Crédit Agricole profits beat as bad debt provisions decline

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(Bloomberg) – Crédit Agricole SA’s profit exceeded expectations as it joined its European peers in posting lower provisions to reflect improving economy.

The Paris-based lender said its net income jumped to 1.97 billion euros ($ 2.3 billion) in the second quarter, more than double the same period last year and above 1, 2 billion euros expected by analysts polled by Bloomberg. Provisions to cover potentially aggravated loans fell 67% to 279 million euros, which was also much better than estimated.

The economic signals and forecasts “tend rather in the direction of an improvement, which would not lead to an increase in the cost of risk, and that is why we are very confident,” said Deputy Managing Director Xavier Musca during a call to journalists.

After setting aside billions of euros when the pandemic shut down entire swathes of the economy last year, European lenders are showing optimism that vaccinations can fuel a recovery, resulting in lower prices. provisions and increased profits. Profits at rival Societe Generale SA exceeded estimates at the start of the week as it lowered its forecast on provisions for the entire year.

Chief Financial Officer Jérôme Grivet said optimism remains even as the delta variant of the coronavirus causes an increase in infections in many European countries.

Support measures

“Until the pandemic is fully under control, we will continue to have measures that will support the global economy and specifically benefit banks,” Grivet said in an interview with Bloomberg TV on Thursday. “So I’m not very concerned about this delta variant. “

Crédit Agricole’s net income also benefited from a gain of 258 million euros thanks to an accounting benefit called badwill, linked to the recent acquisition of the Italian Credito Valtellinese SpA. This boost gave the group its highest quarterly net income since 2007.

The bank also gave details of the buyback plan it announced in February, saying it would spend up to € 500 million on shares in the fourth quarter.

It was a more subdued quarter for corporate and investment banking, with revenues down 8.5% to 1.56 billion euros, slightly below estimates. Fixed income trading revenues fell 28% from a strong quarter a year ago, reflecting the trend of competitor BNP Paribas SA and many US banks.

Retail sales increase

The group is less dependent on its market unit than on its peers, which means it was less affected by the pandemic-induced trade collapse last year. However, this leaves the bank dependent on consumer margins which have proven to be low in recent years, which has led CEO Philippe Brassac to cut jobs in several of its units, reduce the size of its national banking unit by retail LCL, while seeking to expand its retail presence in Italy. .

The bank’s international retail activities, a key element of its expansion strategy, saw their turnover increase by a quarter to 801 million euros, above estimates.

Other highlights of the bank’s results:

Amundi SA, Crédit Agricole’s investment subsidiary, saw its net income double in the last quarter after a one-time tax gain, as dynamic stock markets fueled an increase in the company’s performance fees. The company saw its assets under management reach a record 1.79 trillion euros at the end of June, with investors investing 7.2 billion euros.

Crédit Agricole’s CET1 ratio, a key measure of its financial strength, fell 0.1 percentage point to 12.6% at the end of June. In stress tests published last week by the European Banking Authority, the bank established itself as the strongest listed lender in France.

(Updates with CFO commentary in fifth paragraph)

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