Credit Agricole SA reports big switch back into profit

Credit Agricole SA, the stock-listed parent of French Credit Agricole bank, reported on Wednesday a big switch into profit after two years of heavy losses owing to writedowns. The parent group CASA behind the huge French bank Credit Agricole reported a net profit of 2.50 billion euros ($3.44 billion), slightly beating analysts' expectations. It also recommended a return to making a dividend payout to shareholders after two years without distribution, offering 0.35 euros per share in cash or new shares. Analysts polled by FactSet had expected a net profit figure of about 2.48 billion euros. The price of shares in the group was showing a gain of 1.58 percent to 10.96 euros in mid-day trading. The overall French market as measured by the CAC 40 idex was up 0.17 percent. Managing director Jean-Paul Chifflet said that the figures "reflect the strength of the group, are in line with our expectations and show that our fundamental activities are solid." The company had reported a net loss of 1.47 billion euros in 2011 and a record loss of 6.47 billion euros in 2012. These were the result of writedowns, and a capital loss on the disposal of the Greek banking unit Emporiki, hard hit by the Greek debt crisis. In 2013, the net profit of the operating part of Credit Agricole, Credit Agricole bank which comprises regional savings banks of the same name, was 5.13 billion euros. By comparison, French bank BNP Paribas has reported a net profit of 4.83 billion euros for 2013, and Societe Generale 2.18 billion euros. Chifflet said that during the year the group had successfully re-focused its activities and continued to dispose of non-strategic assets. Last year it disposed of Emporiki, of French brokers Cheuvreux, of CLSA and of Bankinter, reduced its interest in Eurazeo, prepared to sell Newedge and had disposed of blocks of risky assets in the United States. It recently announced the intended sale of its subsidiary in Bulgaria and the Nordic units of its consumer finance arm. For the quoted, parent group CASA, net banking income, a key measure of the margin between the cost of taking in deposits and price of making loans, rose slightly to 16.01 billion euros. - Risk ratios strong - Costs fell by 3.0 percent, owing mainly to cuts under an economy plan called "MUST". In 2012 and 2013 total savings amounted to 351 million euros, or 30 million euros more than targeted. At the end of last year, the return on shareholders' funds was 9.4 percent. The board declined to give new targets before the presentation of a strategic plan on March 20. The group also published a list of ratios to show its financial strength, following the publication at the end of January of a controversial study questioning its balance sheet. Its ratio of hard core shareholder funds to risks carried was 8.3 percent for the parent CASA at the end of 2013, and 11.2 percent for the operating group, under so-called Basel III standards. Chifflet said that regulators were interested mainly in the group figure and were requiring a ratio of 9.0 percent. The bank also said that it had repaid most of its loans under special LTRO refinancing facilities from the European Central Bank. Banking ratios and the strength of shareholder funds are a matter of acute attention in the European banking sector. This is because the ECB, under new powers associated with a new banking union in the eurozone, is doing its own rigorous stress tests on the ability of banks to withstand crisis without provoking risks for the eurozone banking system.