French Banks' Profits Boosted by Retail Banking

PARIS—French banks Socié té Gé né rale SA and Cré dit Agricole SA on Thursday reported a jump in third-quarter net profit, lifted by their retail banking business, as France chugs toward economic recovery.

While Socié té Gé né rale said net profit rose 28% to €1.13 billion ($1.23 billion) in the three months through September, Cré dit Agricole posted a 15% increase in net profit to €930 million.

Socié té Gé né rale's revenue increased by 8% to €6.36 billion, and Cré dit Agricole's revenue fell 2% to €3.92 billion.

The French banks' earnings this quarter reflect an uptick in loan demand in France, as the country's economy progressively recovers from back-to-back crises.

Socié té Gé né rale's retail bank in France posted a net profit of €410 million, up 29% from a year ago, while Cré dit Agricole's retail banking net profit rose 2% to €250 million.

A €447 million gain because of an accounting rule that permits banks to post paper profit when the value of their own credit declines also helped push Socié té Gé né rale's higher, while Cré dit Agricole's stake in investment firm Eurazeo boosted the French bank's earnings this quarter.

However, market volatility, fueled by fears over slower growth in China, dented the two lender's corporate and investment banking business.

Socié té Gé né rale's global banking and investor solution business posted a 30% drop in net profit to €320 million in the third-quarter, while Cré dit Agricole's corporate and investment bank reported a 3% decline in net profit to €256 million.

A strong third-quarter allowed the French banks to continue to increase their capital buffers to meet stricter regulation.

Socié té Gé né rale's core tier-one ratio, which compares top quality capital such as equity and retained earnings with risk-weighted assets, stood at 10.5%, up from 10.4% at the end of June. Cré dit Agricole's core tier-one ratio rose to 10.3%, up from 10.2% in June.

Socié té Gé né rale's leverage ratio, which measures capital held by the bank against its total assets, rose to 3.9%, while that of Cré dit Agricole increased to 4.4%.

Cré dit Agricole, however, made no progress this quarter with its plans to simplify its complex corporate structure, which has for a long time dragged on its valuation. The French bank has been working on a restructuring plan for over a year—Cré dit Agricole is 56%-owned by the group's regional retail banks, and in turn it controls 25% of these lenders—but it has yet to agree terms with European regulators..

When asked for an update, Cré dit Agricole deputy chief executive Xavier Musca told reporters the situation hadn't changed, sending shares sharply lower.

The bank appointed Wednesday long-serving executive Dominique Lefè bvre in a new group chairmanship role—he will chair the listed entity and the regional retail banks.

Write to Noemie Bisserbe at noemie.bisserbe@wsj.com

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(END) Dow Jones Newswires

November 05, 2015 05:15 ET (10:15 GMT)

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