery in home loan production this quarter in a very competitive market, and we also have dynamic production in Poland. The loans outstanding and the on-balance sheet assets continue to grow globally and the growth in off-balance sheet assets was dynamic in France and in Italy. And this was, therefore, reflected in the asset gathering division, which also posted a very good quarter. In insurance, we have a record of premium income at EUR 15 million. It increased by 18% thanks to all of the activities, savings and retirement, personal insurance, property and casualty. The net inflows reached a record of EUR 6.8 billion in savings and retirement, in particular, thanks to the success of the opiant offer the outstandings of which represent close to $5 billion at the end of June, and we reached 18.2 million contracts in P&C this quarter. Amundi, as you know, posted very strong net inflows and record AUM. The medium- to long-term inflows are strong, thanks both to ETFs and to active managers and activities dynamic in third-party distribution and through the insurers of our partners, Crédit Agricole -- and finally, in Wealth Management, AUM are increasing strongly with positive net inflows. If I turn to CAPFM, the production increased to EUR 12.8 billion, thanks both to mobility and to personal finance. Now of course, the used cars remarketing activity is impacted the unfavorable automobile market that weighs on the sale of these used cars, but it's the case for all of the players on the market. And this bears witness to the strength of our diversified business model. You can see that in the large customers division, the CIB posted a record Q2, thanks to the excellent performance in investment banking, in particular, in structured equity and to ECM, we have FICC, which is stable at a high level. And finally, CASA had a high level of settlement and delivery volumes that was boosted also by market volatility in 2026, and we continue to increase our outstandings of AUMs and AUCs. So buoyant activity across the line, which reflects on Slide 9 in the growth in revenues, which was very high this quarter at 7.7%, driven by all the divisions. So I talked about the high -- the strong activity in asset gathering. So these revenues are growing, thanks to higher management and technology looks for Amundi and for strong commissions in wealth management. The insurance revenues grew by 9.1%, supported by the performance of all of the business lines and of course, by a favorable market effect, particularly in savings and retirement. In the large customers, I talked about the record Q2, in particular, with investment banking, which had a growth of above 63% excluding FX effects, and asset servicing more than 8% growth. In SFS, I was talking about the fact that mobility was impacted by a weaker automobile market. This led in terms of revenues to a quarter -- to lower results on used cars at Crédit Agricole Auto Bank in tovala -- but these effects were compensated by the good performance in Personal Finance revenues that was supported by positive price effect. And then in Retail Banking, I talked about strong volume growth. But as you can see, we have in the same way as we had that with the regional banks, a very strong upturn in net interest income in France, 17% growth for SCL so volume and price effects. And we also have an increase in Italy of net interest income by 2%, thanks to an efficient management of the cost of resources and of macro hedging. And of course, the fees increased in all of the geographies in France and in Italy. So you see all of these green bars for the businesses. All of the businesses are contributing to the growth in revenues. And finally, in the Corporate Centre, we integrate the contribution of Banco BPM for EUR 111 million. In fact, at the end of the second quarter in our accounts, we have a 24.9% share of Banco BPM, even though, as you'll see just afterwards, the CET1 is impacted in full by our participation that was brought to 29.3% in July. And so our contribution -- the contribution of Banco BPM to Corporate Centre revenues should increase in the following quarters. And so based upon the current results of Banco BPM, it could be something around $150 million per quarter onward. Now if I move now to expenses. We have a significant positively -- we have significantly positive jaws this quarter, plus 3.1 percentage points, and we have a limited increase in expenses in all of the businesses. So as you can see on the right, we have some scope effects that are summarized on Slide 34, including Milleis and insurance, Banco in Italy, and we have integration costs for under stress. But besides this, it's mostly the variable compensation increase, which is EUR 75 million linked to the strong performance of Amundi that explains most of the increase in asset gathering by customer division. We continue to invest in our development, in particular, in SFS and in the Retail Banking division. In SFS, as you know, we're supporting the strict launching of CA savings and CA Deutsche Fund with costs that represent over the first half year, around EUR 10 million. I had talked to you about EUR 50 million, 5-0, expected in 2026. We're also investing in the transformation of LCL EUR 33 million in the first half of the year out of the EUR 95 million expected over 2026. And even as we invest, we are improving operational efficiency because our cost-to-income ratio is at 54.7%, minus 1.2 percentage points H1 over H1, thanks of course to our decentralized cost sharing model, but also to the integration of recent acquisitions. I'm thinking in particular of CASA. We're fully benefiting from the synergies generated by the integration of RBC Europe, which are going to generate more than $100 million additional net income from 2026, of which 3/4 are linked to cost synergies. And just by the way, that the Degroof Petercam integration is progressing also with about 45% of synergies realized. So we're on track to reach our additional $150 million to $200 million net income target linked to this operation in 2028. Now moving to cost of risk. The cost of risk decreased Q2 on Q1 and was roughly stable between -- from Q2 to Q2. And this evolution was mainly driven by an increase in Stage 3 provisions. A share of this increase, EUR 128 million, is a technical transfer from Stage 1 to Stage 3 of exposures that are currently being disposed of in CACIB. Excluding this, incurred risk is at EUR 571 million, and we have the increased Q2 over Q1, which is explained about EUR 60 million in CAPFM by the increased risk on personal finance in France due, of course, to the economic environment. We're monitoring this closely as well as some adverse impacts of model revisions. And in CIB, roughly EUR 100 million by additional bucket transfers from the Stage 1 and Stage 2 to the Stage 3 on a few tickets. So these transfers are not a surprise. These exposures are closely monitored, and they, of course, have an impact on the Stage 1 and Stage 2 cost of risk, which presents a net reversal. But I see we have a very prudent bit provisioning. And that's why you see, by the way, this net reversal in the Q2. And so in the end, there's no surge in loan loss provisions. The annualized cost of risk on outstandings are decreasing since the Q4 2025. The credit quality indicators are very good. The nonperforming loans ratio remains very low and the coverage ratios are very high. And this is going to allow us to absorb any surge in incurred risk. As you can see, our provisioning is, as always, very prudent and we have among the best coverage ratios in Europe. Now with that said, of course, we remain cautious, and we continue to monitor closely the corporate customers in retail banking, real estate, construction, distribution, automobile, generally SMEs. But as you see, by the way, on the slide, moving forward, in French retail banking, in particular, the cost of risk remains under control. In this slide, Page 12, you see that we have this additional Stage 3 cost of risk of CAPFM, but everything remains very, very controlled. And in the CIB, as you can see, there's these migrations. So we have very low cost of risk with investment-grade customers and the diversified and balanced assets. And just for Crédit Agricole Italia, the cost of risk is decreasing and credit quality indicators have been improving in the fourth quarter of 2025. Now moving on to results, net income. All in all, the net income is high, and it's increasing by 1.4% if we exclude the base effect linked to the capital gain realized last year with the deconsolidation of Amundi U.S. for EUR 304 million in the Q2 of last year. So I already mentioned a very strong increase in revenues, the improved operational efficiency, the controlled cost of risk. Let me just take you a few minutes about the fact that our net income is impacted by the slight decrease in equity accounted entities. We have various opposite effects. We have a decrease contribution from leases minus EUR 33 million this quarter due to lower margins on used cars. I talked about it. This is really a market effect. A pro forma issue on Banco BPM which is very limited. And this is partially offset by a positive base effect in KLF by positive effect for Amundi, where we have the contribution of ICG for plus 12 and Victory Capital for, say, 28. So we have pluses and minus so the evolution of equity-accounted entities is very limited. And of course, we have a higher income tax. First, due to the strong operational performance that I already described. This is an increase in the tax base. But also, we have a couple of base effects, in particular, in insurance, where we had capital gains last year with reduced tax rates and we also have a higher taxation in Italy but also even though it's smaller, Poland and Ukraine. But as you can see, despite these elements, net income is increasing, thanks to this very strong increase in gross operating income, activity was strong, net interest income high, jaws positive, cost of risk stable. And so this is really the strength of our diversified universal banking model. This allows us following slide to generate organic capital. And so as you can see, the capital remained very strong this quarter for CASA with a CET1 ratio of 11.3% as we integrate significant M&A activity. So first, if we look at organic capital generation of 31 bps. This includes an active management of the balance sheet with a new SRT, a significant risk transfer this quarter in CIB. And this brings the total of RWA release, thanks to these optimization measures to EUR 3.8 billion this first half year. Of course, we want to intensify securitizations in the medium-term plan, but we're always making sure that the cost of release is accretive. This allows us to provision the dividend that Olivier was talking about of EUR 57 per share. Recall, it will be paid on the 15th of October. We have an M&A impact, which is quite strong with 30 seats related to the increase in our stake in Banco BPM to 29.3% and 4 bps for the integration of Milleis. We have a methodological impact positive for 10 basis points. This includes business pieces. But as a reminder, it comes after a call of negative impact in the past. So all in all, we're not -- we don't have that strong methodological impact over the last 3 quarters. And finally, OCI and other impact, plus 12 basis points, notably thanks to market recoveries this quarter. And on the right, you see the RWAs are moderately increasing, EUR 2.2 billion over the quarter, with organic growth almost entirely offset by positive methodological effects, and you see the fact that we have this quite stable RWAs in CIB. Moving to the group, Credit Agricole because as you know, our objective is not to build up capital at CASA level, so when we assess the capital strength, the relevant figure is Group Crédit Agricole CET1 ratio, which is above 17%, despite again a strong M&A activity. We have the same factors that apply, but as you know, the M&A is lower for Group Crédit Agricole because we have not gone beyond the threshold for the significant financial states for Group Credit Agricole. And we have an additional positive methodological effect in the regional banks. This brings the total to 28 bps. The TLAC and MREL ratios are very comfortable, in particular, because we have front-loaded our medium- to long-term refinancing plan, which is today at close to 90%. And refinancing plans for CASA. So we prudently managed. And as you see on the next slide, we have a very stable liquidity position. with very high levels of liquidity reserves at EUR 475 billion. The LCR and NSFR ratios are excellent. Customer deposits are stable and our diversified granular servicing is fine on that front. And so moving to next slide, let me just conclude by saying that we're posting strong and growing results, thanks to dynamic activity in all business lines and in particular, thanks to a record performance in the asset gathering division, and to dynamic loan production and net interest income in France. This allows us to reach a record level of revenues of EUR 7.4 billion, which bears witness to the strength of our universal model and diversified business mix. As we grow, operational efficiency is controlled with a steady cost of risk, positive jaws, declining cost-to-income ratio even as we invest. We're investing in AI, as Olivier was saying, with a pooled industrial AI platform in stablecoins, in the transformation of our businesses in France and in Europe. We integrated Milleis this quarter. We signed a partnership with Cajamar, we're rolling out our savings platform in Germany, and we have increased our participation in Banco BPM to 29.3%. And all in all, profitability is very high with a return on tangible equity of 14.3% and this allows us to maintain strong capital levels and to announce the payment of an interim dividend of EUR 0.57 per share in cash on the 15th of October. So I'm going to stop here. Thank you for your attention just before the summer break, and we can now open the floor to questions.

[Operator Instructions] First question is from Giulia Aurora Miotto, Morgan Stanley.

The first 1 on targets. So cost income of EUR 54.7 million, RoTE already above 14% in the first half. And maybe you can tell me that it was a particularly conducive environment. But we are 2 years before the end of the plan, and you're already ahead of the target. And especially in light of an acceleration of AI, your focus on your investment in AI, these 2 things combined would probably call for update or upgrade of targets. Wondering if that is on your mind. Second, thank you for the clarification on Italy. In the past, you have talked about a deal which makes sense for you, which would be the combination of Crédit Agricole Italia and -- wondering if that is on the table or likely in your view anytime soon? And then sorry, just a quick numbers thing, wildfires in France, is there any quantification you can do in terms of the impact for Q3?

Great. Thanks, Giulia, for these 3 questions. Now first, in terms of targets and in particular, on cost-to-income ratio. As you know, usually, the cost-to-income ratio in the first quarter is lower than that of the second quarter. So you can't multiply that of H1 by 2 to get the impact of the cost-to-income ratio at the end of the year. However, we told you a couple of quarters ago, and I'm going to reiterate that, that compared to the pro forma cost-to-income ratio we had in 2025, i.e., 57.4%, we will be decreasing that to go a little below the cost-to-income ratio of 2026. And more generally, we can say that the net income is going to continue to increase in 2026 compared to 2025. So we're really on track with our medium- to long-term targets with this movement, a downward movement of cost-to-income ratio and an upward movement in terms of net income, which is starting, of course, in 2026. Now in terms of costs, of course, we're investing in our AI platform. And this industrial AI platform is going to allow us to create AI agents, customer relationship solutions, but also efficiencies. So indeed, we do want to improve efficiency with AI. But this is one out of a whole number of levers that we're going to use to improve efficiency. As you know, we have a decentralized model. And so each of the businesses are really targeting to lower their cost-to-income ratio to really improve their operational efficiency. We have cross-entity initiatives. We're working on synergies. In Italy, we have these synergies, the acquisitions and of course, AI is going to help us improve our operational efficiency. Italy. Now Italy, it is -- we have not changed our strategy. Our strategy is that Italy is our domestic -- second domestic market. It's a strong priority for us. As you see, Italy represents 20% of our net income this first half year, so 20.1% so it's strategic, it's important for us, and we want to continue to develop in Italy organically, but also with the partnerships that we have between the business line in Crédit Agricole Italia and the business lines and other retail networks and in particular, Banco BPM. So we are a long-term partner of Banco BPM and that's also why we strengthened our stake in Banco BPM to 29.3%. We're now, by far, the first shareholder in Banco BPM. And so we're committed to this investment, into this strategic relationship. Now there's, of course, lots of scenarios on the table. Now we are not going to be the ones who are going to be taking decisions. But what's certain is that with our 29.3% stake, nothing can be done without us. Nothing can be done against us. Now of course, one of the preferred scenarios for us would be a merger between Banco BPM and Crédit Agricole Italia because it would generate value for us, and it would allow us also to strengthen our setup in Italy. But really, in Italy, this strategic market for us, it's a long-term position we have. We really want to build it up in the medium-term plan. We said we wanted to go from 6 million customers to 6.5 million customers. So we're rolling out a lot of initiatives also organically, in particular, digitalization for the professionals, synergies between Crédit Agricole Italia and CACIB, et cetera. Regarding your question on the wildfires. So it's been something that has indeed been very shocking for everyone. So our first priority is really to support the victims and the communities and our employees. And we're putting in place a certain number of relief measures for our customers. So we have loan repayment holidays. We have 0 interest emergency cash advances. We have support plans for businesses. We've put in place a EUR 2 million solidarity fund. So that's what we're focusing on right now. Now in terms of impact, probably the impact is going to be lower than that of the storm's impact in the first quarter. But that's the direct impact. There is going to be an indirect impact, nevertheless with the impact on the macro economy, which will probably hit more on the regional bank in that area, which is Crédit Agricole -- but at this stage, we're really focusing on supporting our customers as we always do in the good times at a time.

Next question is from Tarik El Mejjad, Bank of America.

Just 2 questions, please. I'll come back on Italy. I mean, I'm sorry, but you look actually passive, but also active in the same time. Let me explain. So first, active because you raised your stake. As Mr. Gavalda said, you clearly have your say on any deal. I mean, his comments was clear that it doesn't look like supportive to Bami -- deal, if I understand well. And then passive because clearly also from your comments just now that you're really keen to do Bami-Crédit Agricole. But I mean, do you think this position of being really caring about what government think? I mean we've seen in Europe that any deal that could happen has to be going slightly hostile against different stakeholders, including government, to lend something. Is that something you will intend to consider at some point? I mean, because if you want that deal to happen, clearly, that's what you want. I don't see -- just be on the sidelines, how that could land. And question number 2 is on the cost of risk, Clotilde, you explained very well that part in your comments. But can you just focusing on the Stage 3 ex migration from Stage 1 and 2 what are the areas that showed that flare ups in Stage 3? And how do you see basically the outlook from there?

Okay. Thank you, Tarik. So in Italy, yes, indeed, we do have a -- have a say, sorry, with this 29.3%. We are key, we are a key player. We're not necessarily a decision-maker, but we're a key player and that's why I was saying that nothing can be done without us. Now regarding other scenarios, we have not received any concrete offer regarding NPS, Banco BPM rumors that we're hearing in the press. So we're reading the press like you, but we have not received any concrete offer. Going forward, do we care about the Italian government, of course, Naturally, we are a long-term player in Italy. It is our second domestic market. It is strategic. And so of course, we care about all of the stakeholders in Italy. It's important for us to continue to support the development of the Italian economy. So naturally, we have to think about all of the stakeholders in this country, which is very important for us. Now in terms of cost of risk, so yes, there is this technical migration of a few files. I'm not going to tell you the details of a few files naturally. But what I can tell you is that we have a prudent stance in terms of cost of risk, and we have always had a prudent stance. Now in these specific trials, which is a little bit specific, compared to what you can see usually, the order of magnitude of the reversal of stage 1 and 2 provisions that feed into the increased stage in your provisions. So order of magnitude is very similar for these few technical migrations for files that have -- that are being completely disposed of. So we have had a particularly prudent provisioning stance for these specific files for the ones in '28. Besides that, indeed, we have a few tickets for which we have an increased transfer from Stage 1 to Stage 3 for CACIB. But in fact, our -- it's expected compared to the view that we can have as the whole assets, the quality of our asset base. We have a very diversified and balanced business mix. We have investment-grade customers. As you can see, anointing -- activities, the cost of risk is very low in terms of basis points. So it's -- we're always monitoring the evolution of the corporate business. But our corporate customers are solid, are diversified, are counting on us, by the way, to help them diversify, to help them hedge, to help them developed internationally and the NPL ratio for CACIB is very low. It's below 2%. So this is something that is very -- a strength of CACIB with our business mix. Now moreover, this EUR 571 million in Stage 3 cost of risk is also, but to a lesser extent, due to CAPFM and that's really the macroeconomic environment, which we're very much monitoring closely. And this is something that we're used to dealing with and that we have been used to dealing with it.

Can I just follow up on Italy very quickly. I mean the -- did you have any -- ever had discussions with the government because contemplating merger like others did in other geographies in Europe, also the arguments of serving better economy and other stakeholders and improving profitability in the system and so on and so on? Or do you feel discussions cannot even go to that ground. It's more political and you are, after all, French?

We are discussing all the time with all of the stakeholders. We are a very large bank, and so always talking with everyone. .

Next question is from Delphine Lee, JPMorgan.

So just wanted to come back on Italy, if that's okay. And coming back on what Olivier said a bit earlier. Can you maybe a little bit elaborate on what you mean by when you say that you see it as difficult that a potential Monte Paschi, Banco BPM merger can be value accretive. So could you just explain a bit more. And then my second question is on NII, more generally speaking. We've seen some very strong performance in France. Is the guidance still high single digit for the whole year. And also, in Italy, NII has been progressing as well. But is the guidance also still sort of the NII this year is a little bit under pressure, which feels maybe a bit outdated.

Great. All right. I'm not going to comment more in detail regarding the mergers of in particular, Banco BPM and NPS because what's important for us is to consider more generally, not in one scenario specifically. More generally, we have to consider the positive impact that we will need to get out of any scenario. We have a position where we will make sure that any outcome is value creating for us. So it's not so much a comment on one specific rumor about one specifical merger, which, again, we have not received any concrete proposal. It's just to say that in any case, whatever happens, we will make sure that any outcome is positive for us. We will make sure that any outcome is value creating for us. So that's really what we have is kind of the way we're thinking about things in Italy. Now for net interest income, yes, indeed, very strong net interest income, for example, for LCL, 17%. And indeed, I had told you about high single digit net interest income by the end of the year. We're going to stay on our guidance. Maybe it's a little bit prudent. But for 2026 to 2028 what we have told you in the workshop is that we're planning on having an increase in net interest income by 6% over the medium-term plan. And what is this going to be driven by, we're making the hypothesis that we have a stable liabilities mix. This is an important hypothesis because you remember when there was a strong hike in interest income a couple of years ago, the negative impact that we have had was this shift in the mix from time deposits to time deposits. So what we're making is the assumption that it's going to be stable, which is a very reasonable assumption as you consider that the variations in rates are going to be progressive, which is what we're seeing today, and this increase in net interest income should be driven essentially by 2 things -- well, three, one, volumes; two, on the liability side, a lower rate on the term deposits because as we renew our balance sheet, the rates are low. And three, on the asset side, higher rates on the new loans because as you can see, there is still a positive difference between the front book and the back book for LCL. We also have, in particular, that for regional banks. Four, Italy, yes, indeed, we were talking about a decrease in net interest income. Again, it's probably prudent. It's more or less stable today in the first half year, that's why I want to remain on the prudence guidance for the end of the year because we have a very competitive market in Italy. We have had an impact -- I mean it's stable over the first half year, but we had a decrease in the first quarter, an increase in the second quarter. So I think it's going to remain relatively stable over the year.

Next question is from Stefan Stalmann, Autonomous Research.

I wanted to get back to the moving parts on impaired loans and provisions. I'm not sure I understand that -- you have an increase in impaired loans of about EUR 1.4 billion during the quarter. Can you tell us what happened? And maybe how much of that is related to this pending sale of nonperforming loans. And I'm also not quite sure I understand why there would be a technical migration from Stage 2 to Stage 3 potentially related to this pending disposal. And I also don't understand why the Stage 2 provisions of such a portfolio would be similar to the stage 3 provisions. I mean, usually, Stage 3 should be much higher. Maybe you could add a little bit more detail on that part. And I also wanted to come back to Italy. And I hear you that you don't want to comment on every scenario, but holiday was actually very specific saying that he cannot see or difficult to see how the combination of Monte and BPM could create shareholder value. And that's a pretty specific comment. And I was wondering if you had any color on what the basis is on which you reached that view? And whether that's already baking into the view, some view on what this combination would mean for CASA.

So for the cost of risk, thank you for your questions. So yes, indeed, impaired loans have increased by from EUR 13.4 million EUR 14.8 billion between the end of March and the end of June. So that's EUR 1.4 billion increase, 10%. Now between EUR 500 million and EUR 600 million of that is linked to this technical migration. I'm not going to, again, go into the different files, but what happens when you have a technical migration is that when you have -- you're relatively certain that the file is going to be disposed of, you know what is the price at which it;s going to be disposed of. And so when you have an idea, a good idea as to the price of that, that's when you adjust your provisioning and put it into incurred risk with a rate of provisioning, which is equivalent to the price at which you can dispose of that. And so sometimes, if you have been very, very prudent in the provisioning before of the Stage 1 and 2 risk for this specific file, the price can be, in fact, close to that provisioning. And that's a situation where you can have a same ballpark for plus 128 and the minus on the other side was the reversal of the Stage 1 and 2 provisions. So it's something I agree. It's not something that's habitual. We don't do that usually. But in this specific and different cases, we're going to have this effect, which, again, reflects our very prudent provisioning. Of course, we do that in all of our files, but in certain number of flies, we have a little bit more specific provisioning. Now if we take this off, in fact, the impaired loans ratio, the impaired loans started increasing by about 6%, and which is much more reasonable. And as I was saying, the NPL ratio is very low for CASA, 2.4%. And the NPL ratio for CACIB, as I was saying, it's below 2%. If you correct from this technical migration impact. So very low NPL ratio for CACIB, below 2% corrected from this, very high loan observes -- very high coverage ratio. Now in Italy, what I can tell you is that, again, what is important for us is creating value for our shareholders, and we have a preferred scenario. Yes, a preferred scenario would be to have a merger between Banco BPM and Crédit Agricole Italia. Now it's very difficult for us to be more precise than what Olivier was saying because we have not received a concrete proposal regarding a merger between MPS and Banco BPM. So it's difficult to give you more details because we do not have a more -- we do not have any concrete proposal. But what I can tell you is that our third scenario, which is something that creates value strongly for us, is the scenario of the merger between Banco BPM and Crédit Agricole Italia.

Could I just maybe follow up on the credit part. Is it the fact that you received an indication of interest in these assets or that you try to sell them. Is that what triggered the reclassification from Stage 2 to Stage 3? Or did this launch just go -- That was the piece.

Yes, it's a few files that are being disposed of and on which we are discussing a price. So we have a reasonable idea as to the price. And so that's why you can do this technical migration. You have to do it .

The first time that I hear that the value indication on a loan drives its Stage 2 or Stage 3 classification. .