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The regional Crédit Agricole or how to take advantage of increased the margin of bank intermediation

What is the margin of bank intermediation?

As everyone knows the first business of a bank (including a bank network) is to the credit. Profits from this activity are derived from the differential which the bank finances itself on the market and the rate that it serves its customers multiplied by the leverage entrenched claims to be losses (this which occurs when the client no longer meet its deadlines and that the bank guarantees carried by the bank can not cover the loss).

Take the points one by one.

Today, interest rates on the market are relatively low. Just look at interest rates of the market: over the Euribor 1 month, 3 months and 1 year are respectively 0.33%, 0.70% and 1.26%.

But the rates of past and current credits granted by banks to housing credit are well above refinancing rates. Today they are around 4% on average for fixed rates and 3% for variable rate for a credit on 15 / 20 years for the best record (source: www.meilleurtaux.com ) .

banks lend more money they really have is leverage. It multiplies the output when the differential rate is to their advantage or else can cause significant losses if not. You will understand, for banks, the current period is the jackpot!

The regional Crédit Agricole for Main business credit. Certainly, they also exert an insurance business, supply of means of payment and savings. Even if these activities are increasing (especially insurance), they remain marginal activities in relation to credit.

What is interesting is that regional banks have no banking or investment funding, what are banks network. They may of course invest their surplus capital markets vehicles in more or less risky (monetary \u0026lt;bonds \u0026lt;shares) according to the policy risk of each management. Moreover, they are also jointly responsible for profits and losses from the banks financing the parent Crédit Agricole and its subsidiaries on market activities through Calyon in proportion to their holdings of participation in it. You will find all the information in the annual reports of each fund.

Returning to leverage. The regional banks are generally well endowed with capital as well represent over 10% of total assets . For simplicity, this would mean that at least 10% of allocations are failing and that all guarantees taken on these claims are invalid for the bank to clear. This does not take into account the provisions already made for doubtful debts and litigation (CDL).

All this partly explains the recurrence of regional banks' profits and their consistency over time.

Currently, there are 13 regional banks that have cooperative investment certificates (TCC) quoted on the Paris market. They give a pecuniary right on property and profits, but have no voting rights. What is in our view the main risk of this investment vehicle. However with withdrawals ITC Centre-Loire and Aquitaine recently, the speculative is not zero.

According to our calculations, all the ICC has a forward PE of 5.1 in 2010 an estimated average yield of 6.4% and appreciation potential that values the ICC in capital of 208 % (equity at 31.12.2009).

These figures are averages, and some ICC are more undervalued. Apart fund Toulouse we hold on our shopping list , we recommend you take a look at the cases of Ile-et-Vilaine, Haute-Loire and Seine-Normandy which have respectively a PER of 4.2, 4.2 and 4.0 and a potential appreciation on equity of 278%, 246% and 244% (during the May 28, 2010).

Finally, note that the average CDL observed for all cases is 2.5% of outstanding credit and that is provisioned on average at 70%.

The results of the first quarter of 2010 tend to confirm that the hedging was appropriate because the benefits are yet to go and market shares are increasing. These profits continue to increase the spread between the CCI and CCI capital. In two words: the undervaluation continues to grow!

figures of Q1 2010 CRCAM Toulouse 31: here.

Ticker: CAT31

course the day of publication: € 56.60 (da you closing 28.05.10)

Yield (dividend included) : +9.5%

Tip: PURCHASE

Main risk: no voting

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Ofi Private Equity Capital, a discount unjustified!

Since our previous article, the title OPEC grew by 10.6%. In a little over 3 months, you certainly will find this excellent performance, especially with the stock market turmoil of the period!

Certainly, performance is significant, but the discount on the last Net Asset Value (NAV) per share is still exaggerated.

C A s usual, the company has released a very nice presentation on the 2009 accounts. You can download it here .

Companies portfolio had an activity slightly lower than in 2008 (-6%) but maintained their margin with level EBITDA average of 16.6% in 2009! This is an excellent level of profitability.

Finally, the model of growth and recurrence of the activity of the main interests of OPEC are good omens for the patient investor .

We will keep following points in particular as regards the NRA and its evolution:

summarize the three points:

1. If EBITDA of equity portfolio grew by 10%, the impact on the NAV per share will be 3.54 euros .

2. The debt of EUR 10 million, will mechanically increase the NAV 1.65 euros.

3. Rising stock of comparable 10% will have a positive effect on the NAV per share of 0.65 euros.

If we retain the first two points which are likely to be achieved in the medium term, the NRA will increase by 5.19 euros per share. That's the magic of leverage which improves yields!

We will not consider the third hypothesis that values only the companies held in portfolio by comparable, which has nothing to do with fundamentals.

published NAV per share at March 31, 2010 is 18.40 euros per share. You can read the official publication here.

The discount

At a closing price (21.05.10) from 8.64 euros, the discount is greater than 50% . The potential of the stock relative to its last known RDA is 113%!

If we consider the two as probable hypothesis we have just seen, the NRA can reach € 23.59 = € 18.49 (NAV at 31 March 2010) + 5.19 euros ( EBITDA growth of 10% and repayment of debts of 10 million EUR). In this case, the potential would be 173%.

course, that said leverage, also called " Massu effect. That is to say that the size of the debt can completely screw up the plans of the private equity company if the recurrence of the activities of its holdings falling and / or profitability in recent decreases. It is possible that this pathway is emerging in the months / years coming, and if so OPEC will be unable to cope with debt service.

Weigh the pros and cons before investing in this kind of title. Your opinions are welcome.

Ticker: OPEC

course the day of publication: € 8.64 (da you closing 21.05.10)

Yield: 10.6 %

Tip: PURCHASE

Main risk: highly leveraged

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2009 a good year for our values in the construction

Moury Construct and NCI published their 2009 annual accounts. You will find these publications here:

- Accounts 2009, NCI: here
- Accounts 2009 to Moury: here

As we explained in a previous article, we Investors believe that the value has an interest in thinking on . Below we have summarized the main information of interest for each Title: equity, PER, net cash, backlog and ROE.





For information, reference courses selected for this analysis are as of Thursday 13.05.10 at closing.

What can we learn from these figures?

In terms of profitability, companies have both a PER less than 9, which is a good level. The NCI ROE is relatively higher than Moury to 14% against 11%. However, given the sector, these levels are exceptionally high!

In terms of asset valuation, we see that tangible equity per share are higher for NCI (taking into account a valuation of property in the United States at fair value and not at cost history). Moury is penalized by intangible assets consist solely of goodwill.

Regarding cash per share, again the two companies are at near: over 90% of market capitalization is covered by the cash net of debt! And as we have seen in a previous article , companies that have a gold mine and continue to generate positive cash flows are likely to bring surprises to their shareholders.

Finally, visibility. This time it Moury Construct which takes the lead with an activity level that allows him to see the year 2010 with serenity.


Conclusion

Both companies are still in excellent financial shape.

From a purely "value", NCI has a higher discount to its tangible assets. Nevertheless, Moury has greater visibility due to a backlog filled for the entire year.

Note nonetheless that NCI could book of surprises by the end of the year with the unwinding on the record of the airport Nantes and medium term, a positive output of the real estate business in Romania.

The liquidity of both titles is still very low, we recommend extreme caution if you want to buy these securities. However as part of a long-term investment, we believe that buying the shares of these two companies represents limited risks to a potential gain important.

Since purchasing our advice dated 24.4.2009, NCI conducted a performance of 68.2% (dividend included) and Construct Moury since we reported 20/06/2009 +27.5%.

Which of these two titles do you prefer? Which do you have in the portfolio?

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Monthly report - April 2010



You will find below the reporting month of April. Two

advice only: buy or sell.

You can download the file of April. PDF format here: 2010.04 - Reporting mensuel.pdf

Comments month:
Numerous publications of annual reports this month. Analyses will be published soon to reflect data as of 31.12.2009

Life titles

NCI

Annual Report 2009 published.

Moury Construct
Annual Report 2009 published.
Orsus

Annual Report 2009 published.

COFIGEO
Various speculations about a change of management. For now just rumors. Proposed dividend of EUR 5.

Regional Bank Credit Agricole Mutuel Toulouse
Annual Report 2009 published.

OFI Private Equity Capital (OPEC)
Annual Report 2009 published.

Vianini Lavori
RAS

Average Yield

Since the analysis, the average yield is 13.2%.

Please consult analysis Value and Profit.