Jefferies analysts maintain a Hold rating on SocGen despite a goodwill write down on Russia, while they assign a Buy rating on Credit Agricole SA (EPA:ACA) following strong results.

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Omar Fall and the team at Jefferies in their research report dated May 7, 2014 note Credit Agricole SA (EPA:ACA) is still the only game in town.

Credit Agricole beats consensus

The Jefferies analysts note that, aided by improving credit quality and good cost control, Credit Agricole delivered above consensus results. They point out that the bank’s Basel 3 CET1 capital was 9.0%, showing a 70 bps improvement QoQ, and the bank now meets their FY 14 target. The bank was able to achieve the target primarily due to an €8 billion RWA reduction from revised methodology on ‘safety margins’. Implementation of a CIB action plan also aided in improvement, with underlying RWA falling €16 billion QoQ.

The analysts point out by reporting 9% CET1, the bank is back in line with its European peers. They believe this will help to further reduce the discount that CASA continues to trade at relative to peers.

The analysts also point out Credit Agricole SA (EPA:ACA) delivered headline net income of € 868 million, 14% ahead of consensus. The bank’s adjusted post-provision profit of €671 million was 6% ahead of expectations, aided by a 6% beat on cost of risk, primarily in the Consumer Finance Group. The bank’s retail banking results were a mixed-bag, with revenues posting 2% below consensus. However, its CIB posted very strong revenues almost 7% ahead of consensus.

The analysts assigned a Buy rating on Credit Agricole SA (EPA:ACA) and pegged the target price at €13.5 based on a single-stage GGM model RoTE of 13%.

Goodwill write down impacts Societe Generale

Analyzing the first quarter results announced by Societe Generale SA (ADR) (OTCMKTS:SCGLY) (EPA:GLE) today, the Jefferies analysts point out the firm’s headline numbers were impacted by a €525 million goodwill write down on Russia booked during the first quarter. They note adjusting for the write down, the bank’s PBT came in at €1,235 million, 3% below expectations.

The analysts highlight that the miss was due to (i) French retail revenues coming in 1% light, and (ii) international retail was 2% below expectations.

The bank’s Basel 3 fully loaded CET1 ratio stood at 10.1%, compared to 10% reported for FY 13.

The Jefferies analysts assigned a Hold rating on SocGen and pegged the target price at €44.60 using a single stage GGM.