Credit Agricole Pairs Trading Surge With Jump in Loan FeesBy
Trading revenue rises 17% as bank cites ‘buoyant’ fixed income
Retail banks in France and Italy posted growth in lending
Credit Agricole SA profited from low rates in the first quarter as large clients tapped the bond market and mortgage refinancing led to a surge in fees.
Capital-markets revenue rose 17 percent , with “buoyant activity” in fixed-income, foreign-exchange and credit trading, the Paris-based bank said in a statement Thursday. Net income jumped to 845 million euros ($918 million) from 227 million euros a year earlier, surpassing the 702 million-euro average estimate of six analysts surveyed by Bloomberg.
Chief Executive Officer Philippe Brassac is refocusing the second-largest French bank by assets on its main markets, including France and Italy, and eyeing potential foreign deals after suffering losses in Greece during Europe’s sovereign debt crisis. Profit at the LCL French consumer-banking unit jumped by more than 50 percent to 140 million euros, while the large-customers unit posted profit almost double that of a year earlier.
“This is coming from deep down, it’s good news,” said Alex Koagne, an analyst at Natixis SA who rates the shares buy. “The consumer bank and the investment bank are faring well.”
BNP Paribas SA, France’s largest bank, last week posted a 33 percent surge in global-markets revenue, while Societe Generale SA and Natixis SA also reported revenue growth at their trading business.
“The increase in LCL’s revenues benefited from the positive cumulative impacts of home loan renegotiation fees and early repayment penalties,” the bank said in a statement, with Chief Financial Officer Jerome Grivet adding that clients took advantage of the low rate environment to tap the bond market.
Analysts have said the French banks benefited from political uncertainty in the quarter as corporate clients were keen to issue debt at a low rate before the nation’s election. The vote ultimately saw centrist Emmanuel Macron defeat early front-runner Marine Le Pen, an opponent of the euro currency.
Offerings of euro-denominated corporate bonds amounted to 115 billion euros in the first three months of the year, the second-highest quarterly level in eight years, according to data compiled by Bloomberg.
Credit Agricole have risen about 21 percent in 2017 and were little changed at 9:27 a.m. in Paris. The stock has risen almost twice as much as the increase of the benchmark STOXX Europe 600 Banks Index this year. BNP Paribas and Societe Generale respectively gained 10 percent and 5.5 percent.
Last year, Brassac reshuffled the bank’s complex corporate structure of regional banks for better funding purposes. While low rates benefited some parts of the business, they are weighing on lending margins, prompting Brassac to cut branches and staff at LCL to preserve profitability. He’s set a target of annual profit of more than 4.2 billion euros for Credit Agricole in 2019 by eliminating costs and expanding in asset management and insurance.
Credit Agricole is now expecting LCL sales to be “more or less stable over the whole of 2017” compared with last year, Grivet said.
On the M&A front, Credit Agricole is carrying out its plan for “incremental acquisitions” in Italy, its second-largest market, if bolt-on targets fit its existing businesses, Brassac said.
Credit Agricole’s Italian unit, Cariparma, is in preliminary discussions with the Bank of Italy and the country’s deposit protection fund to buy three troubled local savings lenders. The bank said Cariparma posted a 10.3 percent gain in home loans, as well as a 24 percent increase in lending to large corporations.
Amundi SA, Credit Agricole’s publicly traded asset-management unit, is acquiring Pioneer Investments from UniCredit SpA for 3.5 billion euros.