UPDATE 3-Credit Agricole takes Greek unit hit, shares slide

Tue Jun 22, 2010 9:49am EDT

Related Topics

* More than doubles Emporiki 2010 net loss forecast

* To take 400 mln eur write-down on Emporiki stake

* Credit Agricole shares fall 5 pct, lag banking sector

* Emporiki needs 550 mln eur in Tier 1 capital by 2011

* Increased Emporiki provisions in 2010-2013 of 450 mln eur

(Adds analyst comments, background, detail)

By Lionel Laurent

PARIS, June 22 (Reuters) - French bank Credit Agricole (CAGR.PA) warned of worse-than-expected losses for struggling Greek unit Emporiki and said it would take a 400 million euro ($536.7 million) write-down as Greece fights its debt load.

Credit Agricole's shares fell as much as 5.7 percent, as the bank pushed back profit targets for Emporiki and more than doubled its 2010 net loss forecast for the unit to 750 million euros in an update to investors on Tuesday.

The bank gave its new forecasts for Emporiki against a domestic Greek environment of rising loan provisions and uncertain economic outlook as its government tackles crippling deficit levels with tough austerity measures.

Some analysts, however, said the French bank's new target of a return to profit for Emporiki in 2012 -- a year later than previously forecast -- still looked optimistic.

"They are saying the unit will be profitable in 2012, while I'm still expecting a loss of 200 million in that year," Oddo analyst Alain Dupuis said.

Credit Agricole said Emporiki would make a loss of 750 million euros in 2010 rather than the 300 million to 350 million euro loss it had previously forecast for the bank it bought in 2006, after taking an initial stake in 2000.

The French bank also said the unit would need an extra 550 million euros in Tier 1 capital by 2011.

Finance Director Bertrand Badre said on a conference call there would not be a capital raising but gave no more details.

"A capital raising next year would be a negative surprise," said Simon Maughan, an analyst with MF Global. Emporiki last raised 1 billion euros in capital in March, he added.

EXPOSURE WOES

Credit Agricole shares were down 4.6 percent to 9.5 euros at 1250 GMT, roughly in line with rival Societe Generale SOCG.PA but underperforming a 1.5 percent lower STOXX Europe 600 bank index .SX7P.

Both Credit Agricole and SocGen have subsidiaries in Greece, part of the reason why France has the biggest exposure to Greek debt, according to Bank for International Settlements data.

The banks' share prices were also under pressure from Fitch Ratings' downgrade of BNP Paribas' credit rating late Monday evening, analysts said. [ID:nLDE65L18X]

Credit Agricole said it would write down the value of its 91 percent stake in Emporiki by 400 million euros and book it in results as of June 30, 2010.

Credit Agricole had been expected to reassess its 777 million euros in goodwill remaining on Emporiki, according to Keefe, Bruyette & Woods analyst Jean-Pierre Lambert.

The deteriorating economic environment in debt-stricken Greece will bring additional cost-of-risk loan charges of 450 million euros between 2010 and 2013, though the situation should normalise by 2014, Credit Agricole said.

Deutsche Bank has said European banks could face losses of between 50 billion and 75 billion euros if the debt crisis in Greece continues to escalate and banks are forced to take a "haircut" on Greek sovereign debt.

Credit Agricole has the biggest exposure to Greece of France's listed banks because of Emporiki, which has private-sector loans of around 23 billion euros. ($1=.7453 Euro) (Additional reporting by Juliette Rouillon; Editing by Michael Shields and Simon Jessop)

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