Credit Agricole First-Quarter Net Doubles on Investment Bank

Credit Agricole CEO Jean-Paul Chifflet
Jean-Paul Chifflet, chief executive officer of Credit Agricole SA. Photographer: Antoine Antoniol/Bloomberg

Credit Agricole SA, France’s third-largest bank by market value, reported a doubling in first-quarter profit, helped by higher revenue at its investment bank and lower provisions for doubtful loans.

Credit Agricole rose as much as 2.6 percent in Paris trading after saying first-quarter net income jumped to 1 billion euros ($1.42 billion) from 470 million euros a year earlier, matching the average estimate of 13 analysts surveyed by Bloomberg.

Chief Executive Officer Jean-Paul Chifflet, who took over last year, is aiming to reach between 6 billion euros and 7 billion euros of net income in 2014, helped by a turnaround at the international consumer-banking business. Earnings at the corporate and investment bank doubled to 330 million euros, helped by higher fixed-income revenue and lower provisions on assets the bank is winding down.

“The house-cleaning at the investment bank is done,” said Valerie Cazaban, who helps manage 100 million euros at Paris-based Stratege Finance. “They are performing not too badly.”

Credit Agricole rose 13 cents, or 1.1 percent, to 11.21 euros by 1:17 a.m. in Paris. The stock has gained 18 percent this year, compared with the 1.1 percent increase of the 48-company Bloomberg Europe Banks and Financial Services Index.

‘Less Adventurous’

Italy’s second-largest bank, Intesa Sanpaolo SpA, reported a 4 percent decline in first-quarter profit today, hurt by a higher tax rate and lower income from its insurance business. The shares slumped as much as 2 percent in Milan. UniCredit, Italy’s biggest bank, advanced as much as 4.1 percent after surpassing analysts’ estimates with a 56 percent jump in earnings.

Chifflet, 61, said in December that Credit Agricole’s strategy over the next 10 years will be “less adventurous” than in the past decade. The bank lost 33 million euros in the quarter from risky assets it’s unwinding, compared with a 222 million-euro net loss a year earlier.

“I don’t see any significant impact of discontinuing activities going forward,” Chief Financial Officer Bertrand Badre said on a conference call with analysts. The level of first-quarter losses on the risky assets should set the “trend” for coming quarters, Chifflet said on a call with journalists.

The assets Credit Agricole is seeking to wind down include unhedged super-senior collaterized debt obligations linked to U.S. residential mortgages, according to the bank’s website.

Capital Rules

To help meet the 2014 profit goal, the bank said March 17 it plans to post earnings of more than 900 million euros at the international-banking unit after a loss of 928 million euros last year, as it opens more branches in countries such as Italy.

The bank expects overall revenue to total more than 25 billion euros in 2014, while return on equity, a measure of profitability, may reach 10 percent to 12 percent in the period.

Chifflet reiterated the bank won’t need to sell new shares to comply with Basel III capital rules. The bank aims to have a Tier 1 common equity ratio, a measure of financial strength, of more than 8.75 percent in 2014, it said in March. Basel rules begin taking effect in 2013 and will be fully implemented in 2019.

Credit Agricole Group sees “no problems” from any future too-big-to-fail capital rules, Chifflet said.

BNP Paribas, France’s largest bank, reported last week a 15 percent jump in first-quarter profit to 2.62 billion euros, beating estimates. Societe Generale SA, France’s second-largest bank by market value, said on May 5 that net income fell 14 percent in the period, hurt by a charge tied to its own debt and provisions resulting from political turmoil in Egypt.

Italy, Greece

In Italy, Credit Agricole’s largest market by staff outside of France, the company plans to add 50 branches and 150,000 retail clients by 2014. It already has about 1.7 million customers and 960 branches in Italy.

The consumer-banking business outside France, including Athens-based Emporiki Bank of Greece SA, had a quarterly net loss of 59 million euros, compared with a 97 million-euro loss a year earlier, the company said. The Greek bank has lost more than 2 billion euros since 2008.

Emporiki posted an 11th straight quarterly loss in the three months through March. Emporiki, which holds about 100 million euros of Greek sovereign debt, still aims to return to profit in 2012, Alain Strub, CEO of the Greek division, said last week.

Profit from the regional banks’ French retail network was 374 million euros, up from 333 million euros a year earlier. The LCL French consumer-banking network had 195 million euros of profit, compared with 151 million euros a year earlier.

Citic Talks

Overall provisions for doubtful loans fell to 822 million euros in the quarter from 1.07 billion euros a year earlier.

Earnings at the asset management, insurance and private banking division rose 27 percent to 443 million euros.

Credit Agricole and China’s Citic Securities Co. in December extended until June 30 a deadline for talks to combine investment-banking assets. The talks are continuing ‘without any new element, no interruption,” Chifflet said today.

The bonus pool for 837 employees including “risk takers” at Credit Agricole’s corporate and investment bank was 109 million euros for 2010, the bank said in a separate statement. On average per employee, bonuses fell about 15 percent from a year earlier, Chifflet said.


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