Credit Agricole unviels new ownership structure
Credit Agricole has promised stable investor returns and a solid capital base in the future as the French bank outlined plans to simplify its much-criticised ownership structure.
Its chief executive Philippe Brassac said the plan would put to rest criticism from analysts, shareholders and regulators that the cross-shareholding between its listed entity and its cooperative parent banks was too complex.
Detailing the plan first announced last month, the bank said its listed entity would sell its 25% stake in the parent banks back to them for €18 billion.
The listed entity would repay €5 billion to the parent banks to unwind an intragroup guarantee mechanism.
It would also lend them €11 billion over ten years to fund the stake purchase in a deal expected to be completed in the third quarter.
“At the end of the day we will have a much more understandable and simpler group, because what used to be entangled will be disentangled,” Brassac told a news conference to present the plan and the bank’s 2015 results.
The loss of the parent banks’ contribution to the listed entity’s earnings would carve €470m out of this year’s net income.
The plan would also allow it to pay a dividend exclusively in cash as of 2016 with a payout ratio of 50% of earnings, whereas until now the parent banks took their dividends in shares, effectively increasing its capital.
Brassac said unwinding the cross-shareholding would also mean that the listed entity would be able to keep a steady capital base out to 2019 with common equity tier 1 capital seen at 11% from January this year.
“We want to put an end to this unbearable paradox that we are a big, well-capitalised bank while doubts linger over the fragility of the listed structure’s capital,” Brassac said.
The bank also reported that net income rose 27.5% in the fourth quarter year-on-year to €882m, beating the average estimate in a Reuters poll of €692m.
Revenue rose 10.6% to €4.289 billion, slightly below the expected average of €4.315 billion.
Crédit Agricole is a French network of cooperative and mutual banks comprising the 39 Crédit Agricole Regional Banks. In 1990, it became an international full-service banking group. The cooperative has over 150,000 employees.
