Crédit Agricole to Refocus on Retail Banking

By Noemie Bisserbe

PARIS--French bank Crédit Agricole SA said Wednesday it would focus on its retail, asset management and insurance businesses to boost earnings over the next three years following the planned sale of its 25% stake in the group's regional cooperative banks.

The Paris-based lender, France's second-largest listed bank by assets, said it expected to achieve a net profit upward of EUR4.2 billion ($4.62 billion) in 2019, compared with EUR3.52 billion in 2015, helped by cross-selling and lower costs.

The bank targets a return on tangible equity--a measure of profitability--of more than 10% by 2019.

Crédit Agricole, which disclosed its new medium-term strategic plan on Wednesday, is under pressure to show that it can provide stable returns to investors, given its new revenue mix, and despite persistently low interest rates and choppy markets.

Last month, Crédit Agricole announced its plan to sell the stake it holds in the group's regional lenders back to those banks. Crédit Agricole is currently 56%-owned by the group's regional cooperative lenders and in turn controls 25% of those banks.

While the move will help simplify its much-criticized structure and address investors' concerns on its capital strength, it will also cut Crédit Agricole's earnings by about EUR470 million.

To make up for the lost income, the bank said it would increase cross-selling between the group's retail cooperative lenders and Crédit Agricole's insurance, asset management and consumer credit businesses, generating additional annual revenue of EUR400 million by 2019.

Despite the sale, Crédit Agricole expects total revenue to grow annually by 2.5% between 2016 and 2019.

It targets a 3% annual growth in revenue for its insurance and asset management division between 2016 and 2019, and a 2.5% annual revenue increase for its financial services business--including leasing and consumer credit--during the same period.

LCL, its French retail banking arm, and Cariparma, its Italian lender, are expected to generate annual revenue growth of 0.5% and 3% respectively between 2016 and 2019.

Crédit Agricole also said it planned to trim its investment bank to focus on more profitable clients and meet stricter financial regulation in Europe. The lender said it will cut risk-weighted assets at its investment bank by EUR10 billion and reduce annual costs by EUR230 million by 2019. Still, it expects, corporate and investment banking revenue to grow annually by 2% over the next three years.

Crédit Agricole is targeting total cost-savings of EUR900 million by 2019 through job cuts, the revamp of its IT system, and the simplification of its legal structure. At the same time, it will invest EUR4.4 billion to develop its digital banking services, meet new banking regulation and rationalize costs.

Its core tier-one ratio, which measures the amount of top quality capital such as equity and retained earnings against risk-weighted assets, will stand above 11% in 2019.

From next year on, the bank said it will redistribute 50% of its profit in cash dividends to its shareholders.

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

(END) Dow Jones Newswires

March 09, 2016 01:44 ET (06:44 GMT)

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