Credit Agricole reports smaller-than-expected rise in Q1 profit

(Sharecast News) - Cr�dit Agricole reported a smaller-than-expected rise in first-quarter profit on Thursday, as higher provisions linked partly to the Iran war and weaker investment banking revenues offset resilient retail banking and savings activity.

France's second-largest listed bank said net income group share rose 1.8% year on year to �1.68bn, below analyst expectations of about �1.71bn to �1.72bn cited by Bloomberg and Reuters.

Revenue increased 0.9% to �6.99bn, also short of expectations, while operating expenses edged down 0.2% to �3.98bn.

Gross operating income rose 2.4% to �3.01bn and the cost-income ratio improved by 0.6 percentage points to 56.9%.

At group level, Cr�dit Agricole reported net income group share of �2.10bn, up 5.5%, on revenue of �10.0bn, up 2.8%.

Operating profit rose 6.2%, helped by controlled costs and a sharp improvement in net interest income at the regional banks.

The bank said the quarter showed "robust results despite market turbulence", supported by sustained activity across its business lines, digital customer growth and expansion in Europe.

"Despite the challenges, the group posted solid and growing results for the first quarter," said Cr�dit Agricole SA chief executive Olivier Gavalda.

"These results reflect a sustained development across all the business lines, an acceleration in the digitalisation of customer journeys, and continued expansion in Europe."

Credit costs rose sharply, however.

Cr�dit Agricole SA's cost of risk increased 32.2% to �547m, while the wider group's cost of risk rose 30.6% to �960m.

The bank said the increase reflected prudent provisioning, including �28m of geo-sectoral provisions linked to the conflict in the Middle East and a �17m additional legal provision for UK car loans at its consumer finance business.

Chief financial officer Clotilde L'Angevin told reporters that about �100m of the provisions were precautionary and reflected preparation for a possible deterioration in the macroeconomic outlook, rather than a material rise in defaults.

"This is prudent provisioning, and the actual risk remains very contained; it is even down compared with the fourth quarter," she said, according to Reuters.

"Within the �100m, we have �28m of sectoral and geographic provisions at CACIB, for example on petrochemicals and aviation."

Corporate and investment banking revenue fell 4.0% to �1.81bn, or 0.3% excluding foreign exchange effects, against a record first quarter last year.

Fixed income, currencies and commodities revenue declined 9.0%, while financing activity revenue fell 6.0%.

Those declines were partly offset by strong momentum in structured equity, mergers and acquisitions and equity capital markets, where revenue rose 26.9%, or 29.4% at constant exchange rates.

Retail banking was stronger.

LCL, the group's French retail bank, increased revenue by 8.2% to �1.04bn, helped by higher net interest income as funding costs eased and loans continued to reprice.

Net income group share at LCL rose 11.0%.

In Italy, Cr�dit Agricole Italia revenue rose 2.6% to �798m and net income increased 3.2% to �184m, despite a higher tax rate.

Loan production in Italy rose 34%, driven by a doubling in corporate lending.

Asset gathering remained a major support, with assets under management across asset management, insurance and wealth management rising 6.9% year on year to �3.08tn.

Amundi's assets under management reached a record �2.40trn after �32bn of net inflows, although asset management revenue fell 8.8% after the disposal of Amundi's US business and the consolidation of its stake in ICG.

Cr�dit Agricole said Amundi recorded �9bn of outflows from UniCredit networks, but those were more than offset by inflows elsewhere.

Specialised financial services were weaker, with net income group share down 52.4% to �71m.

The division was hit by higher risk costs, the UK car loans legal provision, weaker used-car income at Leasys and a tougher comparison in China.

Personal finance and mobility revenue was broadly stable, but profit fell sharply.

The bank's capital position disappointed investors.

Cr�dit Agricole SA's phased-in common equity tier one ratio fell to 11.4% at the end of March from 11.8% at the end of December, below the almost 12% expected by analysts cited by Bloomberg.

The wider group's CET1 ratio stood at 17.1%, down from 17.3%, which the bank said remained the strongest level among European global systemically important banks.

The quarter also included further strategic moves in Europe.

Cr�dit Agricole increased its stake in Banco BPM to 22.9%, agreed to acquire Bank Lviv in Ukraine and launched the CA Savings digital savings platform in Germany.

Italy remained the bank's largest market outside France and a key part of Gavalda's growth plan, although Banco BPM was at the centre of broader consolidation speculation in Italian banking.

Separately, SAS Rue La Bo�tie, the investment vehicle controlled by Cr�dit Agricole's regional mutual banks, told Cr�dit Agricole SA it intended to buy up to �800m of the bank's shares on the market by the first quarter of 2027, while keeping its stake below 65%.

At 1350 CEST (1250 BST), shares in Credit Agricole were down 5.05% in Paris at �16.36.

Reporting by Josh White for Sharecast.com.