UPDATE 2-Credit Agricole profits rise, Italy improves

Wed May 7, 2014 3:08am EDT

Related Topics

* Bank to keep cutting expenses in difficult environment-CEO

* Health of bank's Italian consumer-loan unit improves

* Loan losses at investment bank halved in quarter

* Finalises sale of Newedge stake to Societe Generale (Adds detail, background)

By Lionel Laurent and Matthieu Protard

PARIS, May 7 (Reuters) - Credit Agricole, France's third-biggest listed bank, reported a 30 percent rise in quarterly net income on Wednesday as cost cuts took effect and the health of its Italian consumer-loan unit improved.

Credit Agricole, which is returning to its roots as a France-focused retail bank after a series of difficult acquisitions abroad, vowed to implement a recently unveiled strategic plan that calls for more cost cuts and a broader range of products to boost profits.

Its shares rose more than 4 percent, the top performer in the STOXX Europe banks index, which was down 0.8 percent.

"Credit Agricole delivered good results, ahead of consensus, driven by improving credit quality and good cost control," Jefferies analyst Omar Fall said in a note to clients. "We continue to view Credit Agricole as the only French bank (stock) worth owning."

The bank, which is majority owned by a network of cooperative regional lenders, said first-quarter net income rose to 868 million euros ($1.2 billion) from 469 million in the year-earlier period. Taking into account one-off items and the sale of assets in Belgium, the increase was 29.6 percent.

This was higher than the average 809.2 million-euro analyst forecast for net income as compiled by Thomson Reuters I/B/E/S.

Operating expenses fell 1.2 percent in the quarter, while loan-loss provisions were down 20 percent. The bank cited a turnaround at Italian consumer loan unit Agos Ducato, which received a capital injection from parents Credit Agricole and Banco Popolare last year.

Credit Agricole's other Italian retail brand, Cariparma, also saw a slight drop in loan losses after stripping out restated provisions that had already been disclosed in 2013.

Agricole, which like its rivals across Europe is selling assets to bolster its balance-sheet strength and improve profitability, said it had finalised the sale of its stake in brokerage Newedge to Societe Generale. It has also agreed to sell its 50 percent stake in Belgian bank Crelan.

Agricole said its core Tier 1 capital ratio, a key indicator of its ability to absorb losses, was 9.0 percent at the end of March, up from 8.5 percent in January.

"In a difficult environment, where revenues are set to rise in a limited way, we are committed to a serious and controlled management of costs," Chief Executive Jean-Paul Chifflet told journalists on a conference call.

PROVISIONS FALL

Agricole, which generates more than 70 percent of its revenue in France, has been selling assets and pulling out of markets such as Greece to meet tougher post-crisis regulation and a fragile economic environment. It returned to profit in 2013 after two years of losses.

Although the listed entity has frequently been singled out by analysts as having a less robust capital base than its larger domestic rivals, the bank has countered that regulators and ratings agencies are focused only on the much stronger capital ratios at its parent group.

Agricole's corporate and investment bank, which has been heavily restructured since the financial crisis, saw earnings increase after loan-loss provisions fell 50 percent.

The division's cost-to-income ratio also improved, falling to 56.7 percent from 60.3 percent.

Agricole also benefited from its deposit-rich parent group, which contributed 378 million euros in earnings to the listed bank, or 10 percent more than in the year-ago period.

($1 = 0.7177 Euros) (Reporting by Lionel Laurent; editing by James Regan and Tom Pfeiffer)

FILED UNDER: