Long Term Savings And Fee Businesses Will Drive Future Strength Here

Catalysts

About Crédit Agricole

Crédit Agricole is a major European universal banking group with retail banking, insurance, asset management, corporate and investment banking, asset servicing and consumer finance activities.

What are the underlying business or industry changes driving this perspective?

• Expansion in savings and investment products across Europe, supported by record insurance premiums of €52b and asset management inflows of €88b in 2025, positions fee based businesses such as asset management, insurance and wealth management to further support revenue and fee income.
• Growth in long term savings and retirement solutions, helped by higher precautionary savings and a strong life insurance franchise with €15.9b of net inflows in 2025, supports more stable recurring revenues and can improve earnings visibility.
• Partnership driven growth in high potential markets, including deeper ties with Banco BPM in Italy, Victory Capital in the US and ICG in private assets, together with new branches and platforms in Germany and Asia, broadens the profit base and can support group earnings.
• Ongoing digital and efficiency programs, such as the 100% digital housing loan journey, LCL’s digital offerings and AI driven simplification, are designed to keep the cost to income ratio under control, which can support net margins and return on tangible equity.
• Reinforcement of mobility and consumer finance activities, including conservative used car value assumptions at Leasys and growth in renewable energy leasing and Personal Finance, provides a base for recovery in associate income and supports revenue and profit contribution from Specialized Financial Services.

Assumptions

How have these above catalysts been quantified?

• This narrative explores a more optimistic perspective on Crédit Agricole compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming Crédit Agricole's revenue will grow by 6.5% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from 24.8% today to 27.6% in 3 years time.
• The bullish analysts expect earnings to reach €8.9 billion (and earnings per share of €2.74) by about April 2029, up from €6.6 billion today. However, there is some disagreement amongst the analysts with the more bearish ones expecting earnings as low as €7.7 billion.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 12.2x on those 2029 earnings, up from 8.2x today. This future PE is greater than the current PE for the GB Banks industry at 9.4x.
• The bullish analysts expect the number of shares outstanding to remain consistent over the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 12.3%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• Reliance on long term growth in savings, life insurance and asset management means any reversal of the current precautionary savings trend or weaker inflows into products such as life insurance and investment funds could reduce fee based activity and slow the contribution from areas that currently support record premiums of €52b and assets under management of €2,380b, which would affect revenue growth and fee driven earnings.
• Expansion in mobility and consumer finance is exposed to structural shifts in the global auto market, including pressure on electric vehicle residual values and changing demand patterns. These shifts have already led Crédit Agricole to apply conservative used car value assumptions at Leasys and to face unfavorable auto market conditions in Europe and China. If these pressures persist they could weigh on associate income, cost of risk and net margins over time.
• Greater use of partnerships and acquisitions in high potential markets, such as the larger stake in Banco BPM, the Victory Capital partnership, CACEIS expansion and various bolt ons, raises the long term risk that expected synergies or returns on invested capital, currently referenced at around 13% ROIs for past deals, prove harder to sustain. This could limit value creation and reduce the contribution of these deals to future earnings growth.
• Ongoing digital, AI and efficiency programs, including the 100% digital housing loan journey, LCL’s transformation and the new German savings platform, depend on continued execution discipline and customer adoption. If project costs stay elevated or planned cost savings and revenue benefits do not fully materialise, the cost to income ratio, which is currently 55.7% at CASA, could remain higher than intended and compress net margins and return on tangible equity.
• Increasing exposure to sectors and geographies with higher structural uncertainty, such as SMEs in sensitive industries, Chinese auto financing through GAC Sofinco and Italian banking through Banco BPM, increases the chance that sector specific stress or local regulatory and tax changes, like the recent corporate tax surcharge in France, leads to higher than expected cost of risk and taxation. This would put pressure on net income and overall profitability.

Valuation

How have all the factors above been brought together to estimate a fair value?

• The assumed bullish price target for Crédit Agricole is €25.26, which represents up to two standard deviations above the consensus price target of €20.29. This valuation is based on what can be assumed as the expectations of Crédit Agricole's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of €26.0, and the most bearish reporting a price target of just €15.0.
• In order for you to agree with the more bullish analyst cohort, you'd need to believe that by 2029, revenues will be €32.0 billion, earnings will come to €8.9 billion, and it would be trading on a PE ratio of 12.2x, assuming you use a discount rate of 12.3%.
• Given the current share price of €17.78, the analyst price target of €25.26 is 29.6% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.