Credit Agricole SA’s investment bank has reported a record-breaking first quarter, driven by a 42% surge in revenue from fixed income, commodities, and currencies trading. This impressive growth significantly outpaced the 9% increase seen at BNP Paribas SA, and exceeded the performance of larger competitors in a challenging trading period.
The strong trading performance led to record revenue for Credit Agricole’s corporate and investment bank. The bank’s shares rose by 4.7% in Paris trading, marking the largest intraday gain in three months.
Credit Agricole’s trading business capitalized on the revival in primary credit markets and an increase in demand for hedging products amid uncertainties over interest rate trajectories and fears of a recession. However, the French bank cautioned that it may not be able to maintain this level of trading performance in the current period.
Deputy Chief Executive Officer Xavier Musca noted, “Today, there is some kind of a slowdown. As market volatility decreases, our clients’ hedging needs decrease as well.”
Despite this, Bloomberg Intelligence suggested that Credit Agricole’s positive Q1 results, featuring a 10% revenue increase to a record high, bode well for growth momentum through 2023. The bank’s cost growth remained modest at 2%, suggesting an 8 percentage point positive difference between revenue growth and cost growth.
Analysts at Keefe, Bruyette & Woods described the results as “decent” despite the bank’s restatement of earnings to accommodate a new accounting standard. They highlighted the strength of Credit Agricole’s business model, as demonstrated by the growth in deposits during a period of financial stress.
The bank set aside €374 million to cover potential loan defaults in the first quarter, nearly half the amount from the previous year. While Credit Agricole has expressed caution towards the consumer credit and small SMEs sectors, it doesn’t foresee a deterioration for large corporates, according to Deputy CEO Jerome Grivet.
In light of Russia-related concerns, the bank has continued to reduce its exposure to Russia, which now stands at €2.4 billion as of the end of April. Furthermore, unlike its peers BNP Paribas SA and Societe Generale SA, Credit Agricole SA has avoided a criminal probe related to the “Cum-Cum” dividend arbitrage strategy by reaching a settlement with French authorities.
Looking ahead, the bank’s domestic network LCL experienced a 5% revenue drop to €936 million, while its international banking operations saw a 23% rise in revenue to €969 million, largely due to rising rates.
Credit Agricole’s asset manager, Amundi SA, reported separately that it saw an outflow of €11.1 billion in the first quarter. Despite this, the firm’s cost control measures resulted in higher-than-expected profit.
In conclusion, Credit Agricole’s first quarter results showcase an impressive performance in a difficult trading period, offering a positive outlook for the bank’s growth momentum through 2023.
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