Credit Agricole Quarterly Profit Jumps, Boosted by Visa Gain

  • Revenue slumps at French, Italian retail units on low rates
  • Earnings decline at unit housing trading, investment banking

Credit Agricole SA, France’s third-largest bank, said second-quarter profit rose 26 percent as a gain from a stake sale in Visa Europe Ltd. helped offset a drop in revenue at the main consumer business.

Net income rose to 1.16 billion euros ($1.3 billion) from a year earlier, the company, based near Paris, said in a statement Wednesday. That beat the 994 million-euro average estimate of four analysts compiled by Bloomberg. The company booked a gain of 328 million euros tied to its stake sale.

Europe’s largest banks have scrapped profitability goals as they struggled to revive earnings, hurt by record-low interest rates, tougher regulation and volatile markets. At Credit Agricole, which has the largest market share in French consumer banking, Chief Executive Officer Philippe Brassac on Wednesday reiterated a target of reaching a return on tangible equity, a measure of financial health, of more than 10 percent by 2019.

“In a structurally difficult environment, Credit Agricole is showing a few positive elements,” Brassac said on a call with journalists. Credit Agricole’s “level and quality of solvency do not raise any questions.”

Societe Generale SA said on Wednesday that second-quarter profit rose 8 percent, helped by lower provisions for bad loans and a gain on the sale of its stake in Visa Europe. At BNP Paribas SA, profit also beat analysts’ estimates.

Credit Agricole has dropped about 30 percent this year, partly hurt by a wider market selloff in the wake of the U.K.’s decision to leave the European Union. The Bloomberg Europe Banks and Financial Services Index has declined 31 percent.

European banking stocks extended losses on Tuesday as investor skepticism overshadowed stress-test results published late Friday, showing most of the region’s lenders would keep an adequate level of capital in times of crisis. 

The core capital level of Credit Agricole Group, the entity most closely watched by regulators, was 14.2 percent at the end of June, up from 13.9 percent three months previously. Credit Agricole Group’s common equity Tier 1 ratio would fall to 10.5 percent in 2018 under the stress test’s adverse conditions, a higher level than BNP Paribas or Spain’s Banco Santander SA, according to data from the European Banking Authority.

Unit Breakdown

Credit Agricole is nearing the end of a reorganization it announced in February to simplify its structure. The company is selling stakes in about three dozen regional banks in a 18 billion-euro transaction that will reinforce capital and result in gains in the third quarter.

Revenue at LCL, the French branch network, dropped 10 percent in the quarter as low interest rates weighed on lending margins. Underlying net income -- which excludes one-time gains and losses -- tumbled 38 percent. At Cariparma, the Italian retail unit, revenue slid 7.9 percent from a year earlier.

At the large-customers unit -- home of the trading and investment-banking businesses -- underlying net income fell 8.3 percent to 365 million euros, hurt by a 50 million-euro provision for legal risks. Investment banking activity was “buoyant” in the second quarter, boosted by “some large deals” in the rights issue market, with revenue increasing 16 percent to 99 million euros in the year, the lender said.

At the savings business, which includes insurance, the Amundi SA fund-management division and wealth management, net income rose 7.6 percent to 415 million euros. Profit climbed 23 percent at the specialized financial services business, which groups consumer finance, leasing and factoring.

Credit Agricole is planning to carry out 900 million euros of annual cost savings as it scales back some businesses and invests in others.

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