Credit Agricole profit beats estimates as provisions decline

Bloomberg

Credit Agricole SA’s profit came in above expectations as it joined European peers in posting lower provisions to
reflect the improving economy.
The Paris-based lender said 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 the 1.2 billion euros anticipated by analysts polled by Bloomberg. Provisions to cover potentially souring loans fell 67% to 279 million euros, which was also far better than estimates.
The economic signals and forecasts “go rather in the way of an improvement, which would not lead to an increase in cost of risk, and this is
why we are very confident,” said deputy chief executive officer Xavier Musca in a call with reporters.
After setting aside billions of euros when when the pandemic shuttered swathes of the economy last year, European lenders are showing optimism that vaccinations can stoke
a recovery, translating into falling provisions and surging profits. Rival Societe Generale SA’s profits beat estimates
earlier this week as it
lowered its guidance on full-year provisions.
Chief Financial Officer Jerome Grivet said that the optimism remains even as the delta variant of the coronavirus is causing infections to rise in many European countries. “As long as the pandemic is not fully under control we will continue to have some measures that will support the economy globally and that will benefit to banks specifically,” Grivet said in an interview on Bloomberg TV. “So I’m not very worried specifically by this delta variant.”
Credit Agricole’s net income also got a 258 million-euro lift from an accounting benefit known as badwill, linked to
the recent acquisition of Italy’s Credito Valtellinese SpA. This boost gave the group its
highest quarterly net income since 2007. The bank also gave details on the buyback plan it announced in February, saying it would spend up to 500 million euros on shares in the fourth quarter.
It was a more muted quarter at the corporate and investment bank, with revenue falling 8.5% to 1.56 billion euros, slightly worse than estimates. Revenue from the trading of fixed income products fell 28% compared to a buoyant quarter a year ago, mirroring the trend at rival BNP Paribas SA and many US banks.
The group depends less on its markets unit than peers, meaning it was less affected by the trading meltdown induced by the pandemic last year.