Credit Agricole Beats Estimates as Provisions Decline

(Bloomberg) --

Credit Agricole SA’s third-quarter profit jumped 44%, beating analysts’ estimates as provisions for bad loans declined.

Net income at the Paris-based bank increased to 1.4 billion euros, according to a statement Wednesday, exceeding the most optimistic estimate among analysts surveyed by Bloomberg. Provisions dropped 56% to 266 million euros, compared with 460.5 million euros expected in the survey.  

“We are reporting excellent results, at all-time highs, in keeping with previous quarters,” Chief Executive Officer Philippe Brassac said in the statement. “Business is strong, driven in particular by the effectiveness of” government measures to address the pandemic.

The results mirror earnings announcements by peers including BNP Paribas SA, which saw lower provisions as the economic recovery kept defaults at bay. After setting aside billions of euros when when the pandemic shuttered much of the economy last year, European lenders are benefiting as vaccinations help stoke a rebound.

Chief Financial Officer Jerome Grivet said he believes public support will last as long as needed, allowing the bank to start releasing provisions as the economy keeps improving.

“I expect that the coming quarters continue to be well oriented both from a revenue point of view but also from a cost of risk point of view,” he said in an interview with Bloomberg TV on Wednesday.

Credit Agricole shares remained stable in early Paris trading, and were up 0.49% at 9:02 a.m..

Consumer Margins

Credit Agricole’s fixed-income, commodities and currencies trading desk posted a 24% revenue slide, a bigger drop than the average decrease on Wall Street. Credit Agricole depends less on its investment bank than most of its peers, making it less subject to market volatility. 

But that also leaves it more reliant on consumer margins that have proved weak in recent years. Brassac has cut jobs in several of the company’s units, downsizing the domestic retail-banking business, LCL, while seeking to expand its retail footprint in Italy. 

The lender, which recently launched its own car leasing unit, is also looking to expand the range of its services. On Tuesday, the bank confirmed the acquisition of Olinn Finance SAS, a professional equipment leasing and management company, via its subsidiary Credit Agricole Leasing & Factoring.

Credit Agricole’s overall corporate banking activities surged 13% in the quarter. That helped the bank weather a 19% revenue slide at the trading unit, to 552 million euros, which was slightly below analysts’ estimates and came amid an industry-wide slump in fixed-income trading.

The bank, which has a smaller exposure to equities trading than its peers, missed out on a market volatility-induced rally in the business. Still, it does not intend to re-balance the mix of its markets unit. 

“We are not going the change strategy and to develop massively activities that we decided to exit nearly ten years ago”, Grivet said. “We’re happy with the set of activities that we have in our CIB.”

Credit Agricole’s entire corporate and investment-banking unit saw relatively stable underlying revenue in the quarter, at 1.24 billion euros, down 3.7%.  

International Retail

The international-retail unit, a key element in the firm’s growth strategy, saw revenue increase to 794 million euros, still falling short of the 826 million euros that analysts predicted. The bank, which acquired Credito Valtellinese earlier this year, remains on the lookout for similar opportunities in the country.

Amundi SA, Credit Agricole’s investment arm, saw its net inflows unexpectedly dragged down by 16.3 billion euros of cash being pulled from a Chinese joint venture in the third quarter. Still, the unit’s quarterly profit beat estimates and assets under management were in line with forecasts. 

The CET1 ratio, a key measure of the bank’s financial strength, reached 12.7% as of the end of September.

The bank, which launched its second share buyback program for this year in October, confirmed its intention to compensate for the 2020 dividend in 2021 and 2022, sticking to its 50% payout ratio in spite of the temporary ban last year.

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