FRENCH BANK Crédit Agricole is preparing for all possible outcomes to the crisis in Greece, including its exit from the euro zone, after €940 million of charges at its business there led to a plunge in quarterly profit.
Crédit Agricole chief executive Jean-Paul Chifflet said the bank had teams working to prepare for outcomes including a possible Greek exit from the euro zone, even if it still regarded that as a less probable scenario.
“We have been working for several quarters on this concern and have formed a close-knit team to examine it,” he said, while declining to give further details.
France’s third-laregest bank took €940 million in Greece-related write-downs, the latest blow from its ill-fated acquisition of its Emporiki business there. Concern about Greece has contributed to a 20 per cent drop in the bank’s shares this year, compared with a flat European sector.
“Considering the news from Greece, the group’s exposure to Emporiki remains a factor of major concern,” said Natixis analyst Alex Koagne. “Nevertheless, the performance of its core business was solid for the quarter. Elsewhere, the deleveraging plan made a fair amount of progress, which is good news.”
The global bank with roots in rural France said in March that Emporiki, a drag on profits since its purchase in 2006, would have to take new hits on loans to state-controlled entities as part of the €130 billion bailout of Greece.
Crédit Agricole took a €567 million charge for Emporiki and an additional €373 million for the impact of the Greek private sector bailout and accompanying debt forgiveness on its own accounts.
The bank’s net funding to Emporiki fell by €900 million as it succeeded in shifting some liability to the European Central Bank, but it still remains at a hefty €4.6 billion.
“It’s very difficult for everyone to put down a number on potential losses if Greece is going to leave the euro zone,” said another analyst. “If they don’t leave the euro zone it’s a disaster as well, but one they can manage over time.”
Crédit Agricole’s first-quarter net profit dropped 75 per cent to €252 million, lagging the average estimate of €623 million in a Reuters I/B/E/S analyst poll. – (Reuters)
