(AOF) – The last major French listed bank to present its second quarter accounts, Crédit Agricole SA unveiled a better-than-expected performance as its competitors, BNP Paribas and Société Générale. The group’s share of net profit increased by 0.4% to € 1.976 billion, clearly exceeding the consensus of € 1.18 billion. Revenues increased by 8.8% to € 6.33 billion for operating expenses (excluding the contribution to the Single Resolution Fund), up by 6.1%.
The market only advanced € 5.75 billion. In the data below, their growth was 6.2% and 5.2% respectively, which represents a positive 1 point jaw effect.
In addition to this positive spread effect, Crédit Agricole SA’s results benefited from the 27.5% reduction in the cost of risk to -203 million euros.
They were also supported by record business at Corporate and Investment Banking (BFI) level. Underlying revenues jumped 22% to € 1.58 billion. Markets and investment banking in particular stood out (+ 32.1% to € 814 million) in a context of high volatility and customer hedging needs. Within the latter, the activities of the FICC (interest rates, credit, foreign exchange and commodities) achieved a solid performance: + 36.9%.
The listed subsidiary of the Crédit Agricole group closed the quarter with an improvement in the equity ratio of 30 basis points, to 11.3%. It is 3.4 percentage points higher than the regulatory requirements.
AOF – FIND OUT MORE
– Listed vehicle of the mutual group of the same name, 1st French bank and 8th world bank;
– Bank margin of € 22.7 billion, generated by retail banking at 65%, specialized financial services at 12%, wholesale banking at 14% and asset and insurance management;
– 3-point business model – relational excellence by becoming the preferred bank of individuals, entrepreneurs and institutions, local responsibility to support digitalisation and social commitment by amplifying mutual commitment;
– 55.3% capital held by regional mutual societies, hence the strong presence of their representatives on the Board of Directors (10 out of 21 members) chaired by Dominique Lefebvre, of which Philippe Brassac is CEO;
– Solid financial position – CET 1 ratio of 17%, return on equity of 11.6% and cash reserves of € 472 billion.
– Investor response to the new 2025 plan, having achieved the objectives of the 2019-2022 plan one year earlier than expected;
– Innovation strategy, one of the 3 levers of the business model: internally: 90% of the Group entities that have a “data-centric” architecture in 2022 and 300 million euros in IT efficiency gains, 100% of IT employees trained on new technologies at the University of Information Systems and tested 100% of emerging technologies on new services to businesses / customers: expansion of the range of leading applications (Ma banque Pro, Pro & Entreprises LCL, etc …), offer of solutions digital and mobile cash for small / medium merchants, European e-banking offer for large retailers and a full range of e-commerce;
– Enhanced environmental strategy: carbon neutrality by 2050 for its own footprint and on investment and financing portfolios / in 2022: total cessation of financing for unconventional hydrocarbon extraction projects, no mining or gas financing in the Arctic region / in 2025 : reduction to 20% in oil extraction, for all open funds actively managed by Amundi, energy rating higher than that of the competition and 20 billion euros committed to impact funds, renewable energy: doubling of the production capacity of renewable energy financed by Crédit Agricole Assurances at 10.5 GW
– 60% increase in investment banking exposure to non-carbon energies and development of the platform dedicated to hydrogen projects / 50% increase in the financing of renewable energies in France by Unifergie;
– Benefits from penetration into the Chinese (first foreign asset management company) and Indian (cash management offer) market;
– Strengthening of mobility financing through the partnership with Stellantis, operational in 2023 and the launch of an internal entity specialized in car, rental and mobility financing.
– Shareholders’ equity of 13.2 euros per share, compared to the stock market price;
– Russia-Ukraine war: strong impact on 1st quarter earnings due to provisions on risks of the 2 countries and the suspension of loans to Russian companies;
– Integration of Italian CreVal and Lyxor;
– 2021 dividend of € 1.05 (of which € 0.2 for the 2019 recovery).
The negative effects of rising interest rates
Rising interest rates usually cause bank income to increase through loans. In Europe, according to a survey conducted by S&P of 85 banking institutions, the sector expects an average increase of 18% in the interest margin. However, this new inflationary environment also has undesirable effects, notably an increase in refinancing costs. It is also accompanied by the fear of a new recession, which would then affect all the bank’s activities, from loans to asset management, whose income is correlated to market valuations. Reassuring element: euro area banks are strong enough to cope with a deteriorating environment.