Bloomberg News

Credit Agricole First-Quarter Net Drops 75% on Greek Losses

May 11, 2012

Credit Agricole booked 940 million euros of net losses related to Emporiki Bank of Greece SA, the Athens-based unit it acquired in 2006, and Greek bond writedowns resulting from the nation’s sovereign debt restructuring. Photographer: Balint Porneczi/Bloomberg

Credit Agricole booked 940 million euros of net losses related to Emporiki Bank of Greece SA, the Athens-based unit it acquired in 2006, and Greek bond writedowns resulting from the nation’s sovereign debt restructuring. Photographer: Balint Porneczi/Bloomberg

Credit Agricole SA, France’s third- largest bank by market value, said first-quarter profit dropped 75 percent, hurt by Greek losses.

The bank slumped as much as 4 percent in Paris trading after reporting net income of 252 million euros ($326 million), less than the 482 million-euro average estimate of five analysts surveyed by Bloomberg.

Credit Agricole booked 940 million euros of net losses related to Emporiki Bank of Greece SA, the Athens-based unit it acquired in 2006, and Greek bond writedowns resulting from the nation’s sovereign debt restructuring. The French bank is struggling to staunch losses from Greece after reporting its first annual loss last year.

“Credit Agricole keeps suffering because of Greece,” Valerie Cazaban, who helps manage 80 million euros at Stratege Finance in Paris and has shares in the bank, said in an interview before the earnings were released. In Greece, the French bank “can’t lock out its positions, it is extremely difficult.”

Credit Agricole declined 9 cents to 3.41 euros by 2:43 p.m. in Paris, bringing the drop this year to 22 percent. BNP Paribas SA, France’s biggest bank, declined 7.6 percent in 2012 and Societe Generale SA (GLE), the country’s second-largest lender by market value, fell 1.9 percent this year.

The losses in Greece were partly offset by a 466 million- euro gain after Credit Agricole repurchased its own debt.

Refinancing, LTRO

Chief Executive Officer Jean-Paul Chifflet repeated today that his bank will continue to cut exposure to refinancing the Greek unit as it keeps increasing deposits in the country and loans decline. Credit Agricole’s net refinancing exposure to Emporiki was 4.6 billion euros at the end of March, compared with 5.5 billion euros in December, partly as deposits rose.

Credit Agricole also started talks with Greek authorities to access Greece’s Emergency Liquidity Assistance funds, Chifflet said. “For the moment, the door is closed to us,” the CEO said.

Credit Agricole, which by the end of April had achieved 74 percent of its 2012 funding needs, has no plans to use “early reimbursement windows” for the three-year loans the European Central Bank has provided to lenders since December, Chief Financial Officer Bernard Delpit told journalists. Credit Agricole reduced ECB financing to Emporiki to 1.2 billion euros from 1.8 billion euros at the end of March because of so-called haircuts on collaterals, Chifflet said.

Greek Losses

The losses from Greece in the first quarter included 130 million euros in writedowns on Emporiki’s deferred-tax assets and 319 million euros in provisions on debt from three Greek companies as part of the country’s sovereign-debt restructuring.

Credit Agricole last year reduced its Greek staff by 11 percent to 5,100, booking 51 million euros in costs. The lender, which spent about 2.2 billion euros in 2006 to amass a controlling stake in the Athens bank, last year wrote down 359 million euros of remaining goodwill at the unit.

In January, Credit Agricole Group injected about 2 billion euros to reinforce Emporiki’s capital. Chifflet, who took over in 2010, last year started trimming the bank’s balance sheet and Credit Agricole in December scrapped its 2014 earnings targets.

Chifflet reiterated Credit Agricole Group’s target for a common equity Tier 1 ratio of 10 percent by the end of 2010. Credit Agricole sees no need of a capital increase related to its Greek exposures, the CEO said.

Euro Exit Risk

Greece’s political leaders are in a fifth day of talks to form a government, with Evangelos Venizelos, the Greek socialist Pasok leader and former finance minister, pressing counterparts on a proposal for a unity administration that would avert a new election amid rising concern the nation will exit the euro.

“The election results increased the complexity of a situation that was already tense,” Chifflet said on a call with journalists. “We have been working for several quarters on this worry” that Greece will leave the common currency, Chifflet said, adding that a euro exit is not the main scenario.

French banks have been embroiled in Europe’s debt crisis as they held $620 billion in private and public debt in Greece, Portugal, Ireland, Italy and Spain at the end of December, the world’s largest such holdings by foreign lenders, according to the Bank for International Settlements.

Credit Agricole, like BNP Paribas (BNP) and Societe Generale, is cutting investment-banking jobs and assets as the crisis curbs access to funding in dollars and regulators impose stricter capital rules. Credit Agricole reduced its funding needs by 35 billion euros in the nine months through the end of March out of a target of 50 billion euros by the end of 2012, it said.

Consumer Banking

Most of the bank’s balance-sheet reductions come from its corporate- and investment-banking unit. The division, which is shedding 1,750 jobs and closing operations in 21 nations, aims for “medium-term” annual revenue of 5.4 billion euros, up from 4.73 billion euros in 2011, the bank said in April.

First-quarter profit at the unit was 156 million euros, hurt by 246 million euros of net costs related to its balance- sheet trimming plans, Credit Agricole said. Revenue from continuing capital-market and investment-banking operations fell 2.6 percent to 899 million euros, the bank said.

Earnings from the regional banks’ French consumer network were 372 million euros, compared with 374 million euros a year earlier. The LCL French consumer-banking network had 204 million euros of profit, up from 195 million euros a year earlier.

Earnings at the asset-management, insurance and private- banking division rose 22 percent to 116 million euros, helped by inflows at fund-management division Amundi.

In Italy, Credit Agricole’s largest market by staff outside of France, the Cariparma branch network contributed profit of 31 million euros. Credit Agricole’s specialized financial-services unit had a 28 million-euro loss, hurt by a 280 million-euro provision at Italian unit Agos.

To contact the reporter on this story: Fabio Benedetti-Valentini in Paris at fabiobv@bloomberg.net

To contact the editors responsible for this story: Frank Connelly at fconnelly@bloomberg.net;


Toyota's Hydrogen Man
LIMITED-TIME OFFER SUBSCRIBE NOW
 
blog comments powered by Disqus