Credit Agricole posts $3.6bn loss after Greek sale
France’s third largest bank is selling Athens-based Emporiki for a token price of 1 euro
Credit Agricole, France’s third largest bank, posted a quarterly loss that exceeded analysts’ estimates on costs tied to the sale of its Greek unit. The shares dropped the most in six weeks after the bank, based outside of Paris, said Friday it had a third-quarter net loss of 2.85 billion euros ($3.64 billion).
That’s wider than the 1.88 billion-euro average estimate of seven analysts survey. Credit Agricole is selling Athens-based Emporiki for a token price of 1 euro, it said Oct. 17. The French bank will inject more funds into Emporiki, bringing the total capital boost since July to 2.85 billion euros, and buy 150 million euros of convertible bonds issued by Alpha Bank. Credit Agricole, led by Chief Executive Officer Jean-Paul Chifflet, agreed last month to sell its Emporiki Bank unit to Greece’s Alpha Bank under terms cutting the French lender’s net income by 1.96 billion euros. The company is ending a six-year investment in Europe’s most indebted country as concerns linger Greece might exit the euro area.
“This reflects the past and especially their troubles in Greece,” Romain Burnand, who helps manage 900 million euros at Moneta Asset Management in Paris, said before the earnings release. “Now you need to look at their retail bank’s capacity to resist a more difficult economic situation in France.”
Credit Agricole fell 6.3 percent to 5.55 euros by 10:39 a.m. in Paris, the most since Sept. 26 and giving the firm a market value of about 14 billion euros. The shares have risen 27 percent in 2012. BNP Paribas SA, France’s largest bank, has gained 32 percent this year, while Societe Generale, the country’s No. 2 lender, has added 47 percent.
Leaving aside the costs related to the Emporiki sale and additional non-recurring charges, Credit Agricole had a profit of 716 million euros in the quarter, the company said. Profit from the French regional banks fell 3.5 percent, while earnings at the LCL branch network declined 11 percent. The bank also booked an accounting charge of 647 million euros tied to the theoretical cost of buying back its own debt as market prices fluctuate. Credit Agricole recorded a 572 millioneuro writedown mostly on its Italian consumer-credit business, a 181 million-euro loss linked to its sale of CA Cheuvreux, and a 193 millioneuro accounting charge on its stake in Spain’s Bankinter SA. (BKT)
Credit Agricole is selling Athens-based Emporiki for a token price of 1 euro, it said Oct. 17. The French bank will inject more funds into Emporiki, bringing the total capital boost since July to 2.85 billion euros, and buy 150 million euros of convertible bonds issued by Alpha Bank. Credit Agricole and Athens-based Alpha aim to complete the transaction by the end of this year.
Credit Agricole is also shutting its riskiest investment- banking businesses. The bank has stopped most of its equity derivatives and it has no proprietary trading activity, according to a Sept. 26 presentation. The lender is selling its brokerage CLSA to China’s Citic Securities Co. in a transaction valued at $1.25 billion.
Credit Agricole started trimming its balance sheet last year and in December scrapped its 2014 earnings targets. Credit Agricole Group, the entity regulators and rating firms look at for compliance with international rules, expects to reach a core capital ratio of more than 10 percent by the end of 2013 under Basel III rules, the bank reiterated today.
Credit Agricole has no plans for a capital increase, CEO Chifflet told journalists on a call today. While Credit Agricole’s funding to Emporiki made it the foreign lender with the most to lose should Greece exit the euro, the planned sale of the unit to Alpha will create the southern European country’s secondlargest bank by loans.
Credit Agricole, like BNP Paribas and Societe Generale, cut investment-banking jobs and assets as Europe’s debt crisis last year curbed their access to short- term dollar funding, regulators imposed stricter capital rules and French President Francois Hollande considers legislation by year’s end to isolate the banks’ most speculative activities.
Credit Agricole is in “explo- ration discussions” with the French government on the country’s planned law to reform banking structure, Chifflet told reporters. “We’ve got the will to negotiate inch by inch” as part of the talks revolve around market-making activities, he said.
Societe Generale posted an 86 percent decline in third-quarter profit as losses on asset sales and a charge on its own debt outweighed an investment-banking rebound. BNP Paribas said on Nov. 7 that quarterly profit more than doubled, helped by higher trading revenue.
Credit Agricole’s corporate and investment bank had a 302 million-euro net loss in the quarter, hurt by own-debt charges and the cost of selling CA Cheuvreux. Excluding one- time items, the division’s like- for- like profit fell 15 percent to 325 million euros, the bank said.