May 15, 2018 / 5:06 AM / 10 days ago

Credit Agricole misses forecast on weak retail, capital markets

PARIS (Reuters) - French bank Credit Agricole’s (CAGR.PA) quarterly profit fell short of expectations on Tuesday as lower revenue from its domestic retail and capital markets trading businesses ate into gains from asset management.

The bank has been narrowing its focus towards its key markets of France and Italy. It has also been making acquisitions in retail and wealth management, while selling off some assets, such as its Egyptian banking business and a stake in investment firm Eurazeo (EURA.PA).

First-quarter net income rose 1.2 percent to 856 million euros (760 million pounds), just below the average estimate of 878 million euros, according to a Reuters poll of six analysts.

Revenue rose 4.4 percent to 4.91 billion euros versus the 4.98 billion expected by analysts.

Nevertheless, shares in France’s second-biggest bank climbed, with some analysts encouraged by its growth in areas such as insurance and asset management.

“Stock should be under pressure; however, we consider this quarter as a transitional one and we buy on weakness,” wrote analysts at investment bank Jefferies.

Credit Agricole has over the past year simplified a complex shareholding structure with its parent mutual banks to ease investor concerns about its ability to build capital buffers and maintain its dividend payouts.

It now sees insurance and asset management as key revenue growth engines.

Asset manager Amundi (AMUN.PA), majority-owned by Credit Agricole, had already reported higher first quarter profits as its integration of Pioneer Investments progressed ahead of schedule.

FILE PHOTO: Credit Agricole bank logo is seen on a credit card in this picture illustration taken in Bordeaux, Southwestern France, August 22, 2016. REUTERS/Regis Duvignau/File Photo

Credit Agricole’s revenue from asset gathering, which includes insurance, asset and wealth management, rose 17 percent to 1.47 billion.

However, Credit Agricole followed French peers in reporting a drop in earnings from fixed-income trading, with underlying revenues in market activities dropping 23.8 percent.

Like rivals, Credit Agricole cited a ‘wait-and-see’ approach by clients in the first quarter and low euro bond issuance as reasons for the subdued performance in this area.

Another weak spot was French retail banking, where revenues fell 5 percent after last year’s first quarter turned out to be a peak in renegotiation fees for mortgage loans.

“All the better that the renegotiations are over. We do not have one-shot commissions that we had during the first quarter, but in return, all other commissions have grown in Q4 versus Q1,” Chief Executive Philippe Brassac told journalists.

Credit Agricole confirmed its guidance for stable revenue in French retail in 2018 versus a year ago.

Credit Agricole is the worst performer among French banks so far this year after full-year results were hit by several one-off items, including an exceptional tax surcharge introduced by the French government for the largest corporates.

    Its shares, which rose 17 percent in 2017, are down around 2 percent in 2018, versus a 2.7 decline in European 600 Banks index .SX7P.

    Reporting by Maya Nikolaeva and Matthieu Protard; Editing by Sudip Kar-Gupta and Mark Potter

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