Credit Agricole shares fall as rising costs and tax hit Q1 result

By Mathieu Rosemain

PARIS -Credit Agricole reported a drop in first-quarter profit on Wednesday as a one-off government tax hike, rising costs and retail weakness offset strength in its investment bank.

The French bank's shares were down 3.5% in early trade after first-quarter net income fell 4.2% from a year earlier to 1.82 billion euros ($2.08 billion). That compared with analysts' consensus forecast of 1.86 billion euros in a company poll.

Barclays said it expected the higher than expected costs to "lead to a negative share price reaction today".

Profits were hit by the 123 million euros the bank paid out for a one-off levy imposed on big companies to shore up France's finances, Credit Agricole said, adding it faced a total of 200 million euros in exceptional taxes in 2025.

Other European banks to have reported first-quarter numbers have beaten expectations, with executives largely unfazed by U.S. President Donald Trump's trade war and sticking to their financial forecasts.

Credit Agricole said revenues climbed 6.6% to a new quarterly record of 7.26 billion euros, above market expectations, helped by the integration of Degroof Petercam into its wealth management division.

But operating expenses rose faster than sales, up 8.8% over the period. 

Its investment banking division delivered growth of nearly 6%, led by a 7.1% rise in revenues in fixed income, currencies, and commodities, the head of the unit said. 

"We benefited from very volatile markets," Xavier Musca told journalists on a call. "You saw the huge movements in interest rates and exchange rates linked to Trump's announcements and also to the German announcements (on boosting state spending), which caused German interest rates to rise sharply," he added.

ITALIAN BANKING BATTLE

This contrasted with a fall in net interest margin - earnings on loans minus deposit costs - at retail businesses in France and Italy, Credit Agricole's two biggest retail markets. 

The margin fell by 1.7% in France and by 5.8% in Italy, where the European Central Bank's rate cuts are compressing lending margins. This was offset by higher fee and commission income on assets under management, the bank said. 

The listed entity of Credit Agricole Group, which comprises 39 regional banks, is embroiled in an ongoing wave of bank dealmaking in Italy through its 19.8% stake in Banco BPM, the country's third-biggest lender. UniCredit has made an unsolicited bid for Banco BPM, making Credit Agricole, which has direct and indirect partnerships with both lenders, a key player in the M&A battle. Outgoing Chief Executive Philippe Brassac said on the call that the situation was too fluid to decide whether to accept UniCredit's offer.

"We will wait to see all the terms at the bottom of this consolidation equation so that, in a few weeks' time, Credit Agricole will make a decision," Brassac said.

($1 = 0.8761 euros)

(Reporting by Mathieu Rosemain. Additional reporting by Bertrand De Meyer. Editing by Tommy Reggiori Wilkes, Ingrid Melander and Mark Potter)