Credit Agricole completes ownership overhaul, retail suffers

PARIS (Reuters) - French bank Credit Agricole said on Wednesday it had finalised a major overhaul of ties with its mutualist parent as its laggard retail division LCL reported a sharp drop in second quarter profits.

The overhaul, simplifying the group's structure, involves the sale of the listed bank's stake in its retail-focused mutualist parent back to the regional banks that control the business for 18.5 billion euros (15.57 billion pounds).

It focuses the listed bank more on asset management, insurance and investment banking activities. It is also expected to bolster capital and help finance dividends.

Beyond the overhaul, investors hope to see improvements in the performance of retail unit LCL, which has lagged peers even though retail banks across Europe are suffering in a low interest rate environment.

The unit, which accounts for a fifth of earnings, saw its revenue fall 10.1 percent in the second quarter, weighed by "exceptional volumes" of loan renegotiations and early repayments of home loans.

The unit's net income fell 37.6 percent.

Quarterly net income for the whole group rose 25.8 percent to 1.16 billion euros, boosted by a 328 million euros capital gain from the sale of its stake in card payment group VISA Europe.

Underlying earnings came at 818 million euros, a 13 percent increase year-on-year, although the comparable 2015 result was adjusted downwards for a loss of net income resulting from the overhaul.

Revenue at Credit Agricole's asset management division fell 1.1 percent and was down 5 percent in its investment bank, weighed down by uncertainty in financial markets.

The asset management business nevertheless delivered 7.6 percent growth in net income thanks to lower taxes and costs.

(Reporting by Maya Nikolaeva and Julien Ponthus)