Credit Agricole Posts Profit on Consumer Bank, Tax Rebate

Credit Agricole SA, France’s third-largest bank, swung to a fourth-quarter profit from a record loss a year earlier, helped by earnings from French consumer banking and a tax rebate. The shares rose the most in a month.

Net income was 612 million euros ($842 million), the Montrouge, France-based bank said on its website, missing the 677 million-euro average estimate of eight analysts surveyed by Bloomberg. Credit Agricole’s 3.91-billion euro loss the previous year, which was restated today, came after writedowns from selling assets including its Greek unit Emporiki Bank.

Europe’s economy is emerging from a record-long recession, helping Credit Agricole’s revenues from banking in France and from insurance. The bank, which was the foreign lender with the biggest loanbook in Greece at the start of 2011, has trimmed its balance sheet and returned to an annual profit last year after two consecutive full-year losses.

“2014 should be a better year, especially in Italy where we are very present,” Chifflet, 64, told reporters at a news conference in Paris.

Credit Agricole’s shares rose as much as 2.8 percent in Paris trading. They climbed 1.8 percent to 10.97 euros at 11:22 a.m., extending gains over the past 12 months to 50 percent and valuing the company at more than 27 billion euros. BNP Paribas SA, France’s largest bank, advanced 27 percent in the period and the Bloomberg Europe Banks & Financial Services Index rose 14 percent.

Tax Rebate

Credit Agricole booked 264 million euros in tax gains in the fourth quarter, mostly from a rebate on losses it made from Emporiki’s January 2013 capital increase. The company also said it had 132 million euros of one-time charges from the planned disposal of its Bulgarian consumer banking unit and Nordic consumer-finance businesses.

The lender is seeking an additional rebate of about 840 million euros on losses tied to Emporiki’s 2012 recapitalization, Chief Financial Officer Bernard Delpit told reporters.

Profit from Credit Agricole’s French regional banking networks increased 9.5 percent to 230 million euros in the fourth quarter, helped by higher revenues, it said. Revenue at its insurance business also rose 9.2 percent from a year earlier.

Cost Cutting

Credit Agricole achieved more than half of its 2016 target of 650 million euros in annual cost savings in 2013 as it reduced headcount by 5 percent through asset sales and job cuts at its investment bank, consumer finance unit and businesses in Italy, it said. The base year for the reduction in costs is 2011.

The bank also reduced its balance sheet by 305 billion euros to 1.54 trillion euros last year, mainly by netting derivatives trades through a clearing house, it said.

“Most of the cleaning has happened,” said Jean Pierre Lambert, an analyst at Keefe, Bruyette and Woods Ltd. who has a market perform rating on the stock, said by telephone from London. “It’s almost a normal quarter.”

Credit Agricole will provide its new financial targets at a March 20 investors day, Chifflet said, declining to give any details.

Dividend Payment

Credit Agricole said it will pay a dividend of 35 euro cents per share, the first payout since 2011. The holding company that represents Credit Agricole’s regional banks, which owns a majority stake, plans to opt for a dividend payment in new shares, it said in the statement.

Last week, Societe Generale SA, France’s No. 2 bank, said it will more than double its dividend after posting a 322 million-euro fourth-quarter profit compared with a 471 million-euro loss a year earlier. BNP Paribas reported a 76 percent decline in fourth-quarter profit as it set aside $1.1 billion tied to a review of payments to parties subject to U.S. economic sanctions.

Chifflet reiterated today that Credit Agricole is refusing to settle with the European Commission on allegations it fixed benchmark interest rates, saying the bank has a “good” case. It booked 80 million euros of provisions for litigation in the third quarter. He declined to give the company’s total 2013 litigation provisions.

A 446 million-euro European Union antitrust fine hurt Societe Generale’s fourth-quarter profit. The European Commission, the EU’s executive arm, fined six firms a record 1.7 billion euros for allegedly rigging rates in December.

Capital Ratio

Credit Agricole had a common equity Tier 1 capital solvency level under Basel III rules of 8.3 percent in January, the bank said. Credit Agricole Group, the entity regulators and rating firms look at for compliance with international rules, had a common equity Tier 1 capital ratio under fully loaded Basel III standards of 11.2 percent, according to its website.

The bank has reimbursed most of its three-year loans from the European Central Bank known as Longer-Term Refinancing Operations, Delpit said. Societe Generale said last week that it repaid the ECB’s three-year loans in full.

Credit Agricole’s bad-loan provisions increased to 0.86 percent of total loans at the end of December from 0.59 percent three months earlier. The provisions for international consumer banking jumped to 1.62 percent from 1.14 percent in the third quarter, the bank said.

Bad-loan provisions at Credit Agricole’s Parma, Italy-based retail-banking unit rose to 129 million euros in the fourth quarter from 92 million euros in the previous three months.

ECB Inspectors

About 20 inspectors arrived at Credit Agricole’s headquarters this week as part of the ECB’s asset-quality review of the euro area’s largest banks, Chifflet said. “We are not worried but vigilant,” he said.

The ECB is determining whether banks have enough capital to withstand another financial crisis in the review, which precedes it taking over as the pan-European regulator for the industry in November.

Credit Agricole sold 2.7 billion euros of loans in the fourth quarter, including 1.4 billion euros of non-performing loans at its Italian consumer-finance unit Agos-Ducato, it said.

Profit from Credit Agricole’s corporate and investment bank, excluding disposals, fell 24 percent, hurt by an increase in reserves for bad loans, the bank said. Corporate-lending revenue rose 17 percent in the quarter from a year ago while fixed-income trading revenue rose 1.6 percent to 327 million euros, “reflecting strong performances in treasury business and securitization,” the bank said.

Credit Agricole has no proprietary trading. In October, it signed an agreement with BNP Paribas to transfer market risks on a 12.5 billion-euro equity-derivatives book as it exited the business.

Insurance Charge

At the savings-management division, which includes asset management, insurance, private banking and custody, fourth-quarter profit fell 18 percent to 367 million euros, hurt by a 35 million-euro tax charge at the insurance business, it said. Fourth-quarter asset-management net income rose 8.3 percent to 92 million euros.

Cariparma, Credit Agricole’s Italian branch network, posted a 20 million-euro fourth-quarter profit. Credit Agricole’s total international retail-banking activities had a loss of 22 million euros in the quarter, partly because of a 39 million-euro charge on the planned sale of its Bulgarian unit, it said.

Before it's here, it's on the Bloomberg Terminal.