Credit Agricole Becomes Third French Bank With Standout Trading

(Bloomberg) -- Maybe it's a French thing: Credit Agricole SA became the latest Seine-side bank to show trading prowess while securities firms elsewhere stumbled.

Revenue at Credit Agricole's capital-markets unit rose 10 percent in the second quarter, France's second-largest bank said Thursday. It joins the outperformance from BNP Paribas SA and Natixis SA, which set a high bar for trading amid poor results from most Wall Street and European investment banks.

Unlike equity derivatives powerhouses BNP Paribas and Societe Generale SA, Credit Agricole abandoned that business as part of its post-crisis restructuring. But higher debt-trading sales helped drive net income up to 1.35 billion euros ($1.6 billion), surpassing the 1.02 billion-euro average estimate of four analysts compiled by Bloomberg.

Philippe Brassac, who became chief executive officer two years ago, has simplified Credit Agricole's structure, improved capital buffers and sold some assets while expanding in fund management and key consumer-banking markets. Credit Agricole is in talks to buy three local Italian lenders to potentially increase its customer base in the country by 20 percent.

Credit Agricole, based in the Paris suburb of Montrouge, booked a 107 million-euro gain in the second quarter from selling its minority stake in French private-equity firm Eurazeo SA, while the year-earlier period's earnings were lifted by the proceeds of selling a stake in Visa Europe. Excluding exceptional items, quarterly profit at the lender rose 43 percent.

Underlying net income at the so-called large customers unit, which includes trading, rose 23 percent, and “most of the unit's segments performed well,” Chief Financial Officer Jerome Grivet said on a call with journalists. The bank had “good level of revenues in the rates, currencies and credit businesses, despite lower client flows in a wait-and-see market and amid low volatility,” it said in a statement.

There was a silver lining from low rates, which have constrained French banks' interest income from their domestic consumers. Underlying revenue at Agricole's French consumer-banking unit, LCL, rose 1 percent in the second quarter as borrowers rushed to refinance their mortgages amid record-low rates, a trend that the bank says has now probably peaked. LCL's annual sales should be stable in 2017, Grivet said, repeating Credit Agricole's earlier guidance.

Profit from the savings unit, which includes Amundi SA, Europe's largest asset manager by market value, rose 12 percent. Credit Agricole is the majority owner of Amundi, which in early July completed the 3.5 billion-euro purchase of Pioneer Investments from Milan-based UniCredit SpA to expand its European and U.S. footprint.

Credit Agricole's common equity Tier 1 ratio, a key capital strength indicator, rose to 12.4 percent at the end of June, up 55 basis points from end-March partly thanks to the Eurazeo disposal and the effects of Amundi's capital increase. The ratio would fall to 11.7 percent, pro-forma, when taking into account the impact of the Pioneer acquisition. The bank aims for a level of at least 11 percent.

To contact the reporter on this story: Fabio Benedetti-Valentini in Paris at fabiobv@bloomberg.net.

To contact the editors responsible for this story: Dale Crofts at dcrofts@bloomberg.net, Keith Campbell