* Q4 net income 612 mln euros vs 548.7 mln forecast
* To propose dividend at 0.35 euros/share
* C.Agricole says solvency ratios above target
* Shares outperform broader market
(Adds details, analyst comments)
By Maya Nikolaeva and Matthias Blamont
PARIS, Feb 19 France's Credit Agricole
flagged improving conditions in its main markets of France and
Italy on Wednesday as it proposed its first shareholder payout
since 2010 and beat its own annual solvency targets.
The number-three listed French bank by market value reported
2013 net income of 2.5 billion euros ($3.4 billion), turning a
page on two straight years of losses marked by a painful exit
from Greece, Italy-related provisions and a pullout from riskier
The bank said the economic outlook for France and Italy was
improving slightly and that it would need to set aside less
money for bad loans.
"Our fundamentals are sound," Chief Executive Jean-Paul
Chifflet told journalists. "We believe that the French economy
will get better in 2014... and in Italy revenues should improve
and reserves for bad loans should stabilise".
Shares in Credit Agricole outperformed broader markets
, rising 1.6 percent by 0938 GMT.
"The results reflect that the situation is back to normal,"
Pierre Chedeville, an analyst at CM-CIC Securities said in a
note to clients.
Credit Agricole said it expects its net interest margin - a
metric that shows how profitable its lending is - to be flat in
its main French market in 2014. The French recovery is so far
struggling to pick up speed, with unemployment near 11 percent.
Credit Agricole has slimmed down its investment banking
business over recent years and has cut costs, as tougher
regulation and volatile markets hurt, in what it called a
successful refocusing on core domestic retail operations.
"Buoyant" results at its retail business and stronger
inflows in savings management and its asset management arm
Amundi helped offset a decline in investment banking revenues in
The bank, which plans to unveil a three-year strategic plan
on March 20, reiterated its ambition to have the largest network
of bank branches among European lenders by 2020.
Credit Agricole has not yet disclosed targets for return on
equity or dividend payout ratios, unlike French rivals Societe
Generale and BNP Paribas.
The bank said it would propose a dividend of 0.35 euro per
share, either in cash or shares. Major shareholder SAS Rue la
Boetie is opting for payment in shares, the bank said. Credit
Agricole offered a higher dividend payout ratio than SocGen, but
lower than BNP, at 35 percent.
SOLID CAPITAL STRUCTURE
Credit Agricole said it was ahead of schedule on solvency
targets last year, exceeding regulatory requirements and
Regulators and rating agencies are looking at Credit
Agricole at the group level to analyse its capital.
The listed bank Credit Agricole is controlled by a network
of regional savings banks that together form the Credit Agricole
Its fully-loaded common equity Tier 1 ratio under
international rules was 11.2 percent at Dec. 31 versus the
bank's forecast of 11 percent and the 8.5 percent required by
The group leverage ratio stood at 3.8 percent, versus 3.5
percent at the end of the third quarter and 3 percent required
"We are not worried, but vigilant," Chifflet said, referring
to the details it will have to supply to the European Central
Bank's asset quality review, which will involve around 130
experts scrutinizing the group's balance sheet. Around 20 of
them have already started.
Credit Agricole shares are trading at a 20 percent discount
to its European peers, Deutsche Bank analysts say citing
concerns about the solvency of the group's listed entity. Its
fully-loaded common equity Tier 1 ratio came in at 8.3 percent
as of January versus a forecast of 7.8 to 8 percent.
Credit Agricole said retained earnings, new accounting
methods at its Italian unit and a reduction in risk-weighted
assets helped the bank exceed solvency targets for 2013.
The bank reported a better than expected fourth-quarter net
profit of 612 million euros, compared with a 3.98 billion net
loss for the same period a year earlier. That exceeded the
548.74 million of mean estimates in a Thomson Reuters I/B/E/S
poll of analysts.
Tax benefits in France and Italy, gains from lower loan-loss
provisions and cost cuts helped offset a loss of 132 million
euros related to the planned sales of its Bulgarian unit and its
Nordic consumer finance entities, mainly in Sweden and Denmark.
($1 = 0.7272 euros)
(Editing by Andrew Callus and Erica Billingham)