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Credit Agricole Caught in Fixed-Income Slump Like French Rivals

Fabio Benedetti Valentini
Credit Agricole SA Photographer: Balint Porneczi/Bloomberg

Credit Agricole SA’s trading revenue slumped in the first three months of the year, squeezing earnings at its investment bank.

Credit Agricole took a cautious stance. At the end of March, its corporate and investment bank reduced its risk-weighted assets by more than 10 percent from a year earlier, “due to a highly selective approach and a reduction in capital consumption,” the company said in a statement Tuesday. A “more difficult environment” in capital markets and a stronger euro also weighed on its performance.

Like its French rivals, Credit Agricole failed to keep pace with trading gains seen on Wall Street and some of the other top European investment banks in the first quarter. At both BNP Paribas SA and Societe Generale SA, sales from buying and selling fixed income, currencies and commodities slumped by almost a third from a year earlier.

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Credit Agricole’s trading revenue fell 24 percent to 464 million euros ($554 million) in the first quarter from a year earlier, the bank said Tuesday. That’s below the 568 million-euro average estimate of four analysts surveyed by Bloomberg News. France’s second-largest bank by market value exited most of its equity-trading businesses several years ago, giving it little chance to capture business flows that some rivals had from a return of volatility, especially in U.S. stock markets.

Revenue rose 4.4 percent to 4.91 billion euros, below the 5.02 billion-euro average of analyst estimates.

Brassac Plan

Worries about a slowdown in the euro-area economy and the challenges posed by the European Central Bank’s exit from stimulus measures are clouding the picture for big European banks trying to rekindle earnings despite higher regulation costs and record-low rates. Still, Credit Agricole Chief Executive Officer Philippe Brassac is gearing the bank toward higher profitability and revenue growth, partly through a push in asset and wealth management.

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Credit Agricole remains “well on track” to reach its 2019 targets, Brassac said in the statement.

Last year, Credit Agricole expanded with Amundi SA’s purchase of Pioneer Investments and the acquisition of three local lenders in Italy, its second-largest retail market. The acquisitions as well as higher asset-gathering income helped offset lower revenues from trading and French retail banking. As it refocused in 2017, Credit Agricole also sold stakes in French private-equity firm Eurazeo SA and Banque Saudi Fransi.

Credit Agricole stock has fallen about 3 percent so far in 2018, giving the bank a market value of about 38 billion euros. Europe’s benchmark Stoxx 600 banks index is little changed this year.

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