© The Financial Times Ltd 2015 FT and 'Financial Times' are trademarks of The Financial Times Ltd.
August 28, 2012 10:08 am
Crédit Agricole is stepping up moves to offload its Greek subsidiary and reduce its minority stakes in Italian and Spanish banks after its big exposure to troubled eurozone economies again hit profits.
Jean-Paul Chifflet, chief executive, said a deal could be done “in a matter of weeks” on Emporiki, although the bank said no decision had yet been made on entering advanced talks with any of the three local bidders, National Bank of Greece, Alpha Bank and Eurobank.
The French lender said it was in still in discussions with the Bank of Greece, the Greek financial stability fund and the European Commission on terms for the disposal of Emporiki, which Crédit Agricole bought for €2.2bn in 2006 but which has more than 35 per cent of its loans non-performing and has cost its parent €6bn in writedowns.
Crédit Agricole’s exposure to Emporiki has halved over the past year but still stands at €5bn, made up of €2.3bn in financing and €2.7bn in capital since it converted €2.3bn in loans into equity in July to recapitalise the Greek unit.
Bernard Delpit, chief financial officer, insisted that the recapitalisation made Emporiki “very interesting to the (other) Greek banks”. He said Crédit Agricole wanted a clean exit from the lossmaking subsidiary but it might have to retain up to a 10 per cent stake, depending on sale negotiations.
Losses of €370m from Emporiki were one of the biggest causes of a 67 per cent slide in second quarter net profits at Crédit Agricole, France’s third-largest bank by market value, down to €111m from €339m a year ago. Greek losses of €2.4bn forced the bank into its first annual loss in 2011 since its 2001 flotation.
But the biggest hit in the second quarter came from a €427m loss as it wrote down its stake in the Italian bank Intesa Sanpaolo, in which it has reduced its holding to less than 2 per cent.
Italy, where its main arm is retail lender Cariparma, is Crédit Agricole’s second-largest market after France and it also has stakes in banks in Spain and Portugal. Crédit Agricole said it had reduced its stake in Bankinter, a Spanish bank, to less than 20 per cent and was open “to all potential outcomes” for the future of its remaining holding.
Florent Nitu, analyst at Citi Research in London, said the second-quarter results were “slightly disappointing” as southern eurozone exposure still weighed heavily on Crédit Agricole. He said it “is making progress, but not as a fast as people would like”, adding that dealing with Emporiki was the key immediate issue.
Like its bigger French peers BNP Paribas and Société Générale, Crédit Agricole is retrenching to reduce risk and boost its capital, including downsizing its corporate and investment banking operations.
The bank stressed that its overhaul was ahead of schedule, with a €38bn reduction in funding needs achieved by the end of June out of a targeted €50bn by the end of the year. A €48bn reduction in risk-weighted assets was achieved by the end of the second quarter.
It said it was on target to reach a core tier 1 “fully loaded” capital ratio under Basel III regulation of more than 10 per cent by the end of 2013.
It has recently moved to sell its Hong Kong-based brokerage to Citic Securities in a $1.25bn deal and to sell its Cheuvreux Securities business in Europe to Kepler, an independent brokerage. It is closing corporate and investment banking operations in 21 countries.
Net profits in corporate and investment banking were down 58 per cent in the quarter to €295m, on revenues down 20 per cent at €1.35bn.
Overall revenues at Crédit Agricole, a co-operative bank majority owned by its mutual shareholders, were down 14 per cent at €4.7bn in the second quarter, with operating expenses pegged back by 1.8 per cent to €3.3bn.
Crédit Agricole shares were down slightly in afternoon trading in line with the French market.
Please don't cut articles from FT.com and redistribute by email or post to the web.