Credit Agricole begins talks to sell its Greek unit

CREDIT AGRICOLE, the big French bank, said yesterday it had begun exclusive talks to sell its Greek unit, Emporiki, to Alpha Bank of Greece for a symbolic one euro.

Credit Agricole, which has the largest exposure of any European lender to the troubled Greek financial sector, is trying to reduce the possible damage if Greece were to leave the euro.

Already, many of the loans Greek banks made during the days of easy credit have soured after years of financial crisis and austerity-induced recession. An exit, which would probably be accompanied by a sharp devaluation of the new Greek currency against the euro, would further reduce the value of those loans when translated into euro.

Credit Agricole’s gamble on Greece has been a spectacularly bad one. The bank in 2006 paid €2.2 billion for its stake in Emporiki, which is based in Athens, but its losses from the unit are now approaching €6 billion.

Representatives of the International Monetary Fund, the European Central Bank and the European Commission were in Athens yesterday to discuss a new austerity package as Finance Minister Yannis Stournaras presents the 2013 budget plan to parliament.

The proposal is expected to include new measures, including tax increases and spending cuts, to reduce the 2013-2014 budget by €13.5 billion.

As part of its deal with Alpha Bank, one of the largest Greek banks, Credit Agricole said it would inject another €550 million into Emporiki, on top of the €2.3 billion it injected in July.

The Hellenic Financial Stability Fund, the Greek banking support agency, had made it a condition of any sale of Emporiki that the bank be recapitalised.

The French bank will also buy €150 million of convertible bonds to be issued by Alpha Bank. All told, the French banks funding to Emporiki would fall by €700 million.

Aurelie Marboeuf, a Credit Agricole spokeswoman, said the bank would book a loss of around €2.8 billion before taxes when the sale closes, possibly as early as the third quarter of this year.

These measures will help it reach its solvency targets for the end of 2013, she said. – (Reuters)