Crédit Agricole Takes $950 Million Hit on Portuguese Bank
The French bank Crédit Agricole said Tuesday that it nearly had its entire second-quarter profit wiped away as it took a $950 million charge to write off its entire investment in the troubled Portuguese lender Banco Espírito Santo, in which it owned a 14.6 percent stake.
Crédit Agricole, based in Paris, said earnings fell to 17 million euros, or about $22.8 million. That compared with net income of €696 million in the same period last year.
The French bank was one of the largest shareholders of Banco Espírito Santo, which will be split up as part of a €4.9 billion rescue plan announced by Portuguese officials late Sunday. Under the plan, the heaviest losses will be absorbed by Banco Espírito Santo shareholders and some creditors.
Crédit Agricole took a charge of €708 million, or about $950 million, in the quarter as it wrote off its entire investment in the Portuguese bank.
Excluding the Banco Espírito Santo write-down and other items, Crédit Agricole posted net income of about €1 billion in the second quarter.
Crédit Agricole shares rose more than 5 percent in early trading in Paris.
“Despite the situation at BES and its impacts on our quarterly results, the group is on track with the path set when we unveiled our medium-term plan last March, leveraging its strengths and financial robustness while continuing its efforts to cut costs,” Jean-Paul Chifflet, the Crédit Agricole chief executive, said in a news release.
Banco Espírito Santo was undone by exposure to financial problems at its struggling corporate parent.
In the second quarter, Crédit Agricole reported that revenue declined 6 percent, to €3.93 billion, while operating expenses rose slightly to €2.77 billion.
During the first six months of the year, Crédit Agricole said that it reduced its annual costs by €64 million, reflecting a reduction of its recurring costs by €415 million since the program began in 2012. The bank is targeting a reduction in its annual costs of €650 million by the end of 2016.
In its corporate and investment bank, net income rose 4 percent, to €261 million.
In its French retail banking arm, net income declined 8 percent, to €235 million, in its regional banking business and fell 9.7 percent, to €145 million, in its LCL unit.
The bank’s common equity Tier 1 capital ratio, a measure of its ability to weather financial disturbances, rose to 12.3 percent at the end of June, up 0.6 percent from the end of the first quarter.
Source: NYT
