Agricole to sell assets, restructure Calyon

PARIS Thu May 15, 2008 5:08am EDT

Chairman of French bank Credit Agricole SA Rene Carron delivers his speech at the 2007 annual results news conference in Paris in this March 5, 2008 file photo. REUTERS/Benoit Tessier

Chairman of French bank Credit Agricole SA Rene Carron delivers his speech at the 2007 annual results news conference in Paris in this March 5, 2008 file photo.

Credit: Reuters/Benoit Tessier

PARIS (Reuters) - Credit Agricole SA (CAGR.PA), France's biggest retail bank, will sell assets and restructure its Calyon investment banking arm, it said on Thursday as it confirmed a 5.9 billion euro ($9.1 billion) rights issue.

Agricole, one of many banks damaged by the global credit crunch, said it had identified around 5 billion euros of potential disposals to be made over 18 months.

Analysts said this could include the bank's 5.6 percent stake in Italian bank Intesa Sanpaolo (ISP.MI), which is currently worth some 3 billion euros.

Agricole said it would cut around 10 percent of costs at Calyon, which had a first quarter writedown of 1.2 billion euros due to the credit market problems.

"Credit Agricole has paid the price of this crisis," Chief Executive Georges Pauget told reporters.

Agricole unveiled the key elements of its first-quarter results and its planned rights issue earlier this week. It formally published the full first-quarter figures on Thursday.

"The rights issue will be launched before the summer, subject to market conditions," Agricole said in a statement.

Agricole said the cash from the rights issue would bolster its Tier One capital ratio to 8.5 percent from 7.7 percent. France's biggest listed bank BNP Paribas (BNPP.PA) said this week that its Tier One ratio stood at 7.6 percent.

Agricole's first-quarter net profit fell 66 percent to 892 million euros. Calyon registered a first-quarter loss of 795 million euros.

Agricole also confirmed press reports that Patrick Valroff, previously head of Agricole's consumer credit arm Sofinco, would replace Marc Litzler as Calyon chief executive.

Litzler came under pressure last September after Calyon announced an unauthorized trading loss. It had to book a 250 million euro charge related to an unauthorized trading position at its New York subsidiary.

Pauget said Litzler would remain within the company, taking on a new "internal advisory" role.

CALYON JOB CUTS?

Agricole shares eased 0.2 percent to 19.56 euros by 4:17 a.m. EDT (0817 GMT) while the DJ Stoxx European bank sector .SX7P fell 0.8 percent.

West LB cut its rating on Agricole to "hold" from "add". Agilis Gestion fund manager Arnaud Scarpaci said he would avoid Agricole shares for now but may subscribe to the rights issue.

Agricole's rights issue is the latest capital-raising exercise from a global banking sector damaged by losses in the U.S. subprime mortgage market.

Last month, British banks Royal Bank of Scotland (RBS.L) and HBOS HBOS.L announced plans to raise 12 billion pounds and 4 billion pounds respectively, through rights issues.

Agricole's profit fall also follows a slump in earnings at France's top banks.

Societe Generale (SOGN.PA), hit by a rogue trader scandal, reported a 23 percent fall in first-quarter net profit this week, and France's biggest listed bank BNP Paribas (BNPP.PA) posted a 21 percent drop in net profit.

On Thursday, Natixis (CNAT.PA), France's fourth-biggest listed bank, reported an 88 percent fall in first-quarter net profit and also announced a cost-saving plan which would involve job cuts.

Agricole said it would present a new strategy and restructuring plan for Calyon in September and had already outlined 150 million euros of cost-cuts at the division for this year.

Agricole Chief Financial Officer Bertrand Badre declined to specify whether these cost-savings at Calyon would entail job cuts, but one analyst said this was likely.

"They could close down part of their capital markets business," said the analyst, who declined to be named.

Agricole also declined to specify which of its non-core assets it might sell. Along with its stake in Intesa Sanpaolo, it holds 16 percent in French investment company Eurazeo (EURA.PA).

Agricole shares have fallen around 15 percent since the start of 2008, broadly in line with a similar decline in the DJ Stoxx European bank sector.

(Editing by Louise Ireland)