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Credit Agricole Profit Rises 85% on Lower Loan Provisions

By Fabio Benedetti-Valentini
May 07, 2014 12:06 PM EDT
Jean-Paul Chifflet, chief executive officer of Credit Agricole SA. Led by Chifflet, Credit Agricole cut its balance sheet last year by reducing market risks and selling units such as unprofitable Athens-based Emporiki Bank.
Photographer: Fabrice Dimier/Bloomberg
Jean-Paul Chifflet, chief executive officer of Credit Agricole SA. Led by Chifflet, Credit Agricole cut its balance sheet last year by reducing market risks and selling units such as unprofitable Athens-based Emporiki Bank.

Credit Agricole SA (ACA), France’s third-largest bank, said profit surged 85 percent in the first quarter as doubtful-loan provisions fell.

Credit Agricole rose 6.8 percent in Paris trading, the biggest jump in a year, after reporting that net income rose to 868 million euros ($1.21 billion) from 469 million euros a year earlier. Provisions for bad loans fell 20 percent, boosted by an improvement at its Italian consumer-finance unit Agos-Ducato.

Credit Agricole, which returned to an annual profit in 2013 following two consecutive years of losses, is betting on the nascent economic recovery in its key European markets of France and Italy. The lender said in March it’s targeting at least 4 billion euros of annual net income by 2016, compared with 2.51 billion euros last year.

“They’ve righted the ship and are back to profits that conform to their size,” said Jerome Forneris, a fund manager at Banque Martin Maurel in Marseille.

Credit Agricole shares climbed 76 cents to 11.86 euros in Paris, giving the company a market value of 29.7 billion euros. The shares have gained 27 percent in 2014.

Led by Chief Executive Officer Jean-Paul Chifflet, Credit Agricole cut its balance sheet last year by reducing market risks and selling units such as unprofitable Athens-based Emporiki Bank. It disposed of brokers Cheuvreux and CLSA last year and agreed to sell its 50 percent stake in derivatives brokerage Newedge Group.

BNP, SocGen

The bank’s shares are gaining “somewhat at the expense of other French banking stocks,” said Omar Fall, a London-based analyst at Jefferies who recommends buying Credit Agricole shares.

Societe Generale SA (GLE), France’s second-largest bank by market value, posted a 13 percent drop in quarterly profit today, hurt by a 525 million-euro goodwill writedown on its Russian unit. BNP Paribas SA (BNP) said last week it may need to pay “far in excess” of the $1.1 billion it has set aside for legal investigations by U.S. authorities.

“BNP has the overhang of its U.S. problem and SocGen has overhang in Russia, and both showed relatively poor profit progression,” Jefferies’ Fall said.

Credit Agricole’s corporate and investment banking profit rose 27 percent to 285 million euros. Profit from Credit Agricole’s French regional banks gained 10 percent to 378 million euros while net income at its LCL branch network fell 6.2 percent to 162 million euros, the company said.

Net income from Credit Agricole’s savings unit, which includes asset manager Amundi Group, insurance and private banking, fell 6.3 percent to 377 million euros, the bank said.

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

To contact the editors responsible for this story: Frank Connelly at fconnelly@bloomberg.net

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