Tags: Credit | Agricole | Loss | Jobs

Credit Agricole to Report Loss, Cut 2,350 Jobs

Wednesday, 14 December 2011 02:02 PM

Credit Agricole will make a 2011 loss, write off 2.5 billion euros ($3.24 billion) worth of assets and cut 2,350 jobs in a cull of its investment banking operations, the French bank said on Wednesday in its second profit warning of the year.

The warning reflects mounting pressure on lenders to curtail risky activities to meet tougher capital standards even as they wrestle with losses reflecting worsening economies and slumping markets.

"These are all things we would have expected to happen at some point, but putting it all in one quarter, in this kind of market, is unhelpful," said a London based analyst who did not want to be named. "The stock is at bombed-out levels already ...What will be key in how bad this gets is what they tell us about the ongoing business."

The bank is following in the footsteps of larger domestic rivals BNP Paribas and Societe Generale, which have also announced job cuts primarily in investment banking as they seek to cut debt and wean themselves off funding markets frozen by the economic slump.

For Credit Agricole, that will mean exiting 21 of the 55 countries where it operates and shuttering entire businesses like equity derivatives and commodities.

The writedown includes 1.3 billion euros to reflect the shrinkage of its investment banking division and 1.234 billion euros as writedowns of minority stakes such as those in other banks Bankinter and BES.

The bank also shelved its 2014 financial goals and eliminated its dividend for this year to preserve capital.

Analysts had expected France's No. 3 lender to post a full-year profit of 2.4 billion euros after it was profitable in all previous quarters.

In July, Credit Agricole warned that deepening problems at its Greek Emporiki Bank unit would wipe nearly 1 billion euros off its first half results.

The job losses include 1,750 at Credit Agricole's corporate and investment bank, which employs 13,000 people, and 600 at its factoring and consumer finance arms.

The bulk of the job losses will take place internationally, although 550 investment banking and 300 consumer finance jobs will be cut in France.
Credit Agricole shares slumped 6.7 percent to close at 4.23 euros, part of a wider rout in French banking shares which saw Societe Generale slide 8 percent and BNP Paribas lose 7.4 percent.

More than six months of intense market turmoil sparked by the euro zone debt crisis is pummeling investment banks globally, denting their bond and stock trading income and sparking a wave of layoffs in Asia, the U.S. and Europe.

Citigroup was last week among the latest to press ahead with job cuts, while banks in some of the crisis hotspots — such as Italy's UniCredit and Intesa Sanpaolo — are also laying off thousands of people.

More than 120,000 job losses have been announced this year, and many in the industry fear the tally will be greater than at the height of the financial crisis in 2008, as redundancies continue into 2012.

Like its French rivals, Credit Agricole is primarily pulling back in certain financing businesses, such as those in dollars, which have become harder for it to access, and will cut staff accordingly.

It also has a European equity broker, Chevreux, and a majority stake in Asian brokerage CLSA. But the bulk of cuts are likely to fall in fixed-income, which houses its rates and credit divisions, analysts said.

Credit trading in particular has come under pressure at all banks this year as wary investors shy away from the market and new regulation bites.

Credit Agricole's strategy under new Chief Executive Jean-Paul Chifflet, who has espoused a back-to-basics focus on retail banking in France and Europe, is a retreat from previous management ambitions of being a global player in financial markets.

The bank is deeply sensitive to ongoing turmoil in the eurozone economy, not just because it holds a substantial amount of Italian government debt but also because of its subsidiaries in crisis-wracked Greece and Italy.

Chifflet's team is mulling various ways of bolstering the bank's balance sheet, banking sources say, even though Credit Agricole's robust parent network of regional banks has provided a cushion that has made raising additional capital unnecessary.

This may include more deal-making. The bank is close to announcing the sale of its private-equity activities, while it has also struck a $374 million deal to sell minority stakes in its CLSA and Cheuvreux brokerage brands to Chinese brokerage Citic Securities.

While Credit Agricole would be open to letting Citic increase its stake in the ventures — now at 19.9 percent — it aims to at least keep majority control, according to a person familiar with the bank's thinking.

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Credit Agricole will make a 2011 loss, write off 2.5 billion euros ($3.24 billion) worth of assets and cut 2,350 jobs in a cull of its investment banking operations, the French bank said on Wednesday in its second profit warning of the year. The warning reflects mounting...
Wednesday, 14 December 2011 02:02 PM
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