Agricultural credit: Russia weighs in first quarter, solvency disappoints – 05/05/2022 at 10:57

Agricultural credit: Russia weighs in first quarter, solvency disappoints - 05/05/2022 at 10:57

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AGRICULTURAL CREDIT: RUSSIA FALLS IN THE FIRST QUARTER, SOLVENCY DISAPPOINTS

AGRICULTURAL CREDIT: RUSSIA FALLS IN THE FIRST QUARTER, SOLVENCY DISAPPOINTS

by Julien Ponthus

PARIS (Reuters) – Crédit Agricole SA reported a sharp drop in first-quarter earnings on Thursday after booking more than half a billion euros in forecasts related to its exposure to Russia and Ukraine.

Lower-than-expected solvency ratios, higher-than-expected costs and adverse comparisons with its main French competitors, BNP Paribas and Société Générale, affected the group’s share price: it fell 2.13% to 10.18 euros mid-morning, the biggest drop in the CAC 40 index, then rose 1.83%.

At the same time, Societe Generale gained 1.72% and BNP Paribas 1.98%.

Crédit Agricole SA (CASA), France’s second largest listed bank, said its net profit fell 47.2% year-on-year to 552 million euros after opting for a “cautious” ability to cover losses due to the Russian invasion. in Ukraine.

Thus, it has fully predicted, ie for 195 million euros, the value of the equity of its Ukrainian subsidiary, while the forecasts for exposure to Russia amount to 389 million.

“The group has made, financially, a choice of prudence in the face of very low proven risks,” CEO Philippe Brassac told a news conference.

Without this option, net profit for the quarter would have risen by 10% to more than 1 billion euros, he added, stressing the increase in revenue for all parts of the group and the reduction in risk costs outside Russia.

Some analysts point out, however, that costs were higher than estimated and worry about a 0.9-point drop in the CET1 (core equity tier one) solvency index to 11% by the end of March.

“We expect this to punish the stock, as it means that the capital surplus is gone when there could be further headwinds this year,” Jefferies said in a note, judging the quarterly results in general terms. “not good enough”.

EXPOSURE TO RUSSIA REDUCED BY 20%

Crédit Agricole SA, which suspended all operations in Russia, added that its market exposure had shrunk by 1.1 billion euros since the start of the war to 4.4 billion euros at the end of March.

Its chief financial officer, Jérôme Grivet, explained that given the financial strength of the group’s Russian counterparties, he was not particularly concerned about the risk of additional losses associated with the residual exposure.

The group, which has set itself the goal of distributing half of its profits to its shareholders, confirmed its intention to pay a dividend of 1.05 euros per share for 2021, which includes coverage of 0.20 euros of the dividend for 2019 , the payment of which had been prevented by regulatory restrictions.

In the first quarter, net banking income (NBI) increased by 8.1% to 5.938 billion euros, with all the group’s companies recording increasing income.

Corporate and investment banking (BFI) activities recorded an increase of 4.3% in underlying revenues to 1.425 billion euros, despite a decrease of 2.8% in those coming from the markets. Revenue from the FICC was down 9.1%, offset only by a 40.1% increase in equity activity.

The listed asset management subsidiary Amundi reported quarterly revenue of € 835 million last month, up 8.4% year-on-year, thanks to a 15% increase in managed assets.

Group leaders declined to give details of their external growth strategy in Italy, but said they hoped to develop a partnership with Banco BPM, from which Crédit Agricole got 9.2%, which fueled speculation of a possible takeover. .

They also refused to mention their medium- and long-term goals, which will be included in the strategic plan for 2025, the presentation of which is scheduled for June 22.

(Report by Julien Ponthus, French edition by Marc Angrand, edited by Kate Entringer)

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