Crédit Agricole SA intends to launch its takeover bid for Credito Valtellinese SpA, or Creval, in April after receiving regulatory approval from EU and Italian competition authorities, as the former seeks to increase its footprint on the Italian market, the French bank's CFO said Feb. 11
The French lender still requires approval from the European Central Bank after which it will file an offer with the Italian securities market regulator, Consob, CFO Jérôme Grivet told analysts at a fourth-quarter earnings presentation. Then it should be able to launch its bid in early April, he said. Settlement of the offer is expected end-May with the merger expected to conclude in 2022.
The bank expanded in Italy, its so-called second home market, through the 2017 acquisition of three small Italian savings banks and their subsequent merger with its Italian business Crédit Agricole Italia SpA, the eighth-largest Italian bank by assets. The Creval deal would place it in fifth position and strengthen its position in the north of Italy, the country's economic powerhouse.
Crédit Agricole has been expanding through partnerships, for example through the combination of its custody and asset services operations with those of Banco Santander SA, and Grivet said the bank would continue that strategy because of its strength across specialized business lines such as asset management, insurance and consumer credit.
"They are attractive, and they can provide our partners the capacity to enhance their offer towards their customers," he said.
Crédit Agricole has decided to bid for Creval because of its presence in Italy as well as the cost and revenue synergies it expects to generate, he said.
'Comfortable' capital position
Crédit Agricole common equity Tier 1 ratio — a key measure of financial strength — stood at 13.1% as of Dec. 31, 2020, up from 12.6% at the end of September 2020 and 5.2 percentage points above regulatory requirements.
Grivet said the bank was not amassing capital for future M&A and could raise additional capital should there be an opportunity.
Crédit Agricole's "very comfortable" capital position will permit the bank to pay out a 2020 dividend of €0.80 a share with a scrip dividend payment, exceeding its traditional payout ratio of 50% in cash, it said in a statement. Grivet said Crédit Agricole wanted to compensate shareholders after missing out on the 2019 dividend following recommendations from the ECB amid concerns banks could face a capital crunch because of the economic impact of the coronavirus. The bank is also planning a share buyback of up to 5% after the dividend payout.
Following the dividend, the bank will still have an excess of capital levels of close to 12%, above its 11% target, he said.
The bank's fourth-quarter profit fell 92.6% on the year to €124 million, weighed down by specific items including a goodwill impairment charge related to Crédit Agricole Italia. For full year 2020, Crédit Agricole's net profit fell to €2.69 billion from €4.84 billion in 2019.
Bad loans
The pandemic has raised concerns about rising bad loans at European banks as corporates face difficulties in repaying loans. The French central bank said in January that it saw a systemic risk from a rise in corporate debt and that it expected the gross debt of nonfinancial companies, which rose sharply at the outbreak of the coronavirus, to remain high for the length of the crisis.
Cost of risk, the main metric for calculating loan loss provisions, stood at 62 basis points end-2020, compared to 32 points the year before. Grivet said the cost of risk should decline in 2021 as long as public support measures are not lifted too quickly. France in March opened a €300 billion credit guarantee scheme for companies affected by the crisis and extended the deadline from the end of December 2020 until the end of June 2021.
"There is certainty ... that at a certain point in time, the pandemic is going to be put under control, and it's going to be over. There is an uncertainty about the timetable, the precise timetable and that's important to have in mind," he told analysts.
