(AOF) – Crédit Agricole on Wednesday presented the group’s share of net profits down 3.6% in the third quarter, to 1.35 billion euros. This decline is explained by “the exceptional results of the third quarter of 2021”, according to its CEO Philippe Brassac. The net profit is slightly higher than expected, the consensus foresees 1.2 billion euros. In the last quarter, the bank benefited from extraordinary items for approximately +79 million euros.
The sale of La Médicale to the insurer Generali allowed it to realize a capital gain of 101 million euros, while the integration of Lyxor into the asset management business cost it 4 million euros.
Crédit Agricole’s net banking income (NBI) increased by 0.6% to € 5.56 billion in the third quarter. In detail, income from wealth management increased by 11.6%, to € 226 million, while the insurance business grew more modestly (+ 1.3%, to € 602 million). Managed savings, on the other hand, stalled, with a drop in revenues of 4.7%, to 738 million euros.
The underlying corporate and investment banking revenues increased by 4.5% to 1.3 billion euros, thanks to the favorable exchange rate effect and the good performance of corporate banking. Market activities decreased by 5.7% to 520 million euros.
In retail banking in France, Crédit Agricole was affected by the specificities of the fixed-rate mortgage market linked to the usury rate regulations as well as by the increase in the remuneration of regulated savings accounts. However, the increase in commissions offset the decline in net interest income.
Furthermore, Crédit Agricole’s cost of risk reached 30 basis points in the third quarter, a level equivalent to that recorded before the Covid-19 crisis in 2019. However, it increased by 35% compared to the third quarter of 2021, year economic recovery. Crédit Agricole maintained its cautious approach and revised its economic scenarios.
Crédit Agricole’s CET1 solvency ratio decreased by 90 basis points compared to 30 December 2021, reaching 11% as of 30 September 2022, within the group’s target range in its medium-term plan. The decrease is explained by the impact of the rise in interest rates which generated unrealized losses in life insurance, the impact on markets, in particular on foreign exchange and on Russia.
“These market effects are reversible and Crédit Agricole’s solvency ratio remains 310 basis points above regulatory requirements, much more than other systemic banks,” emphasizes Jérôme Grivet, deputy general manager of the green bank. Who reiterated his intention to pay a dividend of 20 cents per share in 2023 as part of the 2019 dividend recovery.
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– Listed vehicle of the mutual group of the same name, 1
French bank and 8
– 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 bank of choice for individuals, entrepreneurs and institutions, local responsibility in support of digitization 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 11.3% at the end of June and liquidity reserves of € 468 billion.
– New “Ambitions 2025” plan: net profit of more than 6 billion euros and return on tangible equity of more than 12% / acceleration of technological and digital transformation with 20 billion budget for IT and digital, of which 1 billion for technological transformation / cash distribution of 50% of the result;
– 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, a European e-banking offer for large retailers and a full range of e-commerce;
– Environmental strategy aimed at carbon neutrality in 2050 for its own footprint and for investment and financing portfolios; Target 2025: reduction of oil exposure to oil extraction to 20% / for Amundi open funds under active management, energy rating higher than that of the competition and € 20 billion committed to impact / growth funds 60% of exposure of the non-carbon energy investment bank and development of the platform dedicated to hydrogen projects / 50% increase in the financing of renewable energy in France / Target 2030: launch of two new activities, Transitions & Energies for the accessibility of accessible energy transitions and Health & Territories for access to care and “age well”;
– Benefits from the penetration of Chinese markets (1
foreign asset management company) and Indian (cash management offer);
– Strengthening the financing of mobility through the partnership with Stellantis, operational in 2023 and the launch of a specialized internal entity.
– Integration of Italian CreVal and Lyxor;
– High impact of provisions and increased cost of risk in the Ukraine and Russia area, resulting in a 16.1% drop in net profit from 1
– Difficult market prospects for 2
n / a
half year, excluding the United States: sharp decline in growth and increase in inflation in Europe, stagflation in emerging countries and rise in reference rates.
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.