Credit Agricole tops Q2 forecasts, dismisses Monte Paschi-Banco BPM tie-up talk

By Mathieu Rosemain

PARIS, July 31 (Reuters) - France's Credit Agricole SA posted better-than-expected second-quarter earnings on Friday, driven by growth across its retail, asset management and investment banking businesses.

The lender's CEO, Olivier Gavalda, also dismissed reports that Italy's Monte dei Paschi and Banco BPM — in which Credit Agricole holds a nearly 30% stake — were in talks to combine as "false".

Net income attributable to shareholders inched up 1.4% year-on-year to €2.05 billion ($2.4 billion), excluding a one-off gain booked a year earlier, beating a company-compiled analyst consensus of around €1.9 billion.

Revenue increased 7.7% to €7.36 billion, also ahead of expectations, while operating expenses rose 4.6% to €3.87 billion.

Analysts at Jefferies welcomed "broad-based revenue strength against (a) modest cost disappointment", while Royal Bank of Canada analysts described the results as strong.

Investment banking revenue rose 4.4%, supported by strong performance in Credit Agricole's structured equity and equity businesses, while fixed income, currencies and commodities trading revenue was broadly stable.

That growth was far below the stellar numbers seen at most of its rivals including BNP Paribas, however, after conflict in the Middle East sparked a wave of trading activity.

In France, retail banking unit LCL benefited from a continued recovery in net interest income, while the group's Italian retail operations also posted growth.

Credit Agricole has emerged as one of Europe's most acquisitive banks in recent years, expanding in wealth management, building its presence in Italy and pursuing growth opportunities in Germany as it seeks to diversify beyond its mature French retail market.

Like domestic rivals BNP and Societe Generale, however, it faces pressure to control costs while competing against U.S. investment banking giants and digital retail challengers.

ITALY IN FOCUS

Italy, Credit Agricole's second-largest market, remains central to its strategy.

The lender recently increased its stake in Banco BPM to 29.3%, strengthening its influence at a time when a wave of consolidation is reshaping Italy's banking sector.

The move reduced Credit Agricole SA's core capital buffer — known as CET1 ratio — by 33 basis points during the quarter, leaving it at 11.3%, but it expects the larger holding to contribute around €150 million of quarterly earnings from the third quarter of 2026.

Asked about potential talks between Banco BPM and Monte dei Paschi di Siena, Gavalda said Credit Agricole had received no proposal or information regarding any possible deal.

"We have received no project, no information on a potential combination between MPS and BPM," he told reporters on a call to discuss the results. "Everything that has been written in the press is completely false as of today."

MPS is also the subject of a takeover bid from Italy's biggest bank, Intesa Sanpaolo.

Credit Agricole Deputy Chief Executive Jerome Grivet said the bank's holding in BPM made it an unavoidable stakeholder.

"Nothing can happen against us or without us," Grivet said.

($1 = 0.8673 euros)

(Reporting by Mathieu Rosemain; Editing by Tommy Reggiori Wilkes and Emelia Sithole-Matarise)