Credit Agricole SA’s investment bank posted a record performance in the first quarter as the French lender’s debt traders powered a surge in revenue.
Fixed income, commodities and currencies underlying revenue jumped 42% in the first three months of the year, outpacing a 9% jump at BNP Paribas SA and beating larger rivals in a difficult trading period. The performance contributed to record revenue at the firm’s corporate and investment bank. Credit Agricole restated earnings for last year after adapting to new accounting standard IFRS 17, making a comparison with analysts’ estimates difficult.
Credit Agricole’s trading business benefited from a recovery in primary credit markets and demand for hedging products in a quarter marked by uncertainty over the trajectory of interest rates and recession worries. Wall Street lenders fixed income revenue decline on average by 1% in the quarter. The French bank warned it may not be able to repeat the same trading performance in the current period.
“Today, there is some kind of a slowdown,” Deputy Chief Executive Officer Xavier Musca said on a call with reporters. “As market volatility decreases, our clients’ hedging needs decrease as well.”
After jumping last year on Russia-related concerns, the amount that the lender set aside to cover souring loans in the first quarter fell by almost half to €374 million.
The bank, which stopped providing new financing to Russia at the onset of the invasion of Ukraine, kept driving down its exposure to Russia this year. The lender’s exposure to the country now stands at €2.4 billion at end April, executives said on a call with reporters.
While peers including BNP Paribas SA and Societe Generale SA saw their Paris premises raided by French prosecutors earlier this year amid suspicions of tax fraud related to a dividend arbitrage strategy known as”Cum-Cum”, Credit Agricole SA reached a settlement with French authorities to avoid being dragged into a criminal probe, Bloomberg News has reported.
The lender paid about €35 million in back taxes and fines, an amount that may swell as authorities are still investigating some of the lender’s trades.
Credit Agricole’s domestic network LCL saw revenue fall 5% to €936 million.
In contrast, the bank’s international banking operations continued to benefit from rising rates, with revenues gaining 23% to €969 million.
Credit Agricole’s asset manager Amundi SA, which reported its earnings separately last month, saw clients clients pull €11.1 billion in the first quarter as traditional life insurance products lost their appeal amid rising markets and interest rates. Still, the firm’s expense controls helped it post higher-than-expected profit.
