Credit Agricole sees provision surge as bank girds for bad loans

MONTROUGE: Credit Agricole SA is setting aside almost three times the amount it booked a year ago to cover souring loans because of the impact of the coronavirus, the latest lender to try and estimate the damage to its balance sheet from the outbreak. Provisions in the first three months of the

€621mil year jumped to (Us$673mil) from €225mil

a year earlier to take account of the worsening economic environment, the bank said in a statement.

The lender expressed optimism it can navigate the crisis after posting mixed results, which included a better-than-expected top line performance and a drop in net income.

Credit Agricole is more diversified and less dependent than rivals BNP Paribas SA and Societe Generale SA on trading, and it has been able to turn to acquisitions to support growth.

The bank avoided the dividend-related equity trading hits that hurt its larger rivals and said revenue at its large customer segment, which includes its investment banking activities, gained more than 8%, in part driven by the bank’s fixed income business.

“We are really focused on financing needs of our big corporate clients,” chief financial officer Jerome Grivet said on a conference call.

“It’s an activity that uses our balance sheet, and we are sometimes criticised for that. It’s an activity that when it’s done well, is much less volatile, and exposes us less than others to market dislocations.”

The bank said it allowed a surge in the use of credit lines at the end of March as large clients rushed to secure their financing needs when the extent of the crisis became apparent.

The lender allowed the drawing down of facilities at a rate of 32%, up from 18% at the end of February.

€10.6bil

As of April 23, had been withdrawn from existing credit lines, with more than 70% of that converted into deposits.

Brassac has been betting on corporate banking and asset management to offset the impact of low or negative interest rates, a weak consumer market and rising capital requirements.

The bank in December wrote down the value of its French retail banking division

€600mil.

LCL by about

Credit Agricole’s giant asset manager,

€3.2bil Amundi SA, saw clients pull in the first quarter. The business has grown into Europe’s largest with the help of acquisitions, making it a model for rivals seeking to consolidate.

Brassac has reorganised Credit Agricole’s structure and sold less-strategic holdings over the past years while seeking partnerships with other companies.

The CEO in June pledged to boost net

€600mil income by more than over three years and drive down costs, after meeting previous key targets ahead of schedule.

The lender affirmed those targets in December, when it announced the goodwill charge at LCL. —

“We are really focused on financing needs of our big corporate clients.” Jerome Grivet