Low interest rates knock Credit Agricole's profits

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Credit Agricole became the latest European bank to report a slump in its profits this morning, as low interest rates continued to put pressure on its bottom line.

The figures

The French lender reported full-year net income of €3.5bn (£3bn), largely flat on the year before - although the fourth-quarter figure was €291m down 67 per cent from €882m.

These figures included a slew of one-off items, such as a €491m charge for goodwill impairment linked to low interest rates in its retail banking operation and a €160m knock for deferred tax revaluation, both of which were booked in the fourth quarter.

On an underlying basis, the bank revealed full-year net income of €3.1bn, up 22.8 per cent compared with €2.6bn the year before, and fourth-quarter net income of €904m, up 52.6 per cent from €593m.

The company also announced a dividend of €0.60 for 2016.

Credit Agricole also announced it was reducing its holding in Amundi, the asset management company which approached Unicredit to buy Pioneer for €3.5bn last year, from 75.7 per cent to 70 per cent.

Shares were trading up 4.6 per cent at €12.29 at the time of writing, thanks likely in part to fourth quarter figures beating analyst expectations.

Why it's important

While anybody with a mortgage might be keen on the current low interest rate environment, banks are less so, as it essentially places a cap on how much income they can hope to rake in.

Credit Agricole revealed today that net income from LCL, its retail banking operation in France, slipped to €509m on an underlying basis for 2016, down 9.9 per cent, while underlying revenues fell to €3.4bn, down 5.9 per cent.

Credit Agricole also kicked off its Strategic Ambition 2020 plan in 2016, which had four key objectives; simplifying the company's structure, providing a more streamlined service for customers, strengthening growth across the firm's core business lines and focusing on sustainability of operations.

What Credit Agricole said

"Credit Agricole performed well in 2016 as a result of further strong top-line momentum across all its business lines, plus a tight grip on its costs and its risk," said chief executive Philippe Brassac.

"These encouraging results have laid the groundwork for the introduction of a normalised dividend policy and reinforced our confidence in our ability to achieve the targets of the Strategic Ambition 2020 plan for the benefit of our customers."

In short

Low interest rates are continue to take their toll on the banking sector.

Full story: Low interest rates knock Credit Agricole's profits: City A.M.

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