Thursday, August 27, 2009

Credit Agricole Profit Doubles In Q2

. Thursday, August 27, 2009

By stockOzone team

Credit Agricole SA, France’s third- largest bank by market value, reported a more than doubling in second-quarter profit, beating analysts’ estimates, and said the impact of “toxic” assets on earnings will diminish.

Credit Agricole rose as much as 7 percent in Paris trading after reporting net income of 201 million euros ($286 million), above the 122 million-euro median estimate of 13 analysts surveyed by Bloomberg.

“All in all, it’s a very positive message for the second half and 2010,” said Jonathan Tyce, a London-based analyst at Friedman, Billings, Ramsey International Ltd. who rates the stock “market perform.” “The underlying results are good.”

Credit Agricole cut the loss at its investment bank to 87 million euros in the second quarter from 855 million euros a year earlier, as asset writedowns shrank. Chief Executive Officer Georges Pauget pledged last year to reduce the capital allocated to the unit, eliminate 500 jobs and scale back the riskiest structured credit and derivatives activities.

The bank advanced 78 cents, or 6.2 percent, to 13.38 euros by 9:34 a.m. in Paris, valuing the company at 31 billion euros. The stock gained 66 percent so far this year, trailing an 89 percent gain in BNP Paribas SA, France’s largest bank. Societe Generale SA, the No. 2 French lender by market value, gained 55 percent this year.

Intesa Charge
“Structured credit operations and toxic products are being run off and their negative impact on earnings will gradually reduce in the future,” Credit Agricole said in the statement. “Market risk declined by 8 billion euros to less than 20 billion euros” by the end of June, the bank said.

Leaving aside a 206 million-euro charge related to its stake in Italy’s Intesa Sanpaolo SpA and 465 million euros of costs tied to operations it’s discontinuing at the investment bank, earnings amounted to 872 million euros, the bank said.

“We see clearly that the path that we’ve determined is a good path and we are confident for the months to come,” Pauget told reporters on a conference call today.

Credit Agricole’s core Tier 1 capital ratio, a gauge of its ability to absorb losses, rose to 8.6 percent by the end of June from 8 percent at the start of the year.

The bank, along with BNP Paribas and Societe Generale, saw a surge in loan defaults as the global economy slumped. Provisions at Credit Agricole more than tripled to 1.13 billion euros in the second quarter from a year earlier.

Emporiki Losses
Losses at Emporiki Bank of Greece SA, Credit Agricole’s unit in that country, have also weighed on the French bank’s earnings. Emporiki had a net loss of 190 million euros in the second quarter, the company said on July 29.

Pauget, 62, told shareholders at the May 19 general meeting that the financial side of the crisis was “behind us,” while the economic effects “will be felt for some months.”

BNP Paribas reported this month a 6.6 percent increase in second-quarter net income to 1.6 billion euros. Societe Generale posted a 52 percent drop in profit to 309 million euros in the period.

Pauget sealed an agreement with Societe Generale to merge the asset-management units of the two banks. In July, Credit Agricole agreed to take a 75 percent stake in the venture, which will be run by Credit Agricole’s Yves Perrier and will have 591 billion euros of assets under management.

Disclosure: Author does not own any of the stocks discussed here.

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