After a winding year, Crédit Agricole SA (CASA), a listed entity of the mutual bank, closed 2019 with an excellent last quarter, boosted by an endowment of more than one billion, which approached the 5 billion annual profit.
After years of litigation with the French tax authorities, the Emporiki case, named after its former Greek subsidiary, will ultimately have had a positive consequence for CASA. That of being able to recognize in the fourth quarter a reversal of the provision linked to the Greek structure after a favorable decision of the Council of State.
Leaded by the bailout and the sale for a symbolic euro of Emporiki in 2012 during the Greek crisis, Crédit Agricole wanted to deduct the corresponding charge of more than two billion euros from the amount of its results declared to taxes.
One of the highest historic
But the tax authorities had refused the operation, supported in this sense by a first court decision. Finally, on appeal in June 2018, the bank succeeded in convincing the tax authorities to pay him back what she could have saved with this deduction, i.e. 838 million euros according to the group’s calculations, to which interest was added. .
This addition of liquidity does not only explain the jump of 10% in profit last year, to 4.84 billion euros, among the highest in the group and far above the 3.66 billion euros that awaited analysts interviewed by the Bloomberg agency.
The Emporiki effect offset a depreciation, announced in mid-December, more than 600 million of its retail banking brand LCL. Once all the exceptional and accounting items have been erased, net profit again rose 4% to 4.6 billion euros. And at the Crédit Agricole group level, that is to say including the regional mutuals, net profit even reached 7.2 billion euros, up 5% both in published and restated data.
A very solid fourth quarter
CASA’s revenues, or net banking income (GNP), increased slightly in both cases, amounting to 20.1 billion euros (20.3 billion after restatement). The year was also marked by very solid performances in the fourth quarter in all segments. Between October and December, CASA saw its net profit increase by 65% to 1.66 billion euros. Once groomed exceptional effects, it jumped 23.5% to 1.3 billion euros.
“All business lines contribute to this annual growth, thanks to dynamic commercial activity”, welcomes Philippe Brassac, general manager of CASA, in a press release, highlighting the conquest of 370,000 customers in France and Italy. These results “were obtained in a virtuous manner” with revenues growing faster than expenses, said Jérôme Grivet, group financial director.
At the end of the day, an improvement in profitability and profit which enabled it over one year to absorb without damage an increase in the cost of risk – either past reserves to deal with payment defaults – which had become too low, particularly in corporate and investment banking (BFI).
BFI, asset management and insurance as main drivers
On the strength of these advantages, CASA has a solvency ratio (known as CET1 composed of capital intended to ward off possible shocks) of 12.1% at the end of December, higher than its target of 11%. Which will lead him to unlock by March 35% of the “Switch” guarantee mechanism, set up with the group’s regional mutuals, which, in exchange for remuneration, provide him with capital to meet regulatory requirements in equity. CASA expects to recover nearly 60 million euros this year through this means.
The best performing professions in this exercise: the CIB; asset management, led by Amundi with a new record level of inflows last year; and insurance, which takes advantage of the retail network to boost the subscription of contracts by individual and professional banking customers.
“Optimists” for 2020
For 2020, “we are optimistic”, declared Philippe Brassac during the presentation of his results. Prospects look good in view of the many partnerships forged internationally, asset management in mind with, by the end of the year, the creation of a joint venture between Amundi and a subsidiary of Bank of China and the next acquisition of asset management from the Spanish Banco Sabadell. So many alliances aiming to exceed the milestone of five billion euros in profit, one of the objectives set for 2022.