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

I just had my first article published on Seeking Alpha in almost two years!

My most recent article was inspired by a message sent to me by a reader about my last article, which described how the publicly stated return on equity of the Crédit Agricole regional banks dramatically understates their profitability. Instead, he argued, a better way to analyze them is to look at their book value per share growth and annual dividends, the same approach I used in my previous articles about investment companies such as Anworth Mortgage, Dynex Capital, and Sixth Street Specialty Lending. 

After reading his message, I was inspired to write an article analyzing Credit Agricole Du Languedoc, one of the Crédit Agricole regional banks, using that methodology; you can check it out here.

The Impact of Local GDP Per Capita on the ROE of Crédit Agricole's Regional Banks

The Crédit Agricole group is not only the largest retail bank in France, but also the largest retail bank in the European Union. The Group consists of Crédit Agricole S.A., whose stock trades in the U.S. under the tickers (CRARY) and (CRARF), as well as a network of 39 regional Crédit Agricole banks, and a larger network of over 2,400 mutual banks. More than 11 million mutual shareholders own shares in the mutual banks, which themselves own shares in the regional banks, which in turn own over half the shares of Crédit Agricole S.A.

Of the 39 Crédit Agricole regional banks, 12 are publicly traded on European exchanges. Their shares have historically been cheap. One problem with investing in them, though, is deciding which ones to invest in. Since each Crédit Agricole regional bank operates in a different area of France with a different GDP per capita, I was curious if areas with higher GDPs per capita might have Crédit Agricole regional banks that earn higher returns. (Read More)

Alternative Financial Services Are A Major Source Of Earnings For Republic Bancorp

At first glance, Republic Bancorp, Inc. (RBCAA) looks like an ordinary regional bank. With $5,601 million in assets, Republic was Kentucky’s biggest bank at the end of 2019. Republic was also America’s 172^nd largest bank.

Unlike most regional banks, though, Republic Bancorp earns around 30% of its net income from alternative financial services. The term “alternative financial services” covers products such as high interest loans and tax refund advances. Customers often use these services when they can’t access traditional bank services. Such customers are often poorer and pay higher costs.

Republic Bancorp’s Republic Processing Group (RPG) business is a big provider of these services. RPG has two segments. Tax Refund Solutions (TRS) offers tax refund advances. TRS also offers “refund transfers” that let tax filers pay for tax preparation using their refunds. Republic Credit Solutions (RCS) offers loans, mainly high interest lines of credit.

These two segments earned $28.246 million of the company’s $91.699 million in 2019 net income. It is very unusual for much of a bank’s earnings to come from alternative financial services. Since these segments are so important, we will analyze them to better understand their impact on the company. (Read More)