Credit Agricole profit jumps on trading

Bloomberg

Credit Agricole SA, France’s third-largest bank, said quarterly profit doubled from a year earlier as it booked gains from a reorganization and bond-trading income surged. The lender also pledged a stable or rising dividend for next year.
Net income climbed to 1.86 billion euros ($2.1 billion) in the third quarter, the bank said in a statement on Tuesday, in line with the 1.81 billion-euro average estimate of seven analysts surveyed by Bloomberg. Excluding one-time items such as the 1.25 billion-euro gain from its restructuring, profit increased 27 percent to 1.02 billion euros.
Credit Agricole intends to pay an all-cash dividend of 60 cents per share for 2016 and said it won’t reduce that per-share payout from 2017 onwards. Credit Agricole’s dividend for 2015 was 60 cents. Chief Executive Officer Philippe Brassac, in his second year in the job, completed a 18.5 billion-euro deal to sell holdings in more than three-dozen regional lenders that own a majority stake in the bank, simplifying the lender’s structure and boosting capital buffers. “There are no more questions on capital,” and therefore the bank can provide “even greater visibility for shareholders” in terms of its dividend, Brassac said.
Underlying revenue rose 12 percent to 4.41 billion euros, helped by higher trading income and increased demand for asset-management products. Provisions set aside for doubtful loans rose 4 percent to 444 million euros. The bank also booked a 50 million-euro charge for legal risks that it didn’t specify.
Credit Agricole’s shares have declined 11 percent this year, though like all of France’s major banks, it has outperformed many European peers that have struggled with profitability and regulatory changes. BNP Paribas, France’s largest bank, is little changed for 2016, while Societe Generale SA, the country’s No. 2 bank by market value, has fallen 14 percent.
Credit Agricole’s large-customer unit, which houses trading and corporate-financing activities, posted a 38 percent increase in third-quarter revenue, helped by a jump in client demand for rates, foreign-exchange and credit-trading activities.
Like its European rivals, Credit Agricole is facing record low interest rates that are squeezing revenues, especially in consumer banking. LCL, the French branch network, had a 300 million-euro pretax charge to adjust its funding costs, with clients rushing to renegotiate home loans amid the low rate environment. Excluding that one-time item, LCL’s revenue fell 2.4 percent from a year earlier, though it rose 2.5 percent from the second quarter.
The structural reorganization, launched in February, resulted in exceptional gains in the third quarter and a capital ratio increase of 72 basis points at the publicly traded bank. For Credit Agricole Group, the entity most closely watched by regulators, the core capital level rose to 14.4 percent at the end of September from 14.2 percent at June 30.