PARIS/SHANGHAI (Reuters) - Credit Agricole (CAGR.PA) said it is in talks to sell all of its CLSA brokerage brand to China’s Citic Securities (600030.SS), in a change of strategy, and has dropped a second transaction to sell a stake in its Cheuvreux brokerage.
The French bank had announced last June that it wanted to sell 19.9 percent holdings in both businesses to China’s largest listed brokerage following more than a year of talks.
Credit Agricole left a question mark hanging over Cheuvreux on Thursday, meanwhile, saying only that it was reviewing its “new strategic orientations”, which it would reveal at a later stage.
”Credit Agricole is... in a situation where it needs to raise capital, and the sale of CLSA is rather welcome from this point of view,“ KBW analyst Jean-Pierre Lambert said. ”For Citic, buying CLSA makes sense and they have the means.
“The question now is to find out what fate Credit Agricole holds in store for Cheuvreux.”
Citic had agreed last year to pay $374 million for the two stakes, with the aim of uniting pan-European Cheuvreux with the more Asia-focused CLSA to tap into investment banking opportunities in the East and create a global brokerage platform.
The move was part of a plan by Credit Agricole to refocus on its domestic French retail business and cut back on riskier investment banking and complex financial products. Citic wants to step up international expansion amid slower growth at home.
The change of plan came “in view of new developments in economic conditions and the recent discussions between the parties”, Credit Agricole said in a statement.
The companies aim to conclude talks “within a short timeframe”, the French bank added. It did not give financial details.
Citic had said in December that the initially planned deals would be completed in early 2012, rather than at the end of 2011, as it would take longer than expected to gain regulatory approvals.
Citic also posted a 27 percent rise in fourth-quarter net profit on Thursday, helped by a one-off investment gain.
Net income during the October-December period rose to 9.2 billion yuan ($1.46 billion) from 7.3 billion a year earlier, according to Reuters calculations.
Citic sold a 51 percent stake in fund unit China Asset Management Co (AMC) for 8.3 billion yuan during the quarter, enabling the firm to post an 11 percent rise in full-year earnings despite a 10 percent drop in operating revenue.
Chinese securities firms, which derive most of their revenue from brokerage commissions, suffered last year as a 22 percent drop in the benchmark stock index .SSEC put many investors on the sidelines, causing a slump in trading volume. Turnover in 2011 was the worst since the global financial crisis of 2008.
They were also hit by lower returns from propriety trading, as well as reduced fee revenue from underwriting businesses due to a shrinking initial public offering market.
“We believe that volatile financial markets will probably offer us acquisition opportunities in our international expansion,” Citic said in its earnings report.
Local media reported this week that Citic slashed its proprietary businesses amid trading losses.
Additional reporting by Christian Plumb, Kazunori Takada and Matthieu Protard; Editing by Tim Dobbyn