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Fundamental View
AS OF 29 Feb 2024Crédit Agricole’s business model enjoys benefits of scale, with a strategy of organic growth and bolt-on acquisitions.
Italy is an important part of its operations, accounting for around 7% of the loan book, and while asset quality there is weaker than at the group level, its performance has been improving.
Group asset quality and capital ratios are robust, reflecting a largely low-risk balance sheet – retail and related banking accounts for around 80% of group net profits.
Business Description
AS OF 07 Jun 2023- Crédit Agricole (CA Group) includes 38 regional banks (Caisses Régionales or CRs) owned by 2,401 local credit co-operatives themselves, owned by 11.5 million mutual shareholders.
- The scope of consolidation used by regulators (e.g. for stress tests) is the CA Group level. The listed entity is Crédit Agricole SA (CASA), owned 57.1% by the CRs (via a holding company); the remaining 42.9% is free float.
- CASA has four business lines in its own operations and through subsidiaries: Retail Banking (LCL, Italy operations), Asset Gathering (Amundi, Indosuez Wealth Management, and insurance business via Crédit Agricole Assurances), Large Customers (Corporate & Investment Bank and Caceis Investor Services), and Specialised Financial Services (Leasing & Factoring and Consumer Finance).
- It mainly operates in banking and insurance in France. Its second largest market is Italy, where CA Italia offers consumer, private and corporate banking, asset management and insurance. It acquired Cariparma in 2007, and since then has added a number of other small banks, most recently Credito Valtellinese in 2021.
Risk & Catalysts
AS OF 29 Feb 2024Crédit Agricole regards Italy as its second domestic market. Asset quality is still weaker than in the rest of the group but has been improving for some time now.
The group aims to strengthen its already strong positions in specialist finance and asset management via organic growth, partnerships, and bolt-on acquisitions. The group regularly looks for opportunities and it builds stakes in various businesses, which remain areas to monitor. The group tends to only pursue opportunities which generate specific return on investments, return on normalised equity, and the capacity to integrate without any difficulty.
Retail Banking in France remains under pressure due to higher (deposit) funding costs.
Group capital ratios remain of comfort for bondholders, with CASA run more tightly, although capital ratios improved there on the first time adoption of IFRS 17.
Key Metric
AS OF 29 Feb 2024| € mn | 4Q23 | Y23 | Y22 | Y21 | Y20 |
|---|---|---|---|---|---|
| Return On Equity | n/m | 6.3% | 6.3% | 7.4% | 4.0% |
| Total Revenues Margin | 1.4% | 1.5% | 1.5% | 1.6% | 1.6% |
| Cost/Income | 64.8% | 60.5% | 60.6% | 62.7% | 65.0% |
| CET1 Ratio (Transitional) | 17.5% | 17.5% | 17.6% | 17.5% | 17.2% |
| CET1 Ratio (Fully-Loaded) | 0.0% | 0.0% | 17.2% | 17.2% | 16.9% |
| Leverage Ratio (Fully-Loaded) | n/m | n/m | 5.3% | 6.0% | 6.0% |
| Liquidity Coverage Ratio | 144% | 144% | 167% | 171% | 149% |
| Impaired Loans (Gross)/Total Loans | 2.1% | 2.1% | 2.1% | 2.0% | 2.4% |
CreditSight View Comment
AS OF 01 Aug 2024Crédit Agricole remains a core holding amongst European banks, with the benefits of several large business franchises. The largest retail banking group in France has reduced the complexity in its mutual structure, with stakes in all the regional banks formerly held by the quoted entity Crédit Agricole S.A. now transferred to a new group entity. Retail banking has been under pressure but there are signs this is now reducing. Asset quality and capital are sound. This strong starting position helped protect the group’s financial ratios during the COVID-19 pandemic, and the latest set of results were resilient in the face of a challenging macro-economic backdrop globally.
Recommendation Reviewed: August 01, 2024
Recommendation Changed: August 10, 2017
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