Credit Agricole Profit Rises on Provisions, Strong Trading

Credit Agricole SA’s profits jumped in the first quarter, as the bank joined European peers in posting a strong trading performance and lower-than-anticipated charges to cover potential loan losses.

Net income rose 64% from a year ago to 1.05 billion euros ($1.27 billion), after Credit Agricole provided 384 million euros against the possibility of souring loans, below the 564.5 million euros estimated by analysts polled by Bloomberg. The bank had been expected to post net income of 729.1 million euros.

The Paris-based lender’s capital markets and investment banking revenue rose 17% to 708 million euros, beating the highest analyst estimate. Credit Agricole’s asset gathering unit, which houses its asset and wealth management operations as well as its insurance business, saw revenues grow by a fifth to 1.58 billion euros, slightly above what analysts anticipated.

Credit Agricole shares rose as much as 1.3% in early Paris trading on Friday and were trading 0.6% higher as of 9:17 a.m. local time.

The results make Credit Agricole the latest beneficiary of a brightening pandemic outlook and busy markets, which have seen all the major European banks beat analyst expectations so far this earnings season.

Europe’s banks set aside billions of euros last year to brace for an expected wave of defaults as large swathes of the economy were shut down to stem the spread of Covid-19. But massive relief from governments and central banks has shielded companies from the impact so far and many now expect the ultimate level of defaults to be lower than previously feared.

“Unless the macroeconomic scenario changes dramatically, we are not going to need to book significant additional provisions on performing loans,” Chief Financial Officer Jerome Grivet said in an interview with Bloomberg TV on Friday.

The need to provision against non performing loans, which was lower in the first quarter than last year, is not expected to pick up either as the bank doesn’t “see any sign of deterioration of credit quality of our counterparts,” Grivet said.

“We expect the cost of risk across 2021 to be lower than the one we had globally to book last year”, he said.

Under Chief Executive Officer Philippe Brassac, Credit Agricole has been betting on corporate banking and asset management to counter weak consumer margins, meaning the bank relies less than domestic peers on its trading business. Last year, the bank avoided the dividend-related equity trading hits that engulfed rivals like BNP Paribas SA and Societe Generale SA.

The Paris-based lender’s corporate and investment banking division saw underlying revenues rise 13.6% to 1.37 billion euros. Revenue from fixed income products, which faltered last quarter, grew 13.5% year-on-year.

Creval Buy

Last month, Credit Agricole gained control of Italian bank Credito Valtellinese SpA in a bid to increase its presence in Italy. The bank overcame resistance from Creval’s board and some investors by sweetening its offer twice, with 90.9% of Creval shareholders tendering their shares.

The successful bid doubles Credit Agricole’s market share in Lombardy, which includes Milan, and consolidates its position as the sixth-biggest retail bank in Italy.

Read more on Creval acquisition

Amundi SA, Credit Agricole’s investment arm, last week reported its highest quarterly profit since the firm’s trading debut in 2015 as rising equity markets fueled an increase in fees. The firm saw assets under management rise to a record 1.76 trillion euros at the end of March, even as investors pulled a net 12.7 billion euros out of its funds.

Other highlights from Credit Agricole’s earnings:

  • Net revenue 5.49 billion euros; analyst estimate was 5.22 billion euros
  • CET1 12.7%; estimate was 12.67%
  • French retail banking revenue 893 million euros; estimate was 899.1 million euros
  • International retail banking revenue 693 million euros; estimate was 666.7 million euros

©2021 Bloomberg L.P.

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