Credit Agricole Bucks Trend as Lender Sees Resilient Trading

(Bloomberg) -- Credit Agricole SA finished 2017 with an unexpected increase in trading revenue as demand for buying and selling fixed-income securities defied the weak trend seen at most of its rivals.

France’s second-largest bank posted a 1 percent revenue gain at its trading business in the fourth quarter, according to a statement Wednesday. Three analysts surveyed by Bloomberg estimated declines between 4 percent and 20 percent. At the large-customers unit, which also includes corporate lending and securities services, revenue increased almost 5 percent from a year earlier.

The capital-markets business enjoyed a “good performance, in particular in credit and securitization, despite low volatility” that hurt areas such as currency trading, the bank said in a presentation.

Still, tax cuts in France and the U.S. weighed on Credit Agricole’s earnings as the Paris-based bank booked 384 million euros ($474 million) of one-time charges in the quarter tied to deferred tax assets. Global financial firms including Deutsche Bank AG and Goldman Sachs Group Inc. have booked billions of dollars in accounting charges after President Donald Trump signed legislation reducing the U.S. corporate tax rate.

Credit Agricole gets most of its trading revenue from products tied to bonds, currencies and commodities. Among its competitors, BNP Paribas SA’s revenue from fixed-income trading fell 27 percent in the fourth quarter, while Societe Generale SA, the country’s third-largest bank, had a 6.5 percent drop.

On top of higher investment-banking revenue, expansion in managing money also fueled revenue growth. Amundi SA, the asset manager the bank controls, acquired Pioneer Investments in mid-2017. At the French retail unit, LCL, revenue fell about 4 percent, in line with estimates from Deutsche Bank research. Record low rates weighed on performances, though demand for loans picked up in France.

The bank plans to pay a dividend of 63 cents a share and said it opted to “neutralize” the effect of the tax surcharge by not reducing the payout accordingly. That partly explains a drop at its common Equity Tier 1 ratio, a measure of financial strength.

That ratio was at 11.7 percent in the quarter, down 0.3 percentage point from the end of September, though still above its target. The acquisitions of three small Italian lenders and some private-banking assets also weighed on the capital level.

Other fourth-quarter highlights include:

  • Net income rose 33% to 387 million euros from a year earlier
  • Provisions for bad loans fell 15% to 335 million euros
  • Bank books 222 million-euro goodwill impairment on Polish unit, more than offset by gain on purchase of Italian lenders

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