Credit Agricole SA said first-quarter net profit was €892 million, down from €2.655 billion a year earlier, mainly due to the severe effects of the global financial market turmoil on its corporate and investment banking (CIB) operations.
It confirmed plans to launch a €5.9 billion rights issue before the summer if market conditions permit, and to sell up to €5 billion in assets 'as and if required' over 18 months to shore up its financial situation.
It also confirmed that sub-prime-related writedowns at its investment bank Calyon totaled €1.205 billion.
Credit Agricole will cut costs at its CIB operations by 10 per cent, a move that will have an impact of at least €150 million this year, as it limits cost increases to less than 1 per cent throughout the group.
It cited its first-quarter results and a move toward a higher Tier 1 liquidity ratio amid tighter regulatory restraints on its capital base as reasons for its planned capital hike.
The rights issue also reflects an assumption that shareholders will shun the right to receive their dividend in shares, which would have an impact of €1.1 billion.
Credit Agricole admitted that the first quarter results reduced the group's financial capacity to fund announced but not completed acquisitions by €1.1 billion and said requirements for Tier 1 financing of minority interest under new Basel II liquidity rules is €800 million.
Credit Agricole's majority shareholder, SAS Rue La Boetie, will subscribe to 54.4 per cent of the rights issue plus any amount that is left unsubscribed.
CIB operations had a net loss of €795 million in the first quarter, against a profit of €539 million a year earlier.
Credit Agricole will develop a plan by September to revamp the business toward focusing on its core expertise and clients and to reduce the proportion of capital allocated to it.
Among the group's other activities, net profit edged higher in retail banking, to €468 million from €464 million, while net income from specialised business lines eased to €534 million from €593 million. These two areas will assume a greater relative weighting in Credit Agricole as CIB is scaled back.
Net income from proprietary asset management and other activities fell to €685 million from €1.059 billion.
Credit Agricole said its capital gain from the sale of its stake in Suez totaled €882 million, and the creation of joint venture brokerage Newedge with Societe Generale resulted in a €420 million gain.
Agencies