Credit Agricole Plunges on Lower Trading, Consumer Bank Sales

  • Net income at corporate and investment bank declines 2.7%
  • Profit from investments including Eurazeo almost doubled

Credit Agricole SA dropped the most since August after the lender reported a decline in profit at its investment bank and consumer-banking revenue at the French LCL branch network fell.

Net income at Credit Agricole’s corporate and investment bank decreased by 2.7 percent to 256 million euros ($279 million), as trading revenue dropped 12 percent to 374 million euros. Higher earnings from its stake in private-equity firm Eurazeo SA helped boost third-quarter profit by 15 percent, the Montrouge, France-based bank said on Thursday.

Credit Agricole, France’s third-largest bank, is seeking to reorganize the financial ties with the regional banks that own a majority stake in the lender and which it owns shares in, a plan that analysts say could free up capital for shareholders. Credit Agricole is focusing on France, where it has the largest share of the consumer-banking market, after revamping the investment bank and retreating from an international expansion.

Credit Agricole’s board on Wednesday elected Dominique Lefebvre, as chairman, replacing Jean-Marie Sander, the bank said in a separate statement. Lefebvre also chairs the holding company through which the group’s regional banks control a stake in the listed bank. For the first time since Credit Agricole’s 2001 initial public offering, the listed bank and its main investor group are chaired by the same person.

The appointment “can be the prelude of a change in governance and structure,” said Francois Chaulet, who helps manage 450 million euros at Montsegur Finance in Paris including Credit Agricole shares. “What’s disappointing at Credit Agricole is that nothing progresses on the capital structure of the group and the corporate and investment bank declined a bit.”

Margin Pressure

The shares fell as much as 6.4 percent to 11.01 euros and was 5.2 percent lower as of 10:00 a.m. in Paris, paring the year’s gains to 3.6 percent.

Profit from holdings including stakes in regional lenders and Eurazeo almost doubled to 552 million euros in the period, the bank said.

Profit from savings activities, including asset management, insurance and private banking, rose 8.6 percent to 438 million euros in the quarter, Credit Agricole said.

At the LCL branch network, revenue fell 1.8 percent in the third quarter. Revenue from the regional banks’ networks in France rose as higher fee income outweighed lower interest income in the quarter.

Net interest margin is under pressure due to rising competition, Bernstein analysts wrote in note.

Societe Generale SA, France’s second-biggest bank, on Thursday said revenue at its consumer-banking division in the country climbed 4.2 percent from a year earlier, outpacing BNP Paribas SA’s retail unit, where sales fell 3 percent in the quarter.

Credit Agricole Group, the entity that regulators and rating firms mostly look at, had common equity Tier 1, a measure of financial strength, of 13.4 percent at the end of September, up from 13.2 percent at the end of June, it said. Credit Agricole SA’s common equity Tier 1 was 10.3 percent at the end of September.

Amundi Group, its fund-management unit that is selling shares in an initial public offering, posted 19.2 billion euros of net inflows in the third quarter. Credit Agricole will keep a stake of 74.6 percent or more in Amundi while Societe Generale SA divests its stake in the IPO.

Credit Agricole last month agreed to pay $787 million to U.S. regulators to resolve allegations that the French bank violated sanctions against Iran and Sudan. Paying the penalty will have no impact on Credit Agricole’s second-half accounts, it said Oct. 20.

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