Credit Agricole Loss Beats Estimates on Investment Bank

Credit Agricole Has Fourth-Quarter Loss on Intesa Writedown
A pedestrian passes the Credit Agricole SA headquarters in Paris. Photographer: Antoine Antoniol/Bloomberg

Credit Agricole SA, France’s third-largest bank, had a narrower-than-estimated fourth-quarter loss as earnings at the investment-banking business helped cushion provisions for bad loans at its Greek unit.

The net loss was 328 million euros ($452 million), compared with net income of 433 million euros a year earlier, the Paris-based bank said in a statement today. That beat analysts’ estimates for a 422 million-euro deficit. The shares rose.

Credit Agricole, led by Chief Executive Officer Jean-Paul Chifflet, is seeking to trim losses at the Greek unit, where the bank booked a 111 million-euro deficit in the quarter. The company said today it expects overall provisions to decline this year. The corporate and investment bank earned 263 million euros in the period, rebounding from a loss a year earlier.

The rebound at the unit “is the cherry on the cake,” said Valerie Cazaban, who helps manage 100 million euros at Stratege Finance in Paris and owns no shares in Credit Agricole. The investment-banking profit adds to the bank’s “very solid” results from its retail branches in France and Italy, she said.

Credit Agricole rose as much as 69 cents, or 5.8 percent, to 12.46 euros, the biggest gain in seven months, and traded at 12.30 euros at 2:17 p.m. in Paris. That gives the bank a market value of 29.5 billion euros.

The lender’s earnings in the quarter were also hurt by a 1.24 billion-euro writedown on a 4.79 percent stake in Intesa Sanpaolo SpA. It took the charge after deciding to end its representation on the Italian lender’s board. Credit Agricole, which now owns about 5 percent of Intesa, last year agreed to buy 172 branches from the company.

Competitors’ Profit

Credit Agricole currently has “no intention” to cut its stake in Intesa, Chifflet told reporters in Montrouge, near Paris. Still, the French bank is “obliged” to sell the holding should the stock reach 4.20 euros, he said. Intesa rose 0.2 percent to 2.39 euros in Milan trading, giving it a market value of 30.2 billion euros.

Credit Agricole’s overall loss in the quarter contrasts with rising earnings at its French competitors. BNP Paribas SA, Europe’s largest bank, last week said fourth-quarter profit rose 14 percent, helped by higher revenue at its investment bank. Societe Generale SA’s quarterly profit in the period quadrupled, helped by a turnaround at its Russian unit and on fewer writedowns at the corporate and investment bank.

Dividend ‘Disappointment’

Credit Agricole’s full-year profit rose 12 percent to 1.26 billion euros, the bank said. It plans to pay a dividend of 45 cents a share for 2010, matching the level of the previous year.

“There’s a disappointment” in terms of the earnings per share and the dividend, Stratege Finance’s Cazaban said. Still, the writedown on the Intesa stake is smaller than expected and that’s “good news,” she said.

Credit Agricole’s revenue rose 8.1 percent to 4.86 billion euros in the fourth quarter, the company said. That matched the 4.89 billion euros estimated by analysts. Provisions on doubtful loans fell to 750 million euros in the quarter from 1.29 billion euros a year earlier.

“Certainly we are going to see a continuation in the decline” of provisions in 2011, Chifflet said, declining to provide an earnings target. Credit Agricole will hold an investors day on March 17 to roll out its “medium-term” plans.

The decline in provisions is “favorable,” said Francois Chaulet, who helps manage 200 million euros at Montsegur Finance in Paris and holds Credit Agricole shares.

Capital Solution

The lender reiterated today it doesn’t need to sell new shares to comply with Basel III capital rules. The bank has found a solution with France’s banking regulator so that a guarantee from its French regional banks will help make up for a combined 5.5 billion euros of shareholders’ borrowings and subordinated debt notes, which will no longer count as common equity capital, the CFO said.

“What matters is this real confirmation that we won’t need a capital increase to comply with Basel III,” Badre said.

The consumer-banking unit outside of France, including Emporiki Bank of Greece SA, had a fourth-quarter loss of 90 million euros. Thousands of Greeks marched through Athens yesterday in the first general strike of the year in renewed protest against government measures to trim the public sector and loosen labor laws for private companies.

“We are being penalized by the Greek environment” despite a “recovery” at Credit Agricole’s unprofitable consumer-banking unit in the country, Chief Financial Officer Bertrand Badre said on a conference call. The French bank reiterated it expects its Athens-based division to return to profit by 2012.

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