Credit Agricole shares rise as French retail profit climbs

[PARIS] Credit Agricole SA shares rose the most in three months, buoyed by higher profit at the LCL consumer-banking division in France.

The unit generated net income of 136 million euros (S$204.504 million) in the fourth quarter, up 15 per cent from a year earlier, the Montrouge, France-based bank said. Profit at Credit Agricole jumped 53 per cent excluding a 491 million-euro goodwill writedown on LCL and some tax-related adjustments.

"This is a mix of good surprises," said Francois Chaulet, who helps manage 500 million euros at Montsegur Finance in Paris and owns shares in Credit Agricole.

"This bank is showing a more reassuring face after a change in scope."

Credit Agricole is cutting branches and staff at LCL as the division seeks to return to revenue growth despite low interest rates. The lender, which refocused on its main markets in recent years, is also expanding in asset management after Chief Executive Officer Philippe Brassac last year reorganised its corporate structure to free up capital.

The shares climbed as much as 5.7 per cent in Paris and were up 4.7 per cent to 12.31 euros by 1149GMT, giving the bank a market value of 35 billion euros. Credit Agricole will pay a cash dividend of 60 US cents a share for 2016.

LCL's sales stabilised in the fourth quarter and expenses fell by 3.5 per cent. Credit Agricole booked the goodwill writedown after "massive" mortgage refinancing by clients. While the charge had no impact on the bank's solvency or dividend policy, it illustrated the squeeze low rates are inflicting on consumer banks.

"We are able to adapt to this very unfavorable environment," Deputy CEO Xavier Musca said in a Bloomberg Television interview.

Profit at Credit Agricole's corporate and investment bank was 271 million euros, compared with the 260 million-euro average estimate of four analysts compiled by Bloomberg News.

Earnings from insurance, private banking and asset management rose 14 per cent to 448 million euros. Amundi SA, the fund manager majority owned by Credit Agricole, last week said it had its highest quarterly net inflows in almost two years.

Amundi plans to carry out a capital increase in March or early April to help finance its 3.5 billion-euro takeover of Pioneer Investments from UniCredit SpA, a move that should reinforce its leadership in Europe. Credit Agricole plans to keep a 70 per cent stake in Amundi after the capital increase.

BLOOMBERG