Investment banking helps French banks offset weak retail earnings

By Leigh Thomas PARIS (Reuters) - Societe Generale and Credit Agricole joined bigger French rival BNP Paribas on Wednesday in posting stronger first quarter earnings on firm revenues from investment banking. Brisk financial market trading and booming corporate bond issuance helped the trio of French banks offset lacklustre performances in their domestic retail banking markets. In its first quarter results report, Societe Generale said revenues from equities trading jumped by nearly a third as many markets reached record highs with unprecedented amounts of central bank liquidity flooding into financial markets. A weaker euro and the full integration of its Newedge brokerage unit drove a nearly 22 percent increase in corporate and investment banking revenues at SocGen. Excluding those two factors, the division's revenues were up to 8 percent. With many corporate borrowers rushing to lock in record low interest rates, Credit Agricole benefited from a strong position in arranging bond issues. France's third-largest listed bank saw its corporate and investment banking revenues rise 24 percent to 1.2 billion euros (1 billion pounds) with nearly half coming from its fixed income business. The increase helped to offset falling revenues at Credit Agricole's retail French banking businesses. With the biggest retail network in France, it is hit particularly hard by state-regulated interest rates French banks have to pay on popular tax-free savings accounts. The government has dismissed calls to cut the rate from the current 1 percent, pinching the margin banks earn between what they have to pay on deposits and falling rates they lend at. "Against all logic, the public authorities are keeping rates too high. This is a handicap for companies as deposits entrusted to banks are often not fully used (for lending) but rather placed on markets," Credit Agricole Chief Executive Jean-Paul Chifflet told journalists on a conference call. Societe Generale saw net banking income in its French retail network dip 0.9 percent while BNP Paribas said revenues at its French retail business were largely flat when it reported first quarter results last week. Also benefiting from investment banking business, BNP Paribas said it saw a nascent recovery in household and businesses' appetite for credit in the euro zone after years of withering. (Additional reporting by Matthias Blamont and Mathieu Protard)