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Crédit Agricole sees retail fees increasing as it seeks to offset weak rates

Crédit Agricole SA is expecting an improvement in fees at its retail division despite a poor first quarter and will focus on providing fee-generating products for its customers as it seeks to offset the impact of a weak interest rate environment, the bank's CFO said on May 15.

Crédit Agricole, which holds the number one position in the French mortgage market along with the regional banks held by parent Crédit Agricole Group, is, like many of its peers, looking for ways to increase profits weighed by low interest rates. French banks cross-sell higher margin products such as asset management and insurance to improve fees and ease pressure from the weak interest rates.

"Fees have to be, I would say, conquered quarter after quarter," Jérôme Grivet told a conference call following publication of the group's first-quarter earnings. "This is of course something on which we are working and this is why we try permanently to enhance our product offer in order to be able to be relevant in what we propose to our customers," he said.

Fees down

Fees and commission income at Crédit Agricole's French retail unit, Crédit Lyonnais SA, LCL fell by 5.7% during the first quarter, while net interest income rose 6.4% helped by strong lending. Retail banking, including the bank's international retail banking activities, accounted for almost a third of revenues during the first quarter.

Overall, fees are expected to pick up across all the bank's retail activities, Grivet said, noting that volatile market conditions in the fourth quarter had made customers "shy" about buying equities and other "risky savings products."

In French retail banking, home loans grew 8.3% year-on-year while small business lending rose 11.8%.

The majority of French mortgages are fixed rate, and low interest rates have resulted in a wave of mortgage renegotiations.

Grivet said demand for home loans remained strong as buyers were attracted by low rates, adding that Crédit Agricole remained committed to the mortgage market despite low margins as it was a key component of its retail strategy.

Home loans

"We have to be active in the space of home loans. So of course, we would prefer the pricing of home loans to be a little bit higher, and actually we had hoped that in 2019, it was going to go up a little bit rather than decreasing as it did in the last four months," Grivet said.

"But we are not going to take an autonomous decision on the home loan market, and we are regarding the retail market globally," he said.

The bank reported a 10.9% drop in first-quarter net profit to €763 million, due to accounting charges and a higher contribution to the EU's Single Resolution Fund, which protects bank deposits.

Excluding specific items, underlying net income group share for the period amounted to €796 million, up from €788 million in the first quarter of 2018. Revenues declined year over year to €4.86 billion from €4.91 billion.

The bank will present a new three-year strategic plan on June 6.