Crédit Agricole poised for profit warning

Bigger than expected write-offs

Crédit Agricole is poised to issue a profits warning, which could come as soon as Friday, linked to reducing the amount of goodwill on its books.

Shares in the French bank fell 1.5 per cent to close at €7.28 on Thursday on fears that the publicly quoted but mutually owned bank would warn investors that it would not meet consensus estimates for the fourth quarter, because of bigger than expected write-offs.

In November, Crédit Agricole reported a worse than expected third-quarter loss of €2.85bn, reflecting the weighty price paid for its exit from Greece and exposure to other heavily indebted eurozone countries, including Italy and Spain.

The bank is already in the red for the nine months to the end of September 2012, having made a net loss of €2.5bn during the period, mainly due to Emporiki, its lossmaking Greek bank, which it sold in October for €1 to Alpha Bank of Greece, incurring a €1.8bn loss.

“The main focus is likely to be on goodwill, which stood at €17bn in June 2012,” said analysts at Citigroup. The analysts added that the temptation to “kitchen-sink” the accounts – that is include as many writedowns as possible – in the fourth quarter would be great given the extent of restructuring this year to help conform to new regulatory rules.

Société Générale, France’ second-biggest bank by market value, said earlier this month it planned a €384m writedown on the goodwill of its 50 per cent stake in Newedge, the broker. Crédit Agricole owns the remaining share of Newedge.

Analysts expect Crédit Agricole, which is France’s third-largest bank by market value, to announce a list of one-off writedowns and impairments when it reports its full-year results on February 20.

These are expected to include a €750m loss on the theoretical cost of buying back its own debt and provisions at Cariparma and Agos, its Italian subsidiaries.

The bank recorded a €572m goodwill impairment, mostly on its Italian consumer-credit business, in its third quarter.

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