Bloomberg News

Agricole May Face $12 Billion Loss on Greek Exit, Analyst Says

May 18, 2012

Credit Agricole SA (ACA), France’s third- biggest bank by market value, may face a loss of as much as 9.1 billion euros ($12 billion) on its Emporiki Bank division in a Greek exit from the euro, Credit Suisse Group AG analysts said.

A departure from the currency would force the French bank to provide more funding to its Greek unit, take losses on loans in the country, and log currency losses as the replacement currency declines in value, Maxence Le Gouvello, an analyst at Credit Suisse in London, wrote in a May 16 report to clients.

Credit Agricole has been trying to reduce its exposure to its Greek unit by boosting deposits in the country, offering interest rates of as much as 5 percent a year to lure consumers. That allowed the French lender to reduce funding to its Greek unit by 900 million euros to 4.6 billion euros in the first quarter, according to company filings. A decline in deposits may force the French parent to provide more loans to its Greek subsidiary, according to analysts at Deutsche Bank.

“Credit Agricole isn’t immune against a potential deposit run that would wipe out all progress achieved so far,” Flora Benhakoun, an analyst at Deutsche Bank AG, wrote in a May 14 report. “A deposit run can still not be ruled out in a country undergoing a deep social and economic crisis and without a government.”

Anne-Sophie Gentil, a spokeswoman at Credit Agricole declined to comment on Credit Suisse’s estimates.

Greek Elections

The loss may be as little as 2.1 billion euros in the best- case outcome and 9.1 billion euros at worst, Le Gouvello wrote. Citigroup Inc. analysts led by Stefan Nedialkov estimated the potential loss at 6 billion euros in a report yesterday.

Greece will hold elections on June 17, after previous polls on May 6 failed to produce a government. The country’s credit rating was reduced one level by Fitch Ratings late yesterday amid concern it won’t muster the political support needed to remain a member of the 17-nation euro area. Almost $4 trillion has been wiped from global equity markets this month amid growing concern Greece will have to leave the euro.

Credit Agricole said its Emporiki unit increased deposits by 570 million euros in the first quarter. The bank has been monitoring deposit levels in recent weeks, Chief Financial Officer Bernard Delpit said on a May 11 conference call with analysts as the bank reported first-quarter earnings.

“We are looking at that every day and I can tell you that this week, we have not seen anything,” Delpit said on the call.

Greece’s central bank head, George Provopoulos, this week told President Karolos Papoulias that Greeks have withdrawn as much as 700 million euros from banks and the situation could worsen, according to a transcript of the president’s meeting with party leaders on May 14. Greece had 160 billion euros of bank deposits on March 30, down 74 billion euros from the peak in 2009, according to the latest data from the central bank.

Credit Agricole purchased Emporiki Bank SA for 2.6 billion euros in 2006. The French lender said last week first-quarter profit tumbled 75 percent, hurt by losses at the Greek unit.

To contact the reporters on this story: Radi Khasawneh in London at rkhasawneh1@bloomberg.net;

To contact the editors responsible for this story: Nicholas Dunbar at ndunbar1@bloomberg.net; Edward Evans at eevans3@bloomberg.net


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