By Julien Ponthus
PARIS (Reuters) -French banking group Credit Agricole (OTC:CRARY)'s shares rose sharply on Thursday after it joined rivals BNP Paribas (OTC:BNPQY) and Societe Generale (OTC:SCGLY) in announcing better-than-expected quarterly profits driven by buoyant investment banking.
Net income was 1.98 billion euros ($2 billion), a figure about 800 million euros higher than the average estimate of analysts.
Analysts also underestimated revenues, which rose 8.8% to 6.33 billions euros, roughly 10% higher than expected.
Shares in Credit Agricole gained up to 4.8% in early trading, their biggest jump since March, and were the best performing stocks across the European banking sector, up just 0.8%.
While activity grew across business lines, including retail banking, the bank's management said investment banking was particularly strong during the quarter.
Underlying revenues for the Corporate and Investment Banking (CIB) division jumped by 22% to 1.58 billion euros, a performance the bank said reflected "record commercial activity, in a context of high volatility and high customer hedging needs".
Fixed income, currencies and commodity (FICC) trading jumped by about 37%, while "buoyant" investment and equity activities rose 12.8% as financial markets experienced one of the worst first halves in living memory.
A sharp drop in the cost of risk - money set aside for failing loans - also helped to lift the group's profits after provisions were taken during the first quarter to compensate for the potential economic impact of the war in Ukraine.
NO COMMENT ON ITALY
In the first quarter, a disappointing reading for its capital ratios, weighed on the bank's shares but it said the CET 1 metric had added 0.3% between April and June.
"The stronger capital ratio than expected is a strong positive today," Jefferies analyst Flora Bocahut said in a note, while cautioning that the pressure on that front would continue for the rest of the year.
In June, the bank published a strategic plan in which it targeted a net profit of more than 6 billion euros by 2025 and pointed to strong potential for growth in Italy, where in April this year, it acquired a 9.2% stake in Banco BPM.
The latter on Wednesday said it expected to decide by the end of the quarter on a possible new insurance partnership for which Credit Agricole and French insurer AXA are both candidates.
During a conference call with reporters, Credit Agricole's management said they aimed to make the "best offer" but declined to comment further.
The group also announced a rejig of its top management following the surprise announcement in July that the head of the Large Clients division, Jacques Ripoll, was leaving to join renewable energy group Eren.
Two new deputy CEOs have been appointed: CFO Jérôme Grivet and Olivier Gavalda, until now head of the Paris region branch.