French banks’ exposures to equities turned from a curse to a blessing in 2021. For Crédit Agricole, the only one of the big French banks to have wholeheartedly cut the business after 2008, that made rivals look comparatively strong.
Overall, especially compared with BNP Paribas, Crédit Agricole’s larger exposure to retail rather than corporate and institutional banking has not been the benefit it was before the pandemic.
Crédit Agricole’s senior management, however, are not rushing back into businesses it exited for good reason.
In the first nine months of 2021, the bank’s operating income rose in all retail divisions, as well as in businesses partly linked to retail, such as asset management and insurance. Net income rose by 62% at group level and by 72% at the central listed entity, Crédit Agricole SA (CASA). While much of that was to do with lower cost of risk, the underlying result was up by 32% at group level and by 38% at CASA.
Stronger capital, thanks to these results, paved the way for CASA to boost its earnings per share in late 2021, fully unwinding the switch mechanism whereby the regional mutual banks in France had bolstered CASA’s solvency in the previous decade.
Sales of its banks in Romania, Serbia, and possibly Morocco are further serving to simplify the group.
Persistently negative eurozone interest rates, and the decline of physical branches as a barrier to entry – particularly post-Covid – raise the question of whether or not Crédit Agricole’s position as France’s biggest retail bank will be as much of an advantage in the future as it has been in the past.
But as the bank prepares its next strategic plan in mid 2022, there is hope that it can do more to build businesses that are, at origin, hung onto the group’s retail customer base.
Retail banking, the way we do it, is not a business model of the past
Jérôme Grivet
“Retail banking, the way we do it, is not a business model of the past,” says Jérôme Grivet, CASA’s chief financial officer. “If you are a pure retail bank, without any capacity to provide anything other than a sight deposit and a mortgage loan, business is going to be tough, because interest margins are thinner and competition is fierce. We are not that kind of retail bank.”
He points to Crédit Agricole’s positions as the biggest insurer for individuals in France; a top-three player in European consumer credit; and Europe’s biggest asset manager, thanks to CASA’s majority ownership of Amundi.
The regional banks also have a large network of estate agents, businesses they are now in the process of integrating at a national level.
Long-term car leasing is one new product that the group is pushing in 2021. Again, it is with a view that it can scale up relatively quickly – reaching 100,000 leases by 2024 – thanks to its millions of retail customers in France and Italy.
In July, it launched a car-leasing marketplace in Germany, and in November the bank acquired car and computer leasing company Olinn to boost it small-business offering.
“Being a retail bank as we are – fully mastering all the additional services and product factories that are plugged into the retail customer base – continues to be a good business model,” says Grivet.
