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BNP PARIBAS

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Investment banking weakness hits Credit Agricole's second quarter profits

08/02/2019 | 06:31am EDT
A logo of Credit Agricole is seen outside a bank office in Bordeaux

PARIS (Reuters) - Credit Agricole, France's second-largest bank by market capitalisation, posted a sharp fall in second quarter profits on Friday, dragged down by a poor performance in its investment banking business.

Major European banks such as Credit Agricole have struggled to drive profitability because low interest rates have constrained returns from retail banking, with corporate and investment banking vulnerable to financial market volatility.

While its French rivals BNP Paribas and Societe Generale have experienced wild swings from corporate and investment banking over the past few quarters, Credit Agricole had enjoyed stabler profits until now.

Group net profit fell 15% to 1.22 billion euros (1.11 billion pounds) on revenue which slipped 0.4% to 5.15 billion. Corporate and investment banking profit dropped 22% to 460 million.

Credit Agricole shares were down 4.3% in early trading, also caught in a broader drop in world stock markets which have been roiled by the escalating trade dispute between the United States and China. [MKTS/GLOB]

"Fixed income, currencies and commodities (FICC) revenues were down 5% year-on-year, mirroring global industry trends - not as good as BNP Paribas and SocGen but better than consensus," wrote UBS analysts, who kept a "neutral" rating on Credit Agricole shares.

Credit Agricole attributed the corporate and banking investment business's weak performance to a "sluggish" market and margin erosion. The bank also booked 69 million euros in new provisions for bad loans during the quarter.

Most of these provisions were caused by a single case, the bank's Chief Executive Philippe Brassac said but refused to elaborate.

A person close to the matter said the case involved Rallye, French retailer Casino's parent company, which filed for protection from creditors in May.

Credit Agricole's other businesses, such as its French and Italian retail banks, as well as insurance and asset management were mostly stable during the quarter.

It reiterated its goal to deliver a return on tangible equity of at least 11% in 2022, the same level it booked in the first half of this year.

"We got what we were looking for: good commercial trends, earnings visibility, operational leverage and gradual improvement of solvency," brokerage Jefferies said in a note, adding it expected improvements and more cost cutting in corporate and investment banking.

The bank's common equity tier 1 ratio inched up to 11.6% from 11.5% three months earlier.

(Reporting by Inti Landauro and Matthieu Protard; Editing by Sudip Kar-Gupta and Emelia Sithole-Matarise)

By Inti Landauro and Matthieu Protard


© Reuters 2019
Stocks mentioned in the article
ChangeLast1st jan.
BNP PARIBAS 2.27% 53.5 Real-time Quote.-11.96%
CASINO, GUICHARD-PERRACHON SA -2.80% 18.39 Real-time Quote.-20.56%
CRÉDIT AGRICOLE S.A. 2.73% 10.534 Real-time Quote.-16.06%
RALLYE -8.01% 3.79 Real-time Quote.-24.80%
SOCIÉTÉ GÉNÉRALE 3.62% 24.05 Real-time Quote.-20.38%
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Sales 2022 48 596 M 51 186 M 51 186 M
Net income 2022 10 609 M 11 174 M 11 174 M
Net Debt 2022 - - -
P/E ratio 2022 6,12x
Yield 2022 7,46%
Capitalization 65 998 M 69 516 M 69 516 M
Capi. / Sales 2022 1,36x
Capi. / Sales 2023 1,42x
Nbr of Employees 190 000
Free-Float 86,5%
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Number of Analysts 21
Last Close Price 53,50 €
Average target price 67,77 €
Spread / Average Target 26,7%
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Jean-Laurent Bonnafé Co-Chief Operating Officer & Director
Jean Lemierre Chairman
Bernard Gavgani Chief Information Officer
Yann Gérardin Chief Operating Officer
Nathalie Hartmann Head-Compliance
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