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Crédit Agricole Proposes Dividend of €0.60 per share, Announces Simplification of Capital Structure

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(Credit: Chesnot/Getty Images) MONTROUGE, FRANCE - OCTOBER 21: The Credit Agricole logo is displayed at the Credit Agricole headquarter on October 21, 2015 in Montrouge, France. Credit Agricole SA agreed to pay $787 million to U.S. regulators and enter into a deferred prosecution agreement with the Justice Department to resolve allegations the French bank violated sanctions aimed at Iran and Sudan. Credit Agricole's Headquarter In Monrouge
February 18
6:17 AM 2016

Crédit Agricole SA (CA) has announced planning for simplification of capital structure on Wednesday. The restructuring plan includes selling back 25% stake from own holdings to the regional lenders. The move aims to ease concerns about its capital strength.

The French bank's shares have been lifted over 11% followed by the announcement in the midmorning of Wednesday. The lift-up has made Crédit Agricole the leading gainer among financial stocks on the Stoxx Europe 600 banks index, reports The Wall Street Journal.

'The Green Bank' narrates the restructuring plan first hinted last month. Its listed entity will sell 25% stake with the parent banks back to them for €18 billion ($20 billion). This will simplify its complex cross-shareholding between listed entity and cooperative parent banks, reports The New York Times quoting Philippe Brassac, Chief Executive of Crédit Agricole SA.

The proposed transaction will witness the transfer of the stakes held by the listed company a group that is 100% owned by the regional banks. CA will finance the deal with an €11bn loan, according to a report published in Financial Times.

France's second largest bank by asset has also revealed its fourth quarter earnings of 2015 during the same announcement. The Paris based lender has reported a 28% jump in net profit to €882 million during the three months. Revenue has also been up by 11% to €4.29 billion due to a pickup in loan demand.

The transaction is believed to exert positive impact on the bank's capital buffers. CA's core tier-one ratio (=equity X retained earning/risk weighted assets) is expected reach over 11%. The ratio remains above regulatory threshold of 9.5% and 10.7% existed in December.

The deal will be partly financed with a 10-year loan of €11 billion at a 2.15% interest rate by CA to its regional lenders. It is scheduled to be completed by the summer. CA will also pay back €5 billion in cash deposits to the regional lenders under an intra-group guarantee mechanism.

CA aims a return on tangible equity of more than 10% over the coming years. However, the bank has previously fixed its goal for 12% during 2016. But sale of stake to the regional banks, higher taxes and capital ratio targets have been analyzed as the weighing factor on earnings.

The bank is scheduled to represent its mid term strategic plan to the investors on March 9. It has proposed a dividend of €0.60 per share in 2015 earnings compared to €0.30 during last year.

Crédit Agricole SA has announced plans for simplification of its complex capital structure. Under the plan, the bank will sell back 25% of its stake to the regional lenders. The Paris based lender has announced €882 million net profit and proposed a €0.60 per share in 2015 compared to €0.30 the previous year.

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