PARIS Credit Agricole (CAGR.PA) reported a more than twelvefold increase in quarterly profit on Tuesday from a year-ago period depressed by Greece and Italy-related provisions as France's No. 3 bank refocuses on its home market.
Chief Executive Jean-Paul Chifflet said he expected the bank - which in 2012 posted a loss close to 4 billion euros ($5.3 billion) related to its exit from Greece and asset writedowns - to deliver a "significantly positive" result for the full year.
While the bank's profit and revenue beat analysts' forecasts, helped by cost cutting and its investment bank, Chifflet sounded a cautious note on the French economy, which has become all the more important to the 119-year-old semi-cooperative bank as it has refocused on its domestic turf.
"The economic situation remains weak and we're proceeding in an environment that's too heavy with constraints for the banks," Chifflet told journalists on a conference call, adding that management remained "cautious over the medium- to long-term".
Last week, Credit Agricole finalized the long-awaited sale of 80.1 percent of its Asian CLSA brokerage unit for $842 million, one of a series of moves over the past year aimed at reversing an expansion drive into investment banking and foreign markets.
The bank will book a $1.15 billion gain on the sale - including the original sale of a 19.9 percent stake in July 2012 - in the third quarter.
Investor optimism that shares in the bank - which trades at 0.45 times its book value compared with a sector average of 0.68 - were cheap has helped fuel a 29 percent surge so far this year, nearly triple the European sector .SX7P.
Net income in the three months ended June 30 rose to 696 million euros ($922 million) from 56 million a year earlier, exceeding the 514 million average of estimates in a Thomson Reuters I/B/E/S poll of analysts.
"This is a good set of results, with a beat in every division," a Paris-based trader said. "French retail performed well, CIB (corporate and investment banking) beats expectations, while (the) cost of risk is also a positive."
Credit Agricole shares traded in Frankfurt (CAGR.F) were up 4.5 percent at 0622 GMT (2:22 a.m. EDT).
Still, capital remains a concern for some analysts, especially given regulators' renewed focus on leverage - a measure of equity to assets.
Credit Agricole leverage under Basel III rules is at 1.7 percent, compared with the 3 percent regulators are targeting for 2018, according to a recent JPMorgan research note.
Credit Agricole has preferred to focus on the leverage ratio at a group level, including the regional banks that control the listed entity, which it said stands at 3.5 percent.
The group's fully-loaded Basel III core capital ratio rose to 10 percent as of June 30 from 9.6 percent at the end of the first quarter. But no such figure was disclosed for the listed entity.
Credit Agricole Chief Financial Officer Bernard Delpit said only the group level ratios should matter.
"It's on that level up until now that we've dealt with regulators as well as with credit ratings agencies," he said.
Delpit said the bank had cut its global payroll, which stood at 150,000 at year-end, by 9 or 10 percent from the year-ago quarter, resulting in a roughly 50 million euro reduction in personnel costs.
Revenue fell 0.9 percent to 4.39 billion euros, compared with an average poll estimate of 4.16 billion.
Results were mixed at the lender's retail units, while profit at its investment bank jumped 38 percent, helped by fixed-income capital markets, following in the footsteps of similarly strong results at rival Societe Generale (SOGN.PA) last week.
($1 = 0.7553 euros)
(Additional reporting by Blaise Robinson; Editing by James Regan and Mark Potter)