Credit Agricole takes $5 billion hit as banks struggle to move on
Credit Agricole , France's No. 3 bank, announced a further 3.8 billion euros ($5.2 billion) in charges on Friday as banks struggle to move on from ill-timed deals before the 2008 financial crisis.
The charges come less than three months after Credit Agricole unveiled 3.6 billion euros of writedowns with its third-quarter results and will plunge it to the largest annual loss since it went public in 2001.
They also come a day after Deutsche Bank , Germany's biggest bank, announced almost $4 billion of charges.
Banks across the world are cutting costs and selling off, or writing down, assets in a bid to meet tougher regulations aimed at preventing a repeat of the 2008 crisis.
The European Union's markets watchdog said last month it had told companies and their accountants they would be named publicly if they failed to properly write down goodwill impairments in their latest results.
Credit Agricole shares are up 15 percent so far this year, versus an 8.5 percent gain for the European banking sector, reflecting hopes its previous clean ups, such as shedding troubled Greek unit Emporiki, would allow it to turn a corner.
Credit Agricole later on Friday said it had completed the sale of Emporiki to Alpha Bank and the deal would have a "slightly positive" impact on its 2012 fourth-quarter results.
Like other banks, Credit Agricole has been selling assets and streamlining its business to meet stricter regulations after the 2008 financial crisis. Last November, it took a 1.96-billion euro-writedown on the sale of Emporiki bank.
The shares opened down 3 percent in Paris, but quickly trimmed their losses and closed up 3.37 percent at 7.52 euros.
KBW analyst Jean-Pierre Lambert called the latest set of charges "a delayed P&L (profit and loss account) recognition of value destruction from past acquisitions."
Credit Agricole is now trying to retreat from an era of disastrous, mostly cross-border deals, to refocus on its domestic business.
TOUGHER ENVIRONMENT
The latest charges include 923 million euros related to consumer finance and 852 million for Italian retail banking, as well as a 267-million writedown on the bank's 20 percent stake in Portuguese lender Banco Espirito Santo .
Credit Agricole said 2.68 billion euros in goodwill writedowns reflected tighter regulatory requirements as well as "the present macro-economic and financial environment in the relevant countries and business lines".
Coming on top of a cumulative nine-month loss for the bank of 2.5 billion euros, the writedowns will mean a big annual loss when it announces fourth-quarter results in 20 days time.
The charges will have no impact on solvency or liquidity ratios, the bank said, although a series of other accounting writedowns could have a marginal impact on regulatory ratios.
Those include an 850-million-euro hit from the revaluation of its own debt on its quarterly revenues, which translates into a roughly 550-million-euro impact on net profit.
"There are many non-recurring charges and the goodwill impairment won't have an impact, so I think the market will ignore the news," said Exane analyst Guillaume Tiberghien.
French rival Societe Generale last month said its fourth quarter would be hit by hundreds of millions of euros in one-off charges, including an unspecified portion of 384 million euros in goodwill for brokerage Newedge, which is co-owned by Credit Agricole.
Credit Agricole's own writedowns included 366 million euros for Newedge. After the writedowns, Credit Agricole still has about 15 billion euros of goodwill on its balance sheet.
The 3.8 billion euros in charges include a 160 million impairment announced last week which reflects a move by the regional banks that control the listed entity to cut the value of their stake.
($1 = 0.7367 euros)
(Reporting By Christian Plumb and Matthias Blamont; Editing by Jeremy Laurence, Mark Potter and Leslie Gevirtz)