Like Société Générale and BNP Paribas, Crédit Agricole has been heavily penalized by the health crisis. But despite soaring provisions, Philippe Brassac, CEO of CASA, seeks to reassure that the group is "confident" it will absorb the "cost of the coronavirus as it stands today".
Net income down 18% year-on-year
Crédit Agricole SA unveiled its quarterly results on May 6, showing the impact of the Covid-19 crisis on its activities. In detail, CASA saw its cost of risk triple to 621 million euros in Q1 2020, compared with 255 million euros in the same period last year. Including the regional mutuals, this figure climbs to 930 million euros, compared with 281 million euros previously.
This rise in the cost of risk is mainly due to the increase in provisions taken as a preventive measure on healthy loans. According to the bank, these provisions do not reflect loan repayment problems, but rather the anticipation of future risks. Nonetheless, these additional provisions had a significant impact on net income. Over the first three months of the year, it fell by 18.1% year-on-year, to 652 million euros. However, these figures are still higher than those anticipated by analysts surveyed by FactSet, who were expecting a 36% drop in net income. Revenues also exceeded expectations, with net banking income (NBI) up 7.1% year-on-year to 5.20 billion euros, compared with analysts' expectations of 4.956 billion euros.
Crédit Agricole SA's revenues were driven primarily by its corporate and investment banking (CIB) business, which grew by 18%. This activity is much less volatile, reducing the bank's exposure to market dislocations.
CASA ready for the shock of the coronavirus
With provisions almost trebled and its CIB activities little affected by the financial market storm, the green bank says it is ready to face the consequences of the Covid-19 crisis. " Crédit Agricole has the capacity both to absorb the impact of Covid-19 in terms of cost of risk, and to ensure the bridging of the economy," said Philippe Brassac during a conference call.
While the head of Crédit Agricole SA does not provide any annual projections in figures, he does emphasize the Group's role in the "economic bridging operation" carried out by French banks to weather the crisis.