PARIS Credit Agricole (CAGR.PA) reported a more than twelvefold increase in quarterly profit, becoming the latest French lender to beat forecasts as its slimmed down investment bank showed unexpected resilience.
However, France's third-biggest bank struck a cautious note on the domestic economy, which has become all the more important to the 119-year-old semi-cooperative bank as it unwinds an ill-fated expansion abroad.
"The economic situation remains weak and we're proceeding in an environment that's too heavy with constraints for the banks," Chief Executive Jean-Paul Chifflet said on a conference call, adding management was "cautious over the medium- to long-term".
France, the euro zone's second-largest economy, is struggling to haul itself out of a period of prolonged economic weakness, with jobless claims at a record high.
Nonetheless, Chifflet predicted Credit Agricole - which in 2012 posted a loss close to 4 billion euros ($5.3 billion) related to its exit from Greece and asset writedowns - would deliver a "significantly positive" result for the full year, helped by its disposal of problem businesses and cost cutting.
Net income in the three months ended June 30 rose to 696 million euros from 56 million a year earlier, beating analysts' average forecast of 514 million. Revenue fell 0.9 percent to 4.39 billion euros, also topping an 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, echoing strong results at rival Societe Generale (SOGN.PA) last week.
France's largest bank, BNP Paribas (BNPP.PA), also beat earnings forecasts, powered by its retail banks. Investment banking and asset management specialist Natixis (CNAT.PA) is set to announce results later on Tuesday.
At 0635 ET, Credit Agricole shares were up 1.4 percent, trimming an initial jump of up to 5.1 percent, but bringing their gains this year to 31 percent, about triple the European sector .SX7P.
"All the lights have turned green," said Jacques-Pascal Porta, a fund manager at OFI Gestion Privee in Paris.
"It's a bank that had suffered a lot and now we're seeing a logical re-rating that allows the group to return to a valuation level that corresponds to its profile, which is that of a less turbulent group."
CAPITAL IN FOCUS
Credit Agricole's capital remains a concern for some analysts, however, especially given regulators' renewed focus on its leverage - a measure of equity to assets - estimated by JPMorgan analysts at l.7 percent.
That compares with the 3 percent regulators are targeting for 2018. Credit Agricole has preferred to focus on the leverage ratio at the 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. No 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 nearly 10 percent from the year-ago quarter, resulting in a roughly 50 million euro reduction in personnel costs.
Credit Agricole acknowledged it had inadvertently published its results on Monday night at around 2000 GMT because of a "technical error". They had been scheduled to be disclosed at 0500 GMT on Tuesday.
($1 = 0.7553 euros)
(Additional reporting by Blaise Robinson; Editing by James Regan and Mark Potter)