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Last updated: December 14, 2011 7:17 pm
Crédit Agricole has issued a steep profits warning, predicting a slide into a net loss this year due to €2.5bn of writedowns, mainly related to its investment banking business.
France’s third-largest bank by market value said on Wednesday it would fire 2,350 employees and scrap its 2011 dividend. It also outlined details of a deleveraging plan to axe activities in its investment bank – including an exit from 21 countries – and scale back its consumer finance unit.
Jean-Paul Chifflet, chief executive, said the lender did not need outside help to meet regulators’ capital requirements and would hit the minimum 9 per cent tier one capital ratio – a key measure of balance sheet strength – by the end of June 2012 “from our own resources.”
He cited “the lack of visibility on the financial and economic climate” as a reason why the bank could not confirm its 2014 target of raising net profits fivefold to between €6bn-€7bn. When Mr Chifflet announced his 2014 strategic plan in March this year, he said it had “strong and focused ambitions with promises that will be kept”.
In September, Crédit Agricole said it planned to reduce financing needs by €52bn by the end of 2012 of which between €15bn and €18bn would be in its corporate and investment bank.
It said on Wednesday it would close its global equity derivatives and commodities activities and cut 1,750 jobs in the investment bank. Another 600 jobs will go in consumer finance which aims to reduce its financing needs by €8bn.
It is the only one of the four big French banking groups not to face a capital shortfall, according to last week’s assessment by the European Banking Authority.
But, along with BNP Paribas and SocGen, its long-term credit was downgraded by Moody’s last week.
The US rating agency cited liquidity and funding concerns for all three banks and noted that Crédit Agricole had a significant exposure to some highly indebted eurozone countries, notably Greece, where it owns Emporiki, a lossmaking bank.
Crédit Agricole shares, which have fallen by two-thirds in the last year, closed down a further 7 per cent at €4.22 in Paris. The shares are worth a quarter of their €16.60 flotation price 10 years ago, having reached a high of €32.70 in 2006.
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