Amundi – Q3 and 9M 2020 results 1/9 Q3 and 9M 2020 results

– AuM3 of €1,662bn at 30 September 2020, an increase of +6.4% year-on-year (+4.4% vs. the end of June 2020)
– High inflows of +€34.7bn in Q3, fuelled by all segments:

• +€22.0bn4 in treasury products
• +€4.7bn in MLT assets3, 5
• Sustained momentum in the JVs (+€8.1bn)

Results
Solid results:

– In Q3:
• adjusted net income1 still high: €235m (+2.3% vs. Q3 2019 and +1.0% vs. Q2 2020)
• cost/income ratio of 51.2%1, stable
– Over the first nine months of the year, adjusted net income1 of €674m (-8.3% vs. 9M 2019), virtually stable excluding financial income (impacted by the market downturn)

Asia

– Positions that are already strong across the entire region (€303bn in AuM6), thanks to a pragmatic approach combining JVs and subsidiaries
– The new subsidiary with BoC WM has significantly enhanced the potential for growth in China
– Ambitious targets for 2025:

• For Amundi BoC WM: more than €60bn in AuM and more than €50m in net income7
• In Asia, an AuM target of €500bn

Amundi’s Board of Directors, chaired by Xavier Musca, convened on 29 October 2020 to review the financial statements for the third quarter and first nine months of 2020.

Commenting on the figures, Yves Perrier, CEO, said:

“In the third quarter of 2020, Amundi posted solid operating performance both in terms of business activity and results. The high level of inflows (+€35bn) was driven by all client segments, and net income1 (€235m) increased +2.3% compared to Q3 2019.

Thanks to its diversified business model and its operating efficiency, Amundi is therefore confirming its ability to combine growth and profitability, in spite of a market environment, which remains fragile due to the Covid-19 crisis.

Asia is a major focus of Amundi’s expansion strategy. In the space of five years, Amundi’s Asian AuM tripled, reaching more than €300bn. The launch of the new subsidiary in China with BoC give Amundi a unique position in this fast-developing market. Thanks to this new growth driver and the favourable momentum of its other activities in Asia, Amundi is targeting AuM of €500bn in the region by 2025.”

I. A high level of inflows: +€35bn in Q3, driven by all segments
Assets under management at €1,662bn, an increase of +6.4% year-on-year.

Amundi’s assets under management totalled €1,662bn at 30 September 2020, an increase of +6.4% year-on-year and +4.4% vs. the end of June 2020. This rise in assets under management is due to a high level of inflows (+€35bn), the integration of the assets under management of Sabadell AM on 1 July 2020 (+€21bn) and a positive market effect (+€15bn).

A market environment that is still uncertain

Overall, the market environment remains lacklustre:

• After the major shock in March due to the Covid-19 epidemic, the Equity markets still look weak to us (-2.7% between 30/06 and 30/09/2020 for the CAC 40 and a flat Stoxx 600), against an uncertain macroeconomic and health backdrop.
  Equity market averages in Q3 2020 (4,967 pts for the CAC 40) recovered but remain significantly lower compared to Q3 2019 (5,512 pts, i.e. down 10%).
• Furthermore, against a backdrop of lingering risk aversion by savers and investors, the European asset management industry has staged a partial recovery. Although inflows returned to positive territory beginning in Q2 2020, year-to-date cumulated inflows have been due almost exclusively to treasury products8.

A high level of net inflows in Q3 2020

In Q3 2020, Amundi reported a high level of net inflows (+€34.7bn) across all segments, driven by the recovery in treasury products (+€22.0bn), resilient activity in MLT products (+€4.7bn) and the continuing good trend in the JVs (+€8.1bn).

• Retail: recovery of inflows (+€5.2bn in Q3 2020 vs. -€4.5bn in Q2 2020)
  Inflows in Medium/Long-Term Assets turned positive (+€2.4bn), driven by Third-party distributors (+€2.8bn). The French and International Networks are still feeling the effects of a widespread wait-and-see attitude by clients, with inflows concentrated in treasury products (+€2.8bn).
• Institutionals: sharp rebound in activity (+€21.4bn in Q3 2020 vs. +€0.6bn in Q2 2020)
  This quarter was marked by a significant turnaround in treasury product flows (+€19.2bn) especially in the Institutionals & Corporates segments. As for MLT assets, inflows of +€2.2bn were driven by all client segments.
• JVs: continued growth trend with a high level of inflows (+€8.1bn), particularly in China (+€7.2bn) in India (+€1.8bn).
• Expertises: MLT flows driven by ETF/index and real assets9

The trend was driven by successful growth drivers and product innovation:
– Passive management, ETFs10 and smart beta had a good third quarter with +€3.2bn in net inflows, bringing AuM to €138bn at end-September 2020. With inflows of +€2.3bn in Q3 2020 in ETFs, Amundi is the number five provider in Europe11. In total, ETF assets totalled €57bn at 30 September 2020 (ranked fifth in Europe10). The success of the Amundi Prime ETF range (launched in March 2019 at very competitive prices) with more than €2bn in AuM, illustrates the ability to develop products that are tuned to the market.
– The trend in Real and Structured Assets continued, with +€1.0bn in net inflows in Q3 2020 (bringing AuM to more than €90bn at end-September 2020). Private Equity and Private Debt expertises posted solid net inflows of +€0.8bn (i.e. €16bn in AuM at end-September 2020).

Gradual recovery in business activity in the first nine months of 2020

Overall, in the first nine months of the year, the high level of inflows (+€30.7bn) was primarily driven by the continuing growth trend in the JVs (+€20.8bn), institutionals (+€6.7bn) and in Retail excluding JV (+€3.2bn). To be noted was the resilient activity in the French networks (+€3.8bn) and Third-party distributors (+€2.3bn).

The trend was positive for Medium/Long-Term assets (+€22.1bn) driven by Joint Ventures and Retail; inflows in treasury products (+€8.6bn) were mostly attributable to flows in the Institutional and Sovereign segments.

II. Solid results
In Q3 2020, high level of adjusted net income12: €235m (+2.3% vs. Q3 2019 and +1.0% vs. Q2 2020)
Cost/income ratio11 of 51.2%, stable
A strengthened financial structure

Amundi’s results remained high, confirming its business model is solid. The impact of the market downturn on revenues was countered by the reduction in operating expenses, which kept the cost/income ratio low and profitability high.

Solid results in the 3rd quarter of 202012

Total net revenue (€630m) was down compared to Q3 2019 (-4.1%) but higher vs. Q2 2020 (+0.8%); these differences were attributable in large part to the market situation.

• As such, net management fees were:
  – down compared to Q3 2019 in light of the decline in average market levels (CAC 40 down 10% Q3/Q3) and the pressure on margins (change in the product/client mix), in line with previous quarters;
  – up compared to Q2 2020 thanks to the integration of Sabadell AM and rising market averages (+7% for the CAC 40 Q3/Q2 average).
• Performance fees were maintained at a good level (€30m vs. €25m in Q3 2019).

Operating expenses were down markedly (€323m or -3.8% vs Q3 2019), thanks to continuing cost-cutting efforts, lower travel and marketing expenses due to the pandemic and the adjustment of variable remuneration. The slight rise relative to Q2 2020 is due to the full consolidation of Sabadell AM.

The operating expenses to average AuM ratio (excl. JVs) remains one of the lowest in the industry at 9.2bp.

Consequently, the cost/income ratio stood at 51.2%, stable compared to Q3 2019.

Taking into consideration the improved contribution to €17m from equity-accounted entities (primarily the Asian joint ventures) and the tax charge, adjusted net income, Group share, totalled €235m (+2.3% vs. Q3 2019 and +1.0% vs. Q2 2020).

First nine months of 202012

Total revenues were €1,866m (-6.2%) primarily due to the market slump’s strong negative effect on financial earnings, which fell from €34m (9M 2019) to -€46m (9M 2020). The trend in net asset management fees stemmed from lower average equity market levels and a less-favourable client/product mix. Performance fees increased (€106m, +24% vs. 9M 2019).

With operating expenses down (-4.4%), the cost/income ratio came to 52.0%, and Gross Operating Income was €895m.

After the contribution from equity-accounted entities (primarily the Asian joint ventures), which increased sharply (+39.5% vs. 2019) and tax expenses, adjusted net income, Group share was maintained at a solid level at €674m (-8.3% vs. end-September 2019). Excluding the financial income (impacted by the market downturn), it was comparable to that of the first nine months of 2019.

A strengthened financial structure

At 30 September 2020, Amundi’s tangible equity13 stood at €2.9bn, compared to €2.7bn at 31 December 2019. The CET 1 ratio came out to 18.6% at 30 September 2020, factoring in the acquisition of Sabadell AM on 30 June 2020 for €430m and no dividend payment in May 2020 in respect of 2019.
Amundi benefits from surplus capital estimated at around €1bn compared to a minimum “managerial” level of 10% of CET 1 capital.

As a reminder, in May 2020, rating agency Fitch confirmed Amundi’s A+ rating, the best in the sector.

III. Asia, a growth driver

In Asia, a rapidly developing area, Amundi has benefitted for years from solid positions across the region’s major markets (€303bn in AuM14) with a pragmatic strategy that combines two approaches: JVs with major retail banks15 (leaders in their markets) and wholly owned subsidiaries.

As an example, SBI FM, the joint venture in partnership with the No. 1 Indian bank, has itself become No. 1 on the market (assets under management of €136bn13, up substantially since 2018) with successful growth in Retail and well-established franchise with institutionals.

With the creation of the new subsidiary in partnership with BoC Wealth Management, Amundi will now have a unique position in China. Amundi covers all segments of the Chinese Asset Management market thanks to partnerships with two large banks: ABC (No. 3 in the country with over 400 million Retail clients and 23,000 branches) and BoC (No. 4 in the country with 300 million Retail clients and 11,000 branches).

The new subsidiary in which Amundi has a 55% ownership interest will be the first company in China with majority foreign capital to offer Wealth Management products. The implementation of this project took place in accordance with the announced schedule: approval from the regulator was obtained in September, the teams and the infrastructures are in place and operational start-up is expected in Q4 2020 with the launch of the first products intended primarily for the BoC network.

The subsidiary, which should break even financially by the end of 2021, is aiming at €60bn in AuM and more than €50m in net income16 by 2025.

For Asia as a whole, the Amundi Group has set an AuM objective of €500bn by 2025.

IV. Responsible Investing

Amundi is continuing to implement its ESG plan: AuM rose to €345bn at end-September 2020, driven by a high level of inflows of +€9bn in Q3 2020( +€16bn for the 9 months of 2020).

This trend is being fuelled by product innovation and ESG solutions:

• Climate change: launch of a fixed incom fund dedicated to green projects in emerging countries and the Climate Change Investment Framework, the preferred tool for investors to help them assess the risks linked to climate change in line with the objectives of the Paris Agreement in partnership with AIIB17.
• Launch of the “ESG Improvers” range, an approach that selects companies demonstrating long-term improvement in ESG criteria.

Amundi’s contribution to international initiatives continues, with the publication in September 2020 of a report on “Responsible Capitalism: An Opportunity For Europe”, by the Institut Montaigne and Comité Médicis, a think tank supported by Amundi.

Furthermore, in connection with the annual PRI assessment18 in September 2020, Amundi was awarded an A+ (the highest score) across all the categories in which it competed, confirming the deployment of our ESG plan in our different asset classes.

V. Other information

Capital increase reserved for employees

The issue of share capital reserved for employees is underway. It will be completed on 17 November2020. This operation, meant to strengthen employees’ sense of belonging, is carried out in the context of existing powers as approved by the General Shareholders’ Meeting of May 2019.

The impact of this operation on net earnings per share should be negligible. The maximum number of securities to be created will be 0.5 million (i.e. 0.2% of capital and voting rights).

Financial disclosure schedule

• 10 February 2021: Publication of 2020 annual results
• 29 April 2021: Publication of Q1 2021 results

1 Adjusted data: excluding amortisation of distribution contracts; See page 8 for definitions and methods.
2 Bank of China
3 Assets under management and net inflows including Sabadell AM as of Q3 2020 and including assets under advisory and assets marketed and take into account 100% of the Asian JVs’ assets under management and net inflows. For Wafa in Morocco, assets are reported on a proportional consolidation basis.
4 Excl. JVs
5 Medium-Long-Term Assets: excluding treasury products
6 At 30/09/2020
7 Net contribution at 100%
8 Sources: Broadridge FundFile, ETFGI. European open-ended & cross-border funds (excluding mandates and dedicated funds). Data at end-August 2020.
9 Data excluding JVs
10 Data including all Exchange-traded products (ETF + ETC)
11 Source: Morningstar
12 Adjusted data: excluding amortisation of distribution contracts.
13 Equity excluding goodwill and other intangibles
14At 30/09/2020
15 JVs with SBI in India (37% stake), with ABC in China (33% stake), with NH in South Korea (30% stake)
16 Net contribution of 100%
* incl. Amundi BoC Wealth Management
17 AIIB: Asian Infrastructure Investment Bank
18 PRI: Principles for Responsible Investment, which Amundi signed when they were drafted in 2006.