Credit Agricole Caps Tough Trading Quarter for French Banks

(Bloomberg) -- Credit Agricole SA’s trading revenue plunged in the fourth quarter, extending a tough quarter for French investment banking after volatile markets at the end of the year kept clients on the sidelines.

Key Insights

  • Capital-markets and investment-banking revenue declined 29 percent in the last three months of 2018, led by fixed income. However, the lender’s earnings are less dependent on investment banking than rivals BNP Paribas SA and Societe Generale SA, which last week cut their targets after trading results disappointed investors.
  • “The second part of the year was more difficult, but this doesn’t mean that there’s any need to close or abandon any activities” in trading, Chief Financial Officer Jerome Grivet told journalists. “If we can, we should be even stricter on costs to shield ourselves from times of lower revenues.”
  • Credit Agricole achieved 2019 targets for profit, revenue, capital and dividends one year ahead of schedule. Analysts and investors are likely to focus now on revenue expectations for the French retail unit, as well as the outlook for insurance, asset management and the investment bank.
  • Chief Executive Officer Philippe Brassac said the bank is well equipped to handle rising market uncertainty and there was “no surprise” in managing its trading books. The bank said will present a new multi-year business plan on June 6.

Market Reaction

  • Credit Agricole was down 0.5 percent in Paris trading as of 9:42 a.m., reversing an earlier gain of as much as 2.3 percent. In 2018, the stock lost 32 percent, compared with the 28 percent decline seen at Europe’s Stoxx 600 banking index.

Dig Deeper

  • Credit Agricole, France’s second-largest bank by market value, plans to pay a dividend of 69 cents for 2018, beating expectations.
  • Net income more than doubled to 1.01 billion euros in the fourth quarter as tax charges from a year earlier weren’t repeated. Profit before tax, which excludes the charge, rose 6.5 percent to 1.38 billion euros.
  • Revenue at insurance businesses rose 6 percent; income from retail banking in Italy also gained more than 17 percent, boosted by integration of three local banks.

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