Cré dit Agricole to Refocus on Retail Banking
March 09 2016 - 2:20AM
Dow Jones News
PARIS—French bank Cré dit 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 €4.2
billion ($4.62 billion) in 2019, compared with €3.52 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.
Cré dit 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, Cré dit Agricole announced its plan to sell the
stake it holds in the group's regional lenders back to those banks.
Cré dit 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 Cré dit Agricole's earnings by about €470 million.
To make up for the lost income, the bank said it would increase
cross-selling between the group's retail cooperative lenders and
Cré dit Agricole's insurance, asset management and consumer credit
businesses, generating additional annual revenue of €400 million by
2019.
Despite the sale, Cré dit 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.
Cré dit 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 €10 billion and
reduce annual costs by €230 million by 2019. Still, it expects,
corporate and investment banking revenue to grow annually by 2%
over the next three years.
Cré dit Agricole is targeting total cost-savings of €900 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 €4.4 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 02:05 ET (07:05 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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