Credit Agricole disappoints the market in the third quarter with lower-than-expected revenue

Crédit Agricole logo in Reze

PARIS (Reuters) – Credit Agricole disappointed the market on Thursday after it reported income and capital placed below expectations in the third quarter, weighing on the headline in the stock market.

In a research note, Jefferies analysts noted that with lower-than-expected revenue and operating expenses growth of 4.4%, the impact of the unwinding is “largely negative” for the quarter.

Revenue was below expectations in the capital and insurance markets, JPMorgan analysts said, adding that costs were higher than expected in wealth management.

In the stock market, Crédit Agricole SA stock was down -4.8439% to €9.233 at 9:36 am, the second biggest drop in the CAC 40 index.

In the third quarter, the second French bank by market value, after BNP Paribas, recorded a net profit of 3.6% lower to 1.35 billion euros, while its revenue increased by 0.6.

In corporate and investment banking (BFI), Crédit Agricole SA’s revenue grew 4.5% during the quarter.

If it increased by 12.6% in financing, then revenue decreased by 5.7% in market activities.

“Overall, we have less risk than our competitors, which may explain why we don’t have a similar performance in situations of high market volatility,” Xavier Musca, Executive Vice President of Crédit Agricole SA, emphasized during a press conference.

In Europe, banking institutions such as Britain’s HSBC, Germany’s Deutsche Bank and Italy’s UniCredit reported strong results for the third quarter, thanks to higher trading yields and higher borrowing costs in the context of interest rate hikes by central banks to combat inflationary pressures.

In France, BNP Paribas indicated last week that it expects a surplus of around €2 billion in income by 2025 with interest margin growth thanks to higher interest rates.

RUE LA BOÉTIE Holdings will acquire shares

On top of provisions for credit risk, Crédit Agricole SA saw a 35.5% cost-of-risk increase in the third quarter and believes it has made enough provision to meet economic volatility.

“We are at the tip of the iceberg in terms of sourcing,” said Philippe Brassac, CEO of Crédit Agricole SA.

“This level, the decades-long build-up of the group’s caution, puts us at relative intellectual comfort (…) regarding these difficulties, this uncertainty of the economy over the next two or three years and allows us to focus on what to invest in in the long term.”

In a separate press release, SAS Rue La Boétie, the holding company that holds regional banks’ equity participation in Crédit Agricole SA (CASA), indicated that it wants to acquire up to €1 billion of CASA shares by the end of the first half of 2023.

However, the holding company, which currently owns approximately 57% of CASA, specifies that it does not intend to increase its stake above 65%.

This announcement of the holding company, according to analysts at Jefferies, should support the title in the short term.

(Reporting by Sylvia Aloisi and Matthew Brottard, Editing by Nicholas Delam and Sophie Lott)