Morningstar | Credit Agricole Achieves Its 2019 Targets a Year Ahead of Time. See Updated Analyst Note from 25 Feb 2019
No-moat Credit Agricole reported attributable net income of EUR 4.4 billion for the 2018 fiscal year. This is 21% higher than 2017 and ahead of the EUR 4.2 billion we estimated. A solid 4% increase in revenue was supported by a 24% decline in loan-loss provisions and a 15% decline in taxes. We often view preprovision profits as the best indicator of underlying performance, and Credit Agricole generated respectable growth of 11%. We have increased our fair value estimate to EUR 12 per share from EUR 11, largely as the result of a downward revision in our expectation for a midcycle tax rate. We maintain our no-moat rating.In contrast to nearly all its European peers, Credit Agricole saw revenue at its corporate and investment banking business (27% of attributable net income) holding up well in the fourth quarter of 2018. There is, however, a pronounced difference between results from the financing arm of Credit Agricole's corporate and investment bank, which saw fourth-quarter revenue growth of 10%, and the global markets business, which recorded a 15% decline in revenue. Overall, pretax profits for the corporate and investment business was stable for 2018 compared with 2017.
Fully owned French retail banking subsidiary LCL (11% of attributable net income) reported a 3% increase in profit before tax for the year. The impact of low interest rates seems to have stabilised, with revenue growth tracking volume. Loan-loss provisions remain low but are not declining further.
Credit Agricole's 70%-owned subsidiary Amundi (11% of attributable net income) saw meaningful pressure on its revenue in the final quarter of 2018; however, this was largely offset by lower costs. We view the flexibility in costs positively. Credit Agricole's attributable earnings from Amundi grew 14% for the year.
Credit Agricole has largely met the goals it set out for 2019 in 2018 already and will set out its new medium-term targets on June 6.
Credit Agricole is active in the market of retail banking and related businesses. Co. provides day-to-day banking, savings products, mortgage and consumer loans, insurance, private banking, asset management, lease finance and factoring, corporate and investment banking. Its activities can be divided into six business lines: French Retail Banking - Regional Banks; French Retail Banking - LCL; International Retail Banking; Specialized Financial Services; Savings Management and Insurance; and Corporate and Investment Banking. Co.'s customers are personal customers, farmers, small businesses, companies and local authorities. As of Dec 31 2013 Co.'s total assets amounted to Euro1,536,873,000,000.
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