Agricultural credit: Russia weighs on the first quarter, solvency disappoints


AGRICULTURAL CREDIT: RUSSIA WEIGHS ON THE FIRST QUARTER, SOLVENCY DISAPPOINTS

by Julien Ponthus

PARIS (Reuters) – Crédit Agricole SA reported a sharp drop in first-quarter profits on Thursday after booking more than half a billion euros in provisions related to its exposure to Russia and Ukraine. .

A solvency ratio below expectations, higher than expected costs and unfavorable comparisons with its major French competitors, BNP Paribas and Société Générale weighed on the group’s share price: it fell 2.13% to 10.18 euros mid-morning, the biggest drop in the CAC 40 index, then up 1.83%.

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

Crédit Agricole SA (CASA), France’s second-largest listed bank, said its net profit fell 47.2% year-on-year to 552 million euros after opting for “cautious” loss provisioning potential due to Russia’s invasion of Ukraine.

It has thus provisioned in full, ie for 195 million euros, the value of the equity of its Ukrainian subsidiary, while the provisions on exposure to Russia amount to 389 million.

“The group has, financially, made a choice of prudence in the face of very low proven risks”, declared the general manager, Philippe Brassac, during a press briefing.

Without this choice, net profit for the quarter would have increased by 10% and exceeded one billion euros, he added, highlighting the increase in revenues in all of the group’s divisions and a reduction in the cost of risk outside Russia.

Some analysts point out, however, that the costs were higher than estimated and are concerned about the decline of 0.9 points in three months in the CET1 (“core equity tier one”) solvency ratio, to 11% at the end of March.

“We expect this to penalize the stock as it means excess capital is gone when there could be further headwinds this year,” Jefferies said in a note, judging the quarterly results broadly. “not good enough”.

EXPOSURE TO RUSSIA REDUCED BY 20%

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

Its chief financial officer, Jérôme Grivet, explained that given the financial strength of the group’s Russian counterparties, he was not particularly concerned about the risk of additional losses linked to residual exposure.

The group, which has set itself the objective of distributing half of its profits to its shareholders, has confirmed its intention to pay a dividend of 1.05 euros per share for 2021, which includes a catch-up of 0.20 euros. of the dividend for 2019, the payment of which had been prevented by regulatory constraints.

In the first quarter, net banking income (NBI) increased by 8.1% to 5.938 billion euros, with all the group’s businesses posting growing revenues.

Corporate and investment banking (BFI) activities posted growth of 4.3% in their underlying revenues to 1.425 billion euros despite a 2.8% decline in those drawn from the markets. Revenues from the Fixed Rates, Currencies and Commodities (FICC) division fell 9.1%, a decline only partially offset by the 40.1% jump in equity activity.

The listed asset management subsidiary Amundi published quarterly revenues of 835 million euros last month, up 8.4% year on year, thanks to a 15% growth in assets under management.

The leaders of the group refused to give details on their external growth strategy in Italy but said they hoped to develop the partnership with Banco BPM, of which Crédit Agricole took 9.2%, which fueled speculation about a possible takeover. .

They also refused to mention their medium and long-term objectives, which will be part of the strategic plan for 2025, the presentation of which is scheduled for June 22.

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

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