Agricultural credit: Russia weighs the first quarter, solvency is disappointing

Julien Pontus

PARIS (Reuters) – Crédit Agricole SA reported a sharp drop in profits in the first quarter on Thursday after booking more than half a billion euros in risk-related reserves for Russia and Ukraine.

Lower-than-expected solvency, higher expected costs and unfavorable comparisons with major French competitors, BNP Paribas and Société Générale, affected the group’s share price: it fell 2.13% to 10.18 euros in the morning, the biggest drop in CAC 40 then by 1.83%.

At the same time, Societe Generale rose by 1.72% and BNP Paribas by 1.98%.

Crédit Agricole SA (CASA), France’s second-largest stock exchange bank, said its net profit fell 47.2% year-on-year to 552 million euros after choosing a “cautious” potential to reserve losses due to Russia’s invasion of Ukraine.

Thus, it fully provided, ie for 195 million euros, the value of the equity of its Ukrainian subsidiary, while the risk reserves in Russia amount to 389 million.

“The group has made a financial choice with caution in the face of very low proven risks,” said general manager Philippe Brassac during a press briefing.

Without this choice, the net profit for the quarter would have increased by 10% and exceeded one billion euros, he added, emphasizing the increase in revenues in all divisions of the group and reduce the cost of risks outside Russia.

However, some analysts note that costs were higher than estimated and concerned about a 0.9 percentage point drop in the three-month solvency ratio of CET1 (“tier 1 capital”) to 11% in late March.

“We expect this to damage stocks, as it means that surplus capital has disappeared when additional hurdles arise this year,” Jeffries said in a note, assessing the quarterly overall performance. “Not good enough.”

EXPOSURE FOR RUSSIA REDUCED BY 20%

Crédit Agricole SA, which has suspended all its activities in Russia, added that its influence in this market had fallen by 1.1 billion euros since the start of the war to 4.4 billion euros at the end of March.

Its chief financial officer, Jerome Grive, explained that, given the financial strength of the group’s Russian counterparties, he was not particularly concerned about the risk of additional losses associated with residual risks.

The group, which has set itself the goal of distributing half of its profits among shareholders, has confirmed its intention to pay a dividend of € 1.05 per share for 2021, which includes a dividend of € 0.20 for 2019. , the payment of which was hindered by regulatory restrictions.

In the first quarter, net banking income (NBI) rose 8.1% to 5.938 billion euros, with all companies in the group showing revenue growth.

Corporate and investment banking (BFI) recorded an increase in basic income of 4.3% to 1.425 billion euros, despite a decrease of 2.8% of income from markets. Revenues from the fixed exchange rate, currency and commodities unit (FICC) fell by 9.1%, the decline was only partially offset by a jump in capital activity by 40.1%.

Amundi’s asset management subsidiary posted quarterly revenue of € 835 million last month, up 8.4% from the same period last year, thanks to a 15% increase in assets under management.

The group’s leaders declined to give details of their external growth strategy in Italy, but said they hoped to develop a partnership with Banco BPM, in which Crédit Agricole received 9.2%, sparking speculation about a possible takeover.

They also declined to name their medium- and long-term goals, which will be part of the strategic plan for 2025, which is scheduled for presentation on June 22.

(Report by Julien Ponthus, French version by Marc Angrand, edited by Kate Entringer)