Corporate Results for the first nine months of 2018

Amundi’s Board of Directors, chaired by Xavier Musca, convened on 25 October 2018 to review the financial statements for the first nine months and third quarter of 2018.

Amundi’s nine-month results show strong growth thanks to a high level of business activity, to good control of operating expenses, mainly attributable to synergies associated with the integration of Pioneer.

These strong results confirm the Group’s ability to generate a high level of profitability in a less favourable environment.

Accounting net income⁶ at the end of September 2018 stood at €663m, up by a sharp 40.5% compared with the first nine months of 2017, benefiting from the effects of the integration of Pioneer (consolidated as from 1 July 2017), growth momentum and achievement of synergies targeted when Pioneer was acquired.

Adjusted data⁷ at a comparable scope⁸

Net asset management revenue reached €1,968m (+3.2%⁹), due mainly to:

• Net management fees of €1,874m (up 3.5%⁹), in relation with the growth in assets under management over 12 months;
• Almost stable performance fees (€94m) in a market environment that has been less favourable since the 2^nd quarter of 2018.As a reminder, performance fees are recognised on the funds’ anniversary date, reflecting the performance over the previous 12 months.

The negative contribution of net financial income (-€6m) was linked mainly to interest expense and to the mark-to-market effect on the investment portfolio. As a reminder, financial income over the first nine months of 2017 included a significant amount of investment capital gains realised in the context of the financing of the Pioneer acquisition.

Operating expenses fell sharply (€1,005m, down 4.0%⁹), due to the rapid execution of the Pioneer integration plan (€71m in cost synergies achieved over the first nine months), despite the recognition of external research costs related to MiFID (Markets in Financial Instruments Directive).

Thanks to this positive jaws effect, the cost/income ratio came in at 51.2%⁷ (among the lowest in the industry), a 1.9 point⁹ decrease from the first nine months of 2017, and gross operating income reached €957m⁷, up 3.5%⁹ vs. the first nine months of 2017.

Taking into consideration the improved contribution (+55% vs. the first nine months of 2017) from equity-accounted entities (primarily the Asian joint ventures) and a tax charge of €275m⁷, adjusted net income, Group share, totalled €721m, up 11.0%⁹ compared with the first nine months of 2017. This increase was higher than the stated target of 7% per year¹⁰.

Q3 2018 accounting net income⁶ was €209m, a sharp increase of 13.3% compared to Q3 2017.

Adjusted data⁷

Net asset management revenue held steady at €622m as the rise in net management fees (+3.6%) was offset by lower performance fees.

Thanks to the decline in operating expenses (€328m, down 2.7%), the cost/income ratio stood at 52.8%, a 0.6‑point decrease vs. Q3 2017. Gross operating income stood at €293m.

Taking into consideration the increased contribution (up 41.5% vs. Q3 2017) from equity-accounted entities (primarily the Asian joint ventures), adjusted net income Group share totalled €230m, up 5.8%⁹ compared with Q3 2017.

Activity in the first nine months of 2018 was characterised by strong net inflows, (+€48.5bn, compared to an average target of €50bn per year) driven by medium/long-term assets and International.

Net inflows in the third quarter were buoyant (+€6.1bn, and +€12.6bn, excluding the reinternalisation by Fineco¹¹  of an asset management mandate), driven by medium/long-term assets, both for Institutionals and Retail.

Amundi's assets under management amounted to €1,475bn at 30 September 2018, reflecting strong business activity (net inflows of +€48.5bn), with a slightly positive market effect (+€0.6bn). These net inflows represent an annualised growth rate of 4.5%.

Note: all variation figures below are computed vs. combined 2017 data (9 months Amundi + 9 months Pioneer).

• The Retail segment enjoyed strong momentum (+€30.2bn), with a high level of net inflows driven by all distribution channels. The reinternalisation (expected) in July 2018 of a €6.5bn asset management mandate by Fineco, formerly recognised in Italy under third-party distributors, should be noted.

The French networks (+€2.4bn and +€3.8bn in MLT assets) continued to deliver strong commercial performance, driven by unit-linked life insurance and discretionary portfolio management.

Net flows remained brisk in the international networks at +€5.4bn (mostly in MLT products), particularly in Italy with net inflows of +€5.1bn, reflecting the success of the partnership with UniCredit.

Net inflows for third-party distributors were up €5.2bn (excluding the reinternalisation by Fineco of an asset management mandate), driven by Europe (Italy, France, Spain, the United Kingdom, etc.) and Asia.

Net flows were strong once again in the Asian joint ventures (+€23.7bn), primarily in China and in India.

• Net flows in the Institutional segment were strong at +€18.3bn in the first nine months of 2018, with a significant MLT component and robust commercial activity for sovereign and other institutional clients. Business activity in the Corporates segment (-€5.4bn) was affected by net outflows in Q2 in treasury products. Nevertheless, net inflows in MLT assets remained positive, especially in Employee Savings.

By asset class, net inflows consisted primarily of MLT assets (+€42.2bn or 87% of the total), mainly in Multi-asset and Equities. 

Commercial successes as at the end of September included:

• Continued market share gains in ETFs: ETF net inflows remained steady in the first nine months of 2018 at +€5.1bn¹² (Amundi is #2 in net flows among European ETF providers^[13]), bringing AuM to €43.5bn at 30 September 2018 in Europe (#5¹³). Overall, ETF / passive management and smart beta assets under management amounted to €104bn at 30 September 2018, up +24% over 12 months.
• Ongoing development of real assets: Real Estate recorded net inflows of +€2bn¹² in the first nine months of 2018, bringing AuM to €30bn¹² at 30 September 2018.

From a geographic viewpoint, net inflows continued to be driven by the International segment with a significant contribution from Asia (+€30.8bn), led by the JVs (China and India), Japan, Hong Kong and Taiwan, and from Italy (+€9.2bn, excluding the reinternalisation by Fineco of an asset management mandate), where the partnership with UniCredit is yielding results. In France, business activity was strong in MLT assets (+€9.5bn), offset by treasury product outflows.

Over one year, international assets under management increased by 13.4%, and they now represent 43% of Amundi’s total AuM, and 58% of AuM excluding Crédit Agricole and Societe Generale insurance companies.

In Q3 2018, net inflows reached +€6.1bn (+12.6bn if the reinternalisation by Fineco of an asset management mandate is excluded), in particular with a high level of inflows from Institutionals.

• In Retail, net inflows in MLT assets remained strong (+€3.5bn^[14]). The French networks posted good performance, with net flows in MLT assets of €1.5bn (unit-linked life insurance and discretionary portfolio management); to be noted in international networks: in Italy, flows remained positive (+€0.7bn in MLT assets). There were positive inflows of +€1.5bn for third-party distributors¹⁴, including Italy. In the Asian joint ventures, which had shown exceptionally high net inflows in the first-half (+€23.5bn), flows are slightly positive, at +€0.3bn.
• Strong net inflows in the Institutionals segment (+€10.5bn), driven primarily by Institutional clients, and sustained by MLT assets.

Enhancement of the commitment to responsible investing

A pioneer in the field of responsible investing (€280bn in responsible assets under management at 30 September 2018, i.e. 19% of its net assets), Amundi announced an ambitious three-year plan on 8 October^[15] to give its commitments a new dimension:

• The explicit inclusion of ESG (environmental, social and governance) factors will be broad-based in the management of all the Group’s funds within three years
• Voting policy in general shareholders' meetings will regularly factor in the results of the ESG rating of businesses
• Specific advisory activities designed for Amundi’s institutional clients will be developed to support them with their ESG strategy
• Specific initiatives in favour of investing in high socio-environmental impact programmes will be doubled
• Investments in the social and solidarity-based economy will reach €500m.

Responsible investment has always been one of Amundi’s founding principles, since its creation in 2010. This approach was related to the belief that when putting their savings to work, investors must consider the impact on society in general, beyond financial criteria. This policy has been implemented in three dimensions:

• Applying ESG criteria in investments policies, in addition to traditional financial analysis. A dedicated Amundi team gives  issuers (currently 5,500) an ESG rating from A to G. This rating may mean certain stocks are overweighted or underweighted in portfolios, or excluded completely. It gives company managements the incentive to improve their environmental and social impact. Assets under management incorporating this policy represent €270 billion.
• €10 billion of dedicated funds with targeted investments, particularly to tackle climate change or finance energy transition. Examples include €4 billion invested in low-carbon index funds in partnership with MSCI, €2 billion invested in green bonds, largely from emerging countries in partnership with the World Bank, and €500 million invested in energy transition through a JV with EDF.
• Support for social and solidarity economy companies through a dedicated €200 million fund.