TEXT-Fitch: Credit Agricole Q4 results ratings neutral

Thu Feb 21, 2013 12:21pm EST

Feb 21 - Fitch Ratings says that Credit Agricole's 
('A+'/Negative/'a') Q412 earnings release did not provide information that would
prompt any immediate rating action. Operating profit for the quarter (EUR1.4bn
as calculated by Fitch) was down by over 20% on Q312 (EUR1.8bn), but was much
higher than in Q411 (EUR0.2bn). However, Q4 is usually the lowest of the year,
especially for the Corporate and Investment Banking (CIB) business. Moreover,
Q412 results show continued progress in enhancing the bank's capital and funding
profile.

Fitch derives operating profit, its measure of underlying earnings, after
adjusting for items such as revaluation of own debt (a loss of EUR837m in Q412
as spreads came in) and impairment of goodwill (EUR2.8bn). Therefore, the bank
is posting a very large net loss (EUR3.4bn in Q412) despite making acceptable
operating profit.

The goodwill impairment charges, which were announced on 1 February 2013, were
significant and reflect the consumer finance activity (EUR921m largely related
to Italian subsidiaries), international retail banking (EUR923m also largely
related to Italian subsidiaries) and CIB (EUR834m, of which almost half related
to the brokerage subsidiary Newedge). Fitch understands that these impairments
are part of a clean-up exercise and relate to past acquisitions, but they also
indicate that future earnings from these businesses will be lower than
originally planned.

Nevertheless, domestic retail banking, by far the bank's main business line,
generated very stable quarter-on-quarter and year-on-year operating profit
(EUR1.4bn in Q412). This compares well with other domestic peers that suffered
from some contraction in operating profit from this business in the quarter.
Credit Agricole continued to grow both lending and deposit volumes, while
keeping loan impairment charges under control despite the difficult economic
environment in France. Fitch does not expect any material rise in loan
impairment charges in the coming quarters.

Fitch considers Credit Agricole's capital ratios adequate. Its pro-forma Basel
2.5 core Tier 1 regulatory capital ratio taking into account of the sale of its
Greek banking subsidiary rose to 11.8% at end-2012 and its pro-forma fully
loaded Basel III common equity Tier 1 ratio rose to 9.3%. This is essentially a
result of deleveraging. Credit Agricole's Fitch core capital ratio is lower than
the fully loaded Basel III ratio due to the full deduction of the net asset
value of the insurance subsidiary from Fitch core capital. The bank will not pay
dividends for the second year in a row, unlike the other major French banks.

The bank's funding profile improved throughout 2012. Its liquidity buffer
amounted to EUR230bn at end-2012 (EUR201bn at end-September 2012) and more than
covers the bank's one year short-term wholesale funding (EUR171bn, including
EUR34bn of repos). However, Fitch views the quality of this liquidity buffer as
weaker than for certain other large French banks. Deposits with central banks
represented 23% of the liquidity buffer at end-2012.

Additional information is available at www.fitchratings.com.
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