What will Crédit Agricole do in Italy with Creval
The accounts of the French banking group Crédit Agricole Italia and the prospects after the takeover bid on the Creval.
Crédit Agricole SA closed the first nine months of 2020 with a net profit of € 5.577 billion. In the same period, all Italian businesses recorded a profit of € 551 million, with Crédit Agricole Italia making a profit of € 169 million. The latter yesterday launched a takeover bid on Creval to consolidate its competitive position as the sixth commercial bank in the Italian market and become the seventh for total assets and number of customers. Crédit Agricole Italia estimates approximately 150 million synergies from the transaction and is ready to launch a capital increase to keep its capital ratios at adequate levels.
THE PRESENCE OF AGRICULTURAL CRÉDIT IN ITALY
Crédit Agricole is present in Italy, its second domestic market, with 14,000 employees and more than 4.5 million customers with a conglomerate made up not only of the Crédit Agricole Italia banking group, but also of the Corporate and Investment Banking companies (Cacib) , Specialized Financial Services (Agos, Fca Bank), Leasing and Factoring (Crédit Agricole Leasing and Crédit Agricole Eurofactor), Asset Management and Asset Services (Amundi, Caceis), Insurance (Crédit Agricole Vita, Crédit Agricole Assicurazioni, Crédit Agricole Creditor Insurance) and Wealth Management (Ca Indosuez Wealth Italy and Ca Indosuez Fiduciaria).
In the first nine months of 2020, the French banking group in Italy recorded a net profit of 551 million euros from all its activities (-15% compared to the same period of 2019), a figure influenced by the prudential provisions against the crisis from Covid-19. Commercial activity has seen an increase in total loans to the economy to 78 billion euros, with total deposits amounting to 259 billion euros. Italy contributes 15% of Crédit Agricole SA's total net profit (equal to € 5.577 billion in the first nine months of 2020).
THE RESULTS OF CRÉDIT AGRICOLE ITALIA
With regard to the Crédit Agricole Italia banking group alone, the nine months of 2020 closed with a net profit of 169 million euros (-29% compared to 239 million euros in the same period of 2019). Direct deposits in the nine months amounted to € 53.3 billion, compared to € 49.7 billion at the end of 2019, while indirect deposits amounted to € 71.9 billion, against € 71.3 billion at the end of 2019. The total assets administered in the nine months of 2020 thus rose to 125.2 billion euros. Net interest income in the nine months of 2020 amounted to 729.6 million euros, down from 761.3 million euros in the same period of 2019, net commissions amounted to 627.5 million euros, against 664.1 million euros in the nine months of 2019 and the intermediation margin was 1.375 billion euros, compared to 1.435 billion euros in the nine months of 2019. As regards credit quality, the Italian division of the transalpine group as at 30 September 2020 has a coverage of non-performing loans (bad loans, unlikely to pay, past due / overdue loans) equal to 55.3% and coverage of bad loans equal to 70.9%. The Bank's equity position shows a Total Capital Ratio of 18.3%, while on the liquidity front the Lcr index is greater than 200%.
WHAT IS CRÉDIT AGRICOLE ITALIA GOING FOR WITH CREVAL
Crédit Agricole Italia, with the takeover bid for Credito Valtellinese , aims to consolidate its competitive position as the sixth commercial bank in the Italian market and to become the seventh in terms of total assets and number of customers, reaching a market share of approximately 5% nationally (based on the number of branches). The operation would guarantee: presence in the most productive areas of the country, especially in Lombardy; over 1,200 branches and 2.8 million customers, with direct access to the offer of the Crédit Agricole group, leader in Europe; improved operational efficiency, in particular through cost synergies; a robust asset quality which will further improve following integration; financial solidity, further strengthened by the support of the Crédit Agricole group.
In terms of geographical coverage, the acquisition of Credito Valtellinese represents an opportunity for growth for Crédit Agricole Italia in light of: the increase in critical mass in areas complementary and adjacent to those already served and for the strengthening of local customer coverage; the significant strengthening in Northern Italy (around 70% of the number of pro forma branches); the doubling of the market share in Lombardy (from 3% to more than 6%), where Credito Valtellinese operates with more than 40% of its branches; the increase in size in Piedmont, Marche and Lazio and access to new Regions, including the most dynamic metropolitan areas of Sicily, as well as Valle d'Aosta and Trentino. The Crédit Agricole SA group expects the transaction to produce an increase in earnings per share by 2022 and to generate a Return on Investment greater than 10% in 3 years, based only on cost and funding synergies. Upon completion of the transaction, it was preliminarily estimated that the negative impact of the transaction on Crédit Agricole SA's Common Equity Tier 1 will remain below 20 basis points.
SYNERGIES FOR 150 MILLION
The CEO of Credit Agricole Italia, Giampiero Maioli, in a conference call with the press agencies explained that the bank estimates synergies from the transaction with Creval to be around 150 million euros. The Italian division of the transalpine group is also ready to launch a capital increase so as to leave the capital ratios at adequate levels. The exact amount of the capital strengthening, which the parent company Credit Agricole SA is ready to guarantee, is not yet known.
THE COMMENT OF DBRS MORNINGSTAR
For Dbrs Morningstar, Credit Agricole Italia's track record on successful mergers should facilitate the transaction with Credito Valtellinese and reduce the execution risk. The rating agency also believes that the deal would be positive for Creval's credit profile: Dbrs could raise the recommendation on Credito Valtellinese to reflect the strengthening of the new shareholder base.
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/economia/che-cosa-fara-credit-agricole-in-italia-con-il-creval/ on Tue, 24 Nov 2020 05:39:25 +0000.