France’s third biggest bank, Crédit Agricole, posted a much larger-than-expected third quarter loss, largely reflecting the price of selling off an unprofitable and costly Greek bank.
The net loss of €2.85 billion ($3.63 billion) far exceeds analysts estimates. Revenue fell 32% to €3.43 billion. Stripping out one-off losses including a revaluation of its debt, costs associated with the sale of it Cheuvreux brokerage unit, and a write-down on its stake in Spain’s Bankinter, the bank had €716 million in net income.
The bulk of Crédit Agricole’s real net losses are due to the bank’s ill-fated foray into Greece. Nearly €2 billion in costs and losses are attributable to the disposal of Emporiki bank, which Crédit Agricole sold for €1 last month to Alpha Bank of Greece.
The time and money spent in recession-hit Greece has proved unwise. Crédit Agricole invested more than €2 billion in 2006 in Emporiki—the least profitable of Greece’s top five banks at the time. Except for 2007, it has been unprofitable ever since. Accumulated losses for Crédit Agricole total about €5.7 billion through the end of June.
The ratings agencies expressed their concerns this year. In September, Moody’s cut the bank’s credit rating by a notch, largely because of its exposure to Greece. Last month, Standard & Poor’s left the bank’s A rating intact, but lowered its outlook to negative, citing exposure to the protracted recession in the euro zone.