Amundi Results

Amundi - Results for the first half and the second quarter of 2016

Paris, France, 7/29/16,  by Amundi

Strong results and activity

Amundi’s Board of Directors, chaired by Xavier Musca, met on 29 July 2016 to review the financial statements for the first half and second quarter of 2016[1].

Commenting on these results, Yves Perrier, CEO, said:

“Amundi’s high level of activity and results in the first half of 2016, in a tough market environment, confirms the strength of its business model and excellent operating efficiency, as well as the value of the strategy presented at the time of its IPO.”

In a tough market environment, Amundi reached one year ahead of schedule the 1 trillion euro AUM target that was announced beginning of 2014. This objective was reached almost exclusively through organic growth[2].

The profit for the first half is the best since Amundi was created thanks to high net inflows coupled with excellent operating efficiency.

A tough market environment in the first half, affected by high volatility

The first half was marked by an environment of highly volatile markets, under the influence of increased economic and geopolitical uncertainties. At the end of the period this was amplified by the outcome of the UK referendum on the European Union.

European equity markets fell on average[3] by -13% compared to the first half of 2015, following a particularly bumpy trajectory: the Stoxx 600 lost -7% in the first quarter, then gained +2% in the second quarter until 23 June, and then promptly lost -5% between that date and the end of the quarter.

The decline in interest rates on the bond markets was more constant over the period: -80bp for 10-year OAT including -20bp over the second quarter, -50bp for the 10-year Bund, most of which was lost in the first quarter. The average for the 3-month Euribor, which had fallen into negative territory in the second half of 2015, kept dropping, reaching -0.3% at the end of the first half of 2016.

This volatility encouraged mounting risk aversion, which negatively impacted the asset management business over the period.

The market effect on Amundi’s assets under management was negative by -€11.6bn in the first quarter and positive by +€13.6bn in the second quarter, resulting in a slightly positive +€2.0bn over the first half.

Business activity: €1tn threshold crossed, high net inflows

Amundi crossed the €1tn threshold for assets under management[4], a target which had been set for the end of 2016 in Crédit Agricole S.A.’s Medium-Term Plan presented in March 2014. It should also be noted that growth over the period was almost entirely organic[5].

In the first half, net inflows reached +€16.8bn, equal to 3.4%[6] of AUM at the beginning of the period. This is almost in line with the objectives set during the IPO last November.

Net inflows for the first half were focused on medium- to long-term assets[7]: +€17.2bn, i.e. 4% annualised of AUM at the beginning of the period, thanks to the positive contribution from all asset classes in this category, particularly equity, which brought in +€5.7bn, in all regions, for both active and passive management, as well as fixed income (+€6.3bn) and multi-asset (+€2.7bn).

Noteworthy developments include, in real assets, the ongoing strong business volume in real estate, with +€1.7bn in inflows over the period, and high inflows in volatility products, which also brought in +€1.7bn over the period. Amundi is a leader in this asset class, which has sparked renewed investor interest thanks to the return of volatility on the markets. Assets under management at end-June 2016 totalled €4.1bn.

The Retail segment[8] proved very resilient, despite high levels of risk aversion. This segment represents the majority (60%) of inflows in the first half of 2016, with +€10.1bn. Joint Ventures (JV) contributed most of these inflows, with +€10.2bn. The other sub-segments are nearly at equilibrium, thanks to the solid performance of Third-Party Distributors, which brought in €3.7bn over the period, and the turnaround in the performance of the French networks in the second quarter: +€0.6bn, primarily from individuals for medium- and long-term assets. Throughout the period, medium- to long-term assets for the French networks stayed flat (+€0.0bn), but showed outflows of -€4.0bn for Treasury products held by companies, mainly due to seasonal effects.

Institutionals are also performing well: net inflows reached +€6.7bn over the period. Mandates from CA and SG insurance companies contributed half of these inflows, i.e. +€3.4bn. All of the sub-segments posted net positive inflows, including for medium- to long-term assets, except for corporates that, as with the Retail segment, recorded outflows for Treasury products, i.e. -€3.3bn over the period.

More than 90% of net inflows in the first half were from international activities[9], i.e. +€15.2bn, of which 79% of net inflows from outside France were from Asia and 26% from Europe excluding France. Particularly noteworthy were the performances of Joint Ventures in Asia (+€10.1bn in inflows over the period) and Italy (+€2.0bn). International AUM increased by +22% compared to 30 June 2015.

In the second quarter of 2016, net inflows amounted to +€3.0bn. They were driven by:

• In terms of client segments, Retail: +€8.3bn
• In terms of asset classes, Medium- to long-term assets: +€10.3bn[10], with a particularly strong contribution from equities (+€3.4bn) ;
• and in terms of geographical areas, activities outside France: +€5.9bn

Treasury products experienced heavy outflows in the second quarter (-€7.3bn¹²), which offset first-quarter inflows. However, inflows recovered in July. Inflows for this asset class remain volatile, but are growing.

Net income for H1 2016: €278m, highly resilient revenues and strict cost control

At €278m, income for the first half of the year was the highest since Amundi was created in 2010, up by +1.4% compared to the same period in 2015.

This increase is attributable to strong operating performance, with very resilient revenues and additional improvements to operating efficiency.

• revenues were down slightly by -1.3%; net management fees were stable with respect to the first half of 2015, owing to resilient margins. Performance fees also proved resilient: at €53m they were nearly unchanged from the first half of 2015. At €35m, only financial income is down, falling by
  -27% compared to the first half of 2015.
• the decrease in operating expenses at constant scope and exchange rates was -2.3% compared to the first half of 2015; this decline is mainly the result of adjusting variable compensation to match changes in revenue; investment in business development was maintained, particularly international recruitment.

At €403m, gross operating income (GOI) was almost the same as in the first half of 2015. The cost/income ratio improved by 0.5 percentage point to 51.9% compared to the first half of 2015.

The net income Group share came out slightly higher (+1.4%), due to the reduced tax charge during the period (-6.4% compared to the first half of 2015) because of the French corporate tax cut. The earnings per share came to €1.66 for the period.

In the second quarter of 2016, the net income Group share was the highest it has been since Amundi was set up in 2010. €148m, up +1.9% from Q2 2015.

Net revenue – €443m – rose slightly by +0.6% compared to the first half of 2015, which nevertheless proved to be a high basis of comparison due to a more favourable market environment. This income was generated thanks to strong increase of performance fees posted over the quarter (+28%) at €35m.

Operating expenses fell by -3.2% compared to the second quarter of 2015. As a result, the cost/income ratio improved by 2 percentage points to 50.3% compared to the second quarter of 2015.

A robust financial structure

Tangible equity[11] totalled €3.2bn, almost unchanged compared to end-2015, as capital resulting from accrual of net income for the period (+€278m) was more than offset by the 2015 dividend payment
(-€343m). Net financial debt is still nil and free capital[12], after taking regulatory requirements into account and deducting non-money-market seed money and investments, remains at €1.5bn.

KBI, an acquisition[13] that strengthens Amundi’s platform and fits its strategy perfectly

On 23 May, Amundi announced that it had signed an agreement to acquire KBI, a fast-growing asset management firm based in Ireland that specialises in global equity (€8bn in assets under management). This acquisition, which is expected to be finalised in the third quarter 2016, offers major potential synergies thanks to the complementary nature of KBI and Amundi’s client bases. It will also meet the acquisition criteria set during the IPO, particularly a 10% return on investment in three years.