French bank Credit Agricole (CAGR.PA) is targeting a net profit of more than 6 billion euros ($6.3 billion) by 2025 and sees strong potential for its business in Italy, it said on Wednesday as it unveiled a new strategic plan.
France's second biggest listed lender, which last year made underlying net income of 5.4 billion euros, expects annual revenues to rise by around 3.5% on average in 2021-25 - with growth coming from large clients, specialist financial services such as its car leasing business, and Italian operations.
The revenue and profit targets exceeded market expectations, analysts said, but the bank disappointed investors by leaving its payout ratio at 50% - lower than rivals, several of which have launched share buybacks recently - and not promising bolder costs cuts.
"We find the cost guidance a bit lacklustre," Jefferies analysts said in a note. The bank's shares fell more than 2%.
The bank expects to grow its retail customer base by more than one million by 2025 and is targeting a return on tangible equity of more than 12%.
Plans $20 Billion on digital infrastructure
It added it would allocate around 20 billion euros to information technology and digital spending over the period.
Executives singled out Italy, where Credit Agricole recently bought smaller peer Credito Valtellinese and also built up a 9.2% stake in Banco BPM (BAMI.MI), as one of the growth drivers going forward.
Deputy chief executive Xavier Musca did not give details, only saying the lender could grow strongly in Italy and it saw a long-term development path in the country.
The stake purchase in Banco BPM has fuelled takeover speculation, and some sources have mentioned possible closer ties with Monte dei Paschi di Siena (BMPS.MI). Musca poured cold water on the rumours, saying there was nothing on the table concerning the Tuscan lender.
The French bank has said it is interested in investing in the insurance activities of Banco BPM, but Musca said there was little progress to report so far.
"It's an open process. BPM has asked a certain number of insurers to make proposals for the takeover of insurance partnerships that they had created with other companies ... it's both for life insurance and property & casualties. At this stage, BPM has not entirely decided how a possible takeover may work," he told reporters.