Credit Agricole upbeat on funding, second quarter beats forecast

French bank Credit Agricole defended its financial firepower in the face of what it called market irrationality about funding fears, lifting its battered stock by over 6 percent. Bank stocks across Europe were buoyed by the comments from France's No 3 bank by market value, which said dollar funding from the Middle East and Asia and its own available resources meant it could withstand a complete disappearance of funding from US money markets.
"(There is) a lot of volatility, a lot of nervousness ... A lot of irrationality linked to perceptions of catastrophic situations," Chief Executive Jean-Paul Chifflet said on a conference call to present second-quarter results. Quarterly earnings fell 10.6 percent, weighed by well-flagged one-off charges and losses at Greek unit Emporiki, but analysts said results were better than expected thanks to assets on the balance sheet that benefit from inflation.
"I think this is going to be taken positively by the market ... It's sort of implying that there are no imminent liquidity issues for Credit Agricole," MF Global analyst Shailesh Raikundlia said. Shares of Credit Agricole were up 6.7 percent, at 6.62 euros, at 1111 GMT, outperforming a 2.2 percent rise for the STOXX 600 Europe banks index.
Elsewhere in Europe, other banks presented a mixed picture of the industry's health. Raiffeisen Bank International, emerging Europe's number three lender, reported forecast-beating results but said it could raise its share capital within a year. SNS Reaal of the Netherlands posted weaker than expected numbers while Austria's Oesterreichische Volksbanken saw its first-half net profit almost wiped out by writedowns on Greek assets.
Italy's Banca Popolare di Milano was due to report earnings after the market close. European bank stocks have been badly battered in recent weeks by fears that access to US money-market funding is drying up. Credit Agricole's stock is still down 36 percent since the end of June.
Credit Agricole said its access to such funding had been roughly halved as a result of market jitters, to about 25 billion euros, but added that it is "well-positioned" in liquidity terms with alternatives available in markets like Asia and the Middle East. "The residual refinancing of dollars from money-market funds has been reduced ... (But) its complete disappearance would not be particularly problematic for us," Deputy Chief Executive Michel Mathieu said.
Credit Agricole said second-quarter net profit fell to 339 million euros, beating expectations of 193.3 million according to a Reuters poll of nine analysts. The bank warned last month it would take a hit of up to 850 million euros linked to losses and one-off charges at Greek unit Emporiki as well as a charge linked to Greece's European rescue package.
The rescue charge involved taking a 202 million euro pre-tax writedown on its portfolio of Greek sovereign bonds, out of a total exposure of 329 million at end-June. Analysts said the Greece numbers were in line with expectations but that assets pegged to inflation boosted numbers at the bank's corporate centre, offsetting a slightly weaker-than-expected performance in retail banking.
"We are negatively surprised by the retail bank's performance in France ... But we see positive trends in deposit growth," Natixis analyst Alex Koagne said in a research note. While Credit Agricole saw growth in its healthy domestic market, its international retail operations posted a loss of 695 million euros. The bank took a goodwill charge on Emporiki of 379 million and a 148 million-euro charge on deferred tax assets held by the unit. Chifflet denied a report in French publication "La Lettre de l'Expansion" that it would recapitalise its units in Southern Europe, which would include Italy's Cariparma, but said it would reinforce Emporiki if necessary.