Credit Agricole Du Languedoc's Past Value Creation May Offer Insights Into Its Future Returns

seekingalpha05-03

Crédit Agricole Du Languedoc is one of the regional retail banks that make up the Crédit Agricole Group.Between book value per share growth and dividends, the company has grown shareholder value by ...

Source Link

Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.

Comments

We need your insight to fill this gap

Leave a comment

{"i18n":{"language":"en_US"},"isChannel":false,"data":{"share":"https://ttm.financial/m/news/2432996558?lang=en_US&edition=fundamental","thumbnail":"https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1492189677/image_1492189677.jpg","is_english":true,"pubTime":"2024-05-03 09:39","share_image_url":"https://static.laohu8.com/5a36db9d73b4222bc376d24ccc48c8a4","id":"2432996558","market":"hk","top_or_hot":-1,"title":"Credit Agricole Du Languedoc's Past Value Creation May Offer Insights Into Its Future Returns","media":"seekingalpha","content":"<div>\n<p>Crédit Agricole Du Languedoc is one of the regional retail banks that make up the Crédit Agricole Group.Between book value per share growth and dividends, the company has grown shareholder value by ...</p>\n\n<a href=\"https://seekingalpha.com/article/4688877-credit-agricole-du-languedocs-past-value-creation-may-offer-insights-into-future-returns\">Source Link</a>\n\n</div>\n","source":"seekingalpha","html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>Credit Agricole Du Languedoc's Past Value Creation May Offer Insights Into Its Future Returns</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nCredit Agricole Du Languedoc's Past Value Creation May Offer Insights Into Its Future Returns\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-05-03 09:39 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4688877-credit-agricole-du-languedocs-past-value-creation-may-offer-insights-into-future-returns><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>Crédit Agricole Du Languedoc is one of the regional retail banks that make up the Crédit Agricole Group.Between book value per share growth and dividends, the company has grown shareholder value by ...</p>\n\n<a href=\"https://seekingalpha.com/article/4688877-credit-agricole-du-languedocs-past-value-creation-may-offer-insights-into-future-returns\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"BK4135","symbol_name":"资产管理与托管银行","start_time":0,"source_url":"https://seekingalpha.com/article/4688877-credit-agricole-du-languedocs-past-value-creation-may-offer-insights-into-future-returns","article_id":"2432996558","we_media_id":null,"thumbnails":["https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1492189677/image_1492189677.jpg"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2432996558","pubTimestamp":1714700383,"sourceInfo":{"source_id":"seekingalpha","name":"Seeking Alpha"},"weMediaInfo":null,"summary":"a di minimis dividend such that the external kind of non-mutual capital realizes a growth in capital higher than you might infer from the ROE less dividends. There's also a couple other sources of incremental compounding…the Crédit Agricole’s Group announced a transaction whereby a cross shareholding held by the corporate and investment bank of 25% of each of the regional banks was sold back to the regional banks at 105% of book value. That…a fairly considerable dividend yield of about 5%. The way Ross analyzed the regional banks’ value creation using book value growth and dividends is similar to how I analyzed investment companies such as Anworth Mortgage (later acquired by Ready Ca","collect":0,"end_time":0,"defaultTopTitle":"seekingalpha.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"BK4135":"资产管理与托管银行","BK4110":"抵押房地产投资信托","BK4207":"综合性银行","DX":"德尼克斯投资","TSLX":"TPG Specialty Lending Inc","CRARF":"Credit Agricole SA","CRARY":"Credit Agricole SA"},"translate_title":"朗格多克农业信贷银行过去的价值创造可能为其未来的回报提供见解","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"CRARF":1,"CRARY":1,"DX":1,"TSLX":1,"US10Y.BOND":0.73,"US12M.BOND":0.73,"US2Y.BOND":0.73,"US30Y.BOND":0.73,"US3Y.BOND":0.73,"US5Y.BOND":0.73,"US6M.BOND":0.73,"US7Y.BOND":0.73,"US912797GL51.BOND":0.6,"US912797HH31.BOND":0.6,"US912797GW17.BOND":0.6,"US912797HE00.BOND":0.6,"US912797HG57.BOND":0.6,"US912797GK78.BOND":0.6,"US912797GB79.BOND":0.6,"US912797FS14.BOND":0.6,"US912797FH58.BOND":0.6},"content_text":"Crédit Agricole Du Languedoc is one of the regional retail banks that make up the Crédit Agricole Group.Between book value per share growth and dividends, the company has grown shareholder value by about 7% per year since 2007.The company trades at a price to book ratio of about 0.21, thus priming it for double-digit returns growing forward.   sommart A couple of years ago, I wrote about the Crédit Agricole Group, the world’s 10th largest bank by assets. The Group’s most prominent subsidiary is Crédit Agricole S.A. (OTCPK:CRARY) (OTCPK:CRARF), which contains the bank’s asset management, insurance, and investment banking arms, among other businesses. However, the Group also contains the largest retail bank in both France and the European Union by number of customers. That business is conducted through 2,395 local banks, which own shares in 39 regional banks. Those regional banks in turn own 59.7% of Crédit Agricole S.A.   An ownership diagram for Credit Agricole S.A. showing relative ownership between the regional banks and outside shareholders (2023 Credit Agricole S.A. Annual Report) Source: 2023 Crédit Agricole S.A. Annual Report 13 of those regional banks are publicly traded, and in my previous article, I found that regional GDP per capita had little to no impact on their return on equity, or ROE. Recently, I received a message from Ross Levin of Arbiter Partners, who pointed out that the regional banks’ stated ROE dramatically understates their profitability. As he said in an August 2023 appearance on the Yet Another Value Podcast:  …the compounding rate of the capital exceeds the stated ROE of the banks because the majority of the capital in these banks is mutual capital that…is taking…a di minimis dividend such that the external kind of non-mutual capital realizes a growth in capital higher than you might infer from the ROE less dividends. There's also a couple other sources of incremental compounding…they don't fully consolidate or proportionately consolidate the earnings from the corporate and investment bank… …So that results in an understatement of earnings from that source of about 50%. And furthermore…the Crédit Agricole’s Group announced a transaction whereby a cross shareholding held by the corporate and investment bank of 25% of each of the regional banks was sold back to the regional banks at 105% of book value. That…results in an understatement of earnings power or capital buildup because they own this 25% stake collectively in each other, they don't reduce their share count by the 25%.  In Ross’s words, this is a more accurate way to look at the regional banks’ value creation: [they have] a book value that's grown seven or 8% per annum over the last 10 years…They also happen to feature…a fairly considerable dividend yield of about 5%. The way Ross analyzed the regional banks’ value creation using book value growth and dividends is similar to how I analyzed investment companies such as Anworth Mortgage (later acquired by Ready Capital Corporation), Dynex Capital (DX) and Sixth Street Specialty Lending (TSLX) in some of my previous articles. In those articles, I described how those companies create shareholder value by:  Increasing equity (book value) per share. Paying dividends.  The first method increases shareholder value by boosting earnings power. Each extra dollar of book value usually lets the company borrow several dollars to buy more assets (usually loans) which can generate earnings. Thus, increasing book value increases earnings power. Because a company’s value comes from its earning power, book value per share growth represents earnings power per share growth, and thus value per share growth. In addition to growing book value per share, an investment company can create shareholder value by paying dividends. Dividends don’t increase company value, but they do increase shareholders’ wealth by transferring value generated by the company to them. Banks work similarly to the investment companies I previously analyzed. They borrow money (mostly through deposits) to create assets in the form of loans. The only difference is that unlike investment companies such as Anworth or Sixth Street, they directly originate the loans they hold instead of buying them. Thus, we can use the approach from my previous articles to analyze the Crédit Agricole regional banks. The first we will analyze is Caisse Régionale de Crédit Agricole Mutuel du Languedoc (CRLA.PA), which has nearly 200 branches and over a million customers in the Languedoc region of southern France. Crédit Agricole du Languedoc had the highest nominal ROE of the regional banks in my previous article, so it seems like a good place to start. Book Value Per Share Growth According to the company’s press release site, Crédit Agricole du Languedoc was formed in May 2007 from the merger of Caisse Régionale du Midi and Caisse Régionale du Gard. Because of that, I will start our analysis of its book value per share in 2007. 2007 is also a good starting point because it represents the height of the last interest rate cycle. Since interest rates have a big impact on bank earnings and we’re also currently in a period of elevated rates, it will be interesting to see how Crédit Agricole du Languedoc grew shareholder wealth across an interest rate cycle. According to TIKR, the company’s book value per share at the end of 2007 was 112.56 euros per share, while its book value per share at the end of 2023 was 256.11 euros:   A screenshot showing a return rate calculation for Credit Agricole du Languedoc's book value since year-end 2007 (Moneychimp Return Rate Calculator) Source: Moneychimp Return Rate Calculator The company’s book value per share rose an average of 4.95 percent annually from the end of 2007 to the end of 2023. Dividends Crédit Agricole du Languedoc’s dividends since the end of 2007 are also available through TIKR:   Fiscal Year Dividends Per Share (Euros)   2008 2.24   2009 2.37   2010 2.53   2011 2.61   2012 2.46   2013 2.34   2014 2.30   2015 2.34   2016 2.39   2017 2.46   2018 2.52   2019 2.56   2020 2.55   2021 2.69   2022 2.78   2023 2.74         Total 39.88   Average Per Year 2.49   Yield on 2007 Book Value Per Share 2.21%   Click to enlarge On average, the company has distributed €2.49 per share in dividends per year since the end of 2007. This means that for each euro of the company’s year-end 2007 book value per share, the company generated an average yearly dividend of 2.21 cents. I think this 2.21% “yield on book value” is better than the usual dividend yield in calculating Crédit Agricole du Languedoc’s dividend generating power. Dividend yield is a percentage of a company’s share price, which is largely outside management’s control, at least in the short run. In contrast, yield on book value represents how much in dividends each euro of the company’s book value can generate. This is something management is responsible for. Also, we previously measured the annual change in Crédit Agricole du Languedoc’s book value per share as a percentage of year-end 2007 book value per share. By also calculating dividends as a percentage of year-end 2007 book value per share, we can add the two to get the total annual value creation.  How Much Value Has Crédit Agricole du Languedoc Created for Shareholders, and How Much Might It Create Going Forward?  Adding up Crédit Agricole du Languedoc’s two forms of value creation gives this result:  Value Created by Crédit Agricole du Languedoc  Average Annual Book Value Per Share Change 4.95%   Average Annual Dividend Yield on Book Value Per Share 2.21%   Total (Annual Value Creation Per Share) 7.16%   Click to enlarge 7.16% is our estimate for Crédit Agricole du Languedoc’s average annual shareholder value creation since 2007. At first glance, this doesn’t seem very high, given the S&P 500 grew annually by about 7.47% over the same period without even considering dividends. That said, this doesn’t take into account the bank’s discount to book value. The stock is trading at a price to book (P/B) ratio of around 0.20, which means each Crédit Agricole du Languedoc share currently costs around €52.90 but corresponds to around €256.11 in book value per share. If that book value continues to generate value at a rate of 7.16% per year, that means a yearly per share value increase of €18.33, or roughly 34.7% of the current share price. Risks Of course, even if a Crédit Agricole du Languedoc investor can look forward to a yearly per share value increase of around 35% of the current share price, that doesn’t mean the share price will actually rise 35% every year, or at all. In fact, the company’s stock has actually fallen by over 20% in the past 3 years:   A TIKR screenshot showing Credit Agricole du Languedoc's stock price since March 2021 (TIKR.com) This drop has been caused by a fall in the bank’s P/B ratio from 0.31 at the end of March 2021 to 0.21 today. This means each euro of stock now buys five euros of book value, up from about 3.23 euros a little over 3 years ago. While this low valuation may seem irrational given the bank’s steady value creation, there’s no guarantee it will change anytime soon. After all, there is a famous quote which essentially says “just because a stock is cheap doesn’t mean it can’t get cheaper.” There are other risks to investing in Crédit Agricole du Languedoc. The bank’s book value dropped significantly in 2008 during the financial crisis and didn’t fully recover until 2010. While it seems unlikely a similar crisis will occur anytime soon, banks are inherently leveraged businesses, and there’s always the possibility of an unexpected shock, as we’ve seen in the U.S. with the collapses of Silicon Valley Bank and First Republic Bank. That said, the biggest risk to investing in Crédit Agricole du Languedoc—or any of the Crédit Agricole regional banks—is probably the bank’s ownership structure. The bank’s directors—and by extension, management—are chosen by the local banks that hold much of its capital. As a result, the bank is probably not being run solely to maximize shareholder returns, and minority shareholders have little power to change the bank’s governance. My guess is this is the biggest reason why all the Crédit Agricole regional banks trade at such depressed valuations, despite their reasonable annual book value growth and strong dividend yields.  Conclusion—How Likely Is It That Crédit Agricole du Languedoc’s Value Generation Will Turn Into Actual Shareholder Returns?  Crédit Agricole du Languedoc’s complex ownership structure is unlikely to change anytime soon. Despite that, I am still optimistic about it as a potential investment for several reasons. The first reason is simply how cheap the stock is. A price to book value ratio of 0.2 is unheard of in the U.S. for a regional bank with a strong market position, a history of consistent profits, and a considerable dividend yield. While the stock could always get cheaper, even during the March 2020 COVID downturn, the bank’s price to book valuation was 50% higher than it is now. In that context, it is hard to imagine how much cheaper it could get, even in a major crisis. Moreover, even if the stock doesn’t go up, shareholders should still be rewarded. The bank’s shares have a dividend yield of nearly 5%. This, combined with the bank’s nearly 5% annual book value per share growth, means the stock should return nearly 10% a year even if its P/B ratio merely stays the same. At the end of the day, there’s the famous quote “In the short-run, the stock market is a voting machine. Yet, in the long-run, it is a weighing machine.” As a value investor, this quote is the basis of my investment philosophy, and because of that, I think Crédit Agricole du Languedoc might be a good investment for someone who can buy and hold for the long run.  Editor's Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.","kind":null,"is_publish_news":null,"is_publish_highlight":null,"is_publish_live":null,"is_publish_wemedia":null,"editions":null,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.22.5","shortVersion":"4.22.5","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2432996558"}