Credit Agricole SA bank, one of the biggest banks in Europe by capitalisation, reported a 75.0-percent drop in first quarter net profit on May 11, hit by its exposure to the Greek debt crisis.
The bank reported a net profit for the first quarter of 252 million euros ($325.0 million). The result was far lower than estimates by analysts who had forecast quarterly earnings of 482 million euros, according to a survey by Bloomberg. The firm said total losses on Greece were 940 million euros, including costs linked to the Greek sovereign debt swap agreed in March and provisions related to its majority stake in Athens bank Emporiki. The bank also suffered from the negative effects of an adjustment plan intended to bring the bank in line with stricter core capital requirements known as Basel III.
The bank said that without the exceptional items, the bank showed solid results with operating income up 9.3 percent. Banking income rose 2.3 percent to 5.4 billion euros.
Brokers CM-CIC said: "There is no end to the cleaning up of the balance sheet." In 2006, Credit Agricole bought Emporiki bank, the fifth-biggest bank in Greece, at a time when the Greek economy seemed set for growth. Natixis analyst Alex Koagne told Le Monde newspaper that if Greece went deeper into recession, the risks carried by Credit Agricole would generate losses in Greece until 2014 at least.
If Greece left the eurozone, and there was a subsequent 50-percent devaluation of the drachma as would then be inevitable, Credit Agricole would lose about 2.5 billion euros, having invested 7.0 billion euros in the subsidiary.