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Is Caisse Regionale de Credit Agricole Mutuel de la Loire-Haute-Loire SA (EPA:CRLO) Exposed To Too Much Risk?

Caisse Regionale de Credit Agricole Mutuel de la Loire-Haute-Loire SA (ENXTPA:CRLO) is a small cap stock with a market capitalisation of €769.89M. As a company operating in the financial services sector, it faces the risk of bad loans, also formally known as credit risk. Small banks are directly affected by macroeconomic events as the ability for borrowers to repay their loan depends on the stability of their salary and level of interest rates. Since bad debt is written off as an expense, it impacts Caisse Regionale de Credit Agricole Mutuel de la Loire-Haute-Loire’s bottom line and shareholders’ value. Today we’re going to assess the level of bad debt and liabilities Caisse Regionale de Credit Agricole Mutuel de la Loire-Haute-Loire currently has in order to properly analyse the risk involved with investing in Caisse Regionale de Credit Agricole Mutuel de la Loire-Haute-Loire. Check out our latest analysis for Caisse Regionale de Credit Agricole Mutuel de la Loire-Haute-Loire

ENXTPA:CRLO Historical Debt May 26th 18
ENXTPA:CRLO Historical Debt May 26th 18

How Good Is Caisse Regionale de Credit Agricole Mutuel de la Loire-Haute-Loire At Forecasting Its Risks?

Caisse Regionale de Credit Agricole Mutuel de la Loire-Haute-Loire’s ability to forecast and provision for its bad loans relatively accurately indicates it has a good understanding of the level of risk it is taking on. If it writes off more than 100% of the bad debt it provisioned for, then it has poorly anticipated the factors that may have contributed to a higher bad loan level which begs the question – does Caisse Regionale de Credit Agricole Mutuel de la Loire-Haute-Loire understand its own risk?. With a bad loan to bad debt ratio of 88.07%, Caisse Regionale de Credit Agricole Mutuel de la Loire-Haute-Loire has under-provisioned by -11.93% which is below the sensible margin of error, illustrating room for improvement in the bank’s forecasting methodology.

How Much Risk Is Too Much?

If bad loans comprise of more than 3% of Caisse Regionale de Credit Agricole Mutuel de la Loire-Haute-Loire’s total loans, it is seen as engaging in risky lending practices above the prudent level. Bad loans are those that cannot be recovered and are directly expensed from the bank’s bottom line. Since bad loans make up 3.12% of its total assets, which is above the prudent level of 3%, it faces a high chance of default. Given that most banks tend to be well-below this threshold, Caisse Regionale de Credit Agricole Mutuel de la Loire-Haute-Loire faces a much higher risk level and shows below-averagebad debt management.

How Big Is Caisse Regionale de Credit Agricole Mutuel de la Loire-Haute-Loire’s Safety Net?

Handing Money Transparent
Handing Money Transparent

Caisse Regionale de Credit Agricole Mutuel de la Loire-Haute-Loire profits from lending out its various forms of borrowings and charging interest rates. Deposits from customers tend to carry the lowest risk due to the relatively stable interest rate and amount available. The general rule is the higher level of deposits a bank holds, the less risky it is considered to be. Since Caisse Regionale de Credit Agricole Mutuel de la Loire-Haute-Loire’s total deposit to total liabilities is very high at 95.24% which is well-above the prudent level of 50% for banks, Caisse Regionale de Credit Agricole Mutuel de la Loire-Haute-Loire may be too cautious with its level of deposits and has plenty of headroom to take on risker forms of liability.

Next Steps:

Even though Caisse Regionale de Credit Agricole Mutuel de la Loire-Haute-Loire’s level of deposits is sensible relative to its liabilities, it carries risk on the bad debt front by carrying a high level of the risky asset as well as exhibiting poor provisioning. Moving forward, this may mean its profits could be lower than expected. This potential negative impact on cash flows lowers our conviction of Caisse Regionale de Credit Agricole Mutuel de la Loire-Haute-Loire as an investment. Keep in mind that a stock investment requires research on more than just its operational side. I’ve put together three key aspects you should further research:

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  1. Valuation: What is CRLO worth today? Has the future growth potential already been factored into the price? The intrinsic value infographic in our free research report helps visualize whether CRLO is currently mispriced by the market.

  2. Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Caisse Regionale de Credit Agricole Mutuel de la Loire-Haute-Loire’s board and the CEO’s back ground.

  3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.


To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned.