Crédit Agricole, SocGen profit surge on stake sales

French banks Crédit Agricole SA and Société Générale SA reported Wednesday a bigger-than-expected jump in second-quarter net profit, as the sale of their respective shares in Visa Europe helped offset pressure from volatile markets and persistently low interest rates.

Crédit Agricole’s net profit rose 26% to EUR1.16 billion ($1.30 billion) in the three months to the end of June, while at Société Générale it increased 8% to EUR1.46 billion. Revenue rose by 2% at both banks, to EUR4.74 billion at Crédit Agricole and to EUR6.98 billion at Société Générale.

The Visa Europe stake sale gave Crédit Agricole a gain of EUR328 million and Société Générale EUR725 million.

The forecast-beating results cheered investors and In early trading Wednesday Crédit Agricole were up 2.9% while Société Générale’s rose 3.1%.

Capital gains and a balanced business mix have helped French banks navigate a difficult economy and choppy markets this quarter. French lenders fared better than some of their European rivals such as Credit Suisse Group and Deutsche Bank AG, that were badly hit by a drop in equity trading and the impact of stricter financial regulation.

Crédit Agricole said that insurance, asset management and a strong specialized financial services business helped make up for a lower net profit from its investment bank.

Its insurance and asset management business reported an 8% increase in net profit to EUR415 million, while net profit for its specialized financial services business rose 23% to EUR154 million.

Net profit at its corporate and investment bank fell 8% to EUR365 million under pressure from volatile markets.

Crédit Agricole’s domestic retail arm, LCL, also reported a 38% drop in net profit to EUR108 million, hurt by persistently low interest rates.

At Société Générale, international retail banking and financial services helped offset sharply lower trading.

Its international retail banking and financial services division posted a 36% jump in second-quarter net profit to EUR436 million, while its global banking and investor solutions business–which includes investment banking, security services and asset management–posted a 36% drop in net profit to EUR448 million.

Net profit at Société Générale’s retail bank in France was also down 5% at EUR403 million.

The two banks said their capital buffers remained comfortably above regulatory thresholds.

Société Générale’s core tier one ratio, which compares top quality capital such as equity and retained earnings with risk-weighted assets, was stable at 11.1% in June while at Crédit Agricole’s it rose to 11.2% in June from 10.8% in March.

The sale of Crédit Agricole’s 25% stake the bank holds in the group’s regional lenders should help lift its core tier one ratio to 11.9%.

The bank, which is 56%-owned by the group’s regional cooperative lenders, said in February it would sell back the 25% stake it holds in the group’s regional lenders to ease concerns about its capital strength.

Crédit Agricole said on Wednesday that it would book a EUR1.25 billion gain on the stake sale in the third quarter of 2016.

Source: MarketWatch