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Credit Agricole posts $3.6 billion loss after Greek sale

Credit Agricole SA, France’s third- largest bank, posted a quarterly loss that exceeded analysts’ estimates on costs tied to the sale of its Greek unit.

The third-quarter net loss was 2.85 billion euros, the bank, based outside Paris, said in an e-mailed statement on Friday. The loss was wider than the 1.88 billion-euro average estimate of seven analysts surveyed by Bloomberg.

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 bank’s net income by 1.96 billion euros. Credit Agricole 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.”

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 million-euro writedown mostly on its Italian consumer-credit business, a 181 million-euro loss linked to its sale of CA Cheuvreux, and a 193 million-euro accounting charge on its stake in Spain’s Bankinter SA.

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 on Friday.

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 second-largest bank by loans.

Credit Agricole, like larger French competitors BNP Paribas SA and Societe Generale SA, 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.

Societe Generale, France’s second-largest bank by market value, on Friday 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 on Nov. 7 said quarterly profit more than doubled, helped by higher trading revenue.

Credit Agricole’s corporate and investment bank had a 302 million-euro third-quarter net loss, 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.

Securities firms have posted gains in revenue since European Central Bank President Mario Draghi’s July pledge to do “whatever it takes” to defend the euro sparked a rally in bond markets. French banks, the biggest foreign holders of private and public debt in the troubled economies of Greece, Ireland, Italy, Portugal and Spain, are benefiting from the ECB’s moves as the crisis enters its fourth year.

Credit Agricole has risen 36 percent in Paris trading this year. BNP Paribas, France’s largest bank, gained 32 percent and Societe Generale rose 45 percent in the period.

Greece, heading for a sixth year of recession, is overhauling its banking system after lenders booked losses on government-bond holdings in the biggest sovereign-debt restructuring in history. The country obtained a 130 billion- euro bailout in March from the European Union and the International Monetary Fund that earmarked 50 billion euros for recapitalizing the banks.

Credit Agricole’s net funding to Emporiki was 2.1 billion euros at the end of September, and the latest capital injection and purchase of convertible bonds will “immediately” lower that by 700 million euros, the bank said Oct. 17. Credit Agricole already provided about 2.3 billion euros in capital to Emporiki in July following a request from the Bank of Greece.

The French bank, founded in 1894 as a lender to farmers, invested 2.2 billion euros in 2006 to buy a majority stake in Emporiki, the least profitable of Greece’s top five banks at the time. Since then, Emporiki has been unprofitable every year except 2007, with accumulated losses for Credit Agricole of about 5.7 billion euros through the end of June.

Alpha Bank will add 17.4 billion euros of Emporiki loans as part of the deal, and the combined entity will have about 61 billion euros of loans and 737 branches. The combined bank had pro-forma capital of 4.1 billion euros as of March, Alpha Bank said last month.

Greek Prime Minister Antonis Samaras this week secured support in Parliament to approve austerity measures needed to unlock bailout funds, in a tense vote that weakened his majority after the expulsion of seven dissenting lawmakers.

[Bloomberg]

ekathimerini.com , Friday November 9, 2012 (10:34)  
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