Crédit Agricole Profit Hurt by Stake Sale -- Update

By Noemie Bisserbe

PARIS--Crédit Agricole SA said Thursday that its net profit plunged in the first quarter, hit by the planned sale of its 25% stake in the group's regional banks and debt restructuring.

The Paris-based lender, France's second-largest listed bank by assets, said net profit fell by 71% to EUR227 million ($259 million) in the three months to the end of March from EUR784 million a year ago. Revenue was down 13% at EUR3.8 billion.

The bank said it booked a EUR448 million charge to restructure part of its debt and help reduce future costs. Crédit Agricole also discounted the contribution from the group's regional lenders in its first-quarter earnings.

The profit figure missed forecasts of EUR314 million according to a FactSet poll, pushing the bank's shares sharply lower in early trading Thursday.

Crédit Agricole is 56%-owned by the group's regional cooperative lenders and in turn controls 25% of those banks. It warned earlier this year that the sale of the 25% stake back to these regional lenders would cut the bank's annual earnings by about EUR470 million.

Its earnings this quarter highlight the challenge faced by the French bank in continuing to provide stable returns to investors given its new revenue mix, particularly against a backdrop of persistently low interest rates and volatile markets.

Higher revenue at its insurance, asset management and specialized financial service units in the first quarter didn't make up for a weak investment banking business, which was dented by lower client demand and choppy markets.

Crédit Agricole's insurance and asset management business reported a 10% increase in net profit to EUR379 million, while net profit for its specialized financial services business rose 89% to EUR129 million.

Net profit at its corporate and investment bank plunged 54% to EUR163 million from EUR334 million a year earlier.

Net profit for its international retail banking business, which includes Italy, Poland and Egypt, nearly doubled to EUR53 million from EUR27 million a year earlier.

However, Crédit Agricole's own domestic retail arm, LCL, reported a 32% drop in net profit to EUR85 million, pressured by low interest rates despite a pickup in loan demand.

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Excluding the impact of the stake sale and one-time items, Crédit Agricole's net profit still fell by 9% to EUR394 million from EUR435 million a year earlier.

Despite its lower earnings, Crédit Agricole's core tier-one ratio, which compares top-quality capital such as equity and retained earnings with risk-weighted assets, stood at 10.8%, up from 10.7% in December.

The bank's leverage ratio, which measures capital held by the bank against its total assets, was 4.4% compared with 4.6% at the end of December.

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

(END) Dow Jones Newswires

May 12, 2016 04:05 ET (08:05 GMT)

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