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Last updated: September 28, 2011 11:21 pm
Crédit Agricole is hoping to reduce its net debt by €50bn in order to lower its financing requirements, as French banks face funding pressure amid continued uncertainty over the eurozone sovereign debt crisis.
France’s third-largest bank wants to slash its debt, which stood at €310bn at the end of June, to €260bn by the end of 2012, saying that banks had experienced “sustained pressure” on liquidity in recent months.
Crédit Agricole, originally founded to finance farmers, will scale back activity in its corporate and investment banking and specialised financial services divisions while increasing its focus on retail banking activities which, apart from the riskiest loans, carry less capital requirements.
This will ease financing requirements across the group, with reductions of up to €23bn for retail banking, up to €11bn in specialised financial services and between €15 and €18bn in corporate and investment banking, Crédit Agricole said on Wednesday.
French banks have come under increasing pressure in recent months due to their holdings of peripheral eurozone sovereign debt and concerns over funding, specifically the ease with which they can borrow US dollars.
Crédit Agricole said that, while it had a surplus dollar position which meant it made daily overnight deposits of $8bn at the US Federal Reserve, it warned that banks’ access to short-term financing had “diminished, particularly in dollars.”
The majority of Crédit Agricole’s debt reduction plan is focused on short-term debt, which accounts for €45bn of the €50bn target. It said it had already reduced this by €25bn since the end of June, when it stood at €170bn.
Crédit Agricole said its medium and long-term funding was “secure”, but added that it plans to raise €12bn in the markets in 2012, down from €22bn this year.
It said it had more than €110bn of available liquidity reserves.
Crédit Agricole was downgraded by one level earlier this month by Moody’s, the rating agency, which cited its exposure to Greece.
The bank has already made a €202m provision linked to its Greek bondholdings but is also exposed via Emporiki, its subsidiary there which reported net losses of €557m in the first six months of the year.
Shares in Crédit Agricole closed flat at €5.18.
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