* Management buyout, joint venture among options
* Full shutdown seen unlikely
* 710 jobs at stake, 400 in France
* Latest sign of wider equity brokerage struggles
By Christian Plumb
PARIS, April 25 The best thing for Credit
Agricole may be to put its Cheuvreux brokerage arm out
of its misery but that's not likely, leaving France's No. 3 bank
with limited options for the loss-making unit.
Cheuvreux lost a potential lifeline last month when China's
Citic Securities dropped plans to acquire a 20
percent stake in the unit, instead setting its sights on buying
all of the lender's CLSA Asian brokerage.
With the cooperative bank, which is already cutting more
than 2,000 jobs in its investment bank, reluctant to fire or
reassign Cheuvreux's hundreds of employees, a full shutdown is
unlikely, a London-based investment banker and various analysts
"That may be the best option but I don't think that's the
option they would go for a number of reasons," the London-based
banker said, referring to possible moves at the end of a
business review expected to last two to three months.
More likely would be a management buyout, a partnership or a
move to drastically scale back the brokerage, although such
moves could still leave the equity sales and research firm
limping toward an uncertain future.
"Look at the kind of money that Cheuvreux has been losing in
the past few years," said a London-based banker, speaking on
condition of anonymity. "I'm hoping for them that it's not
beyond repair, but I'm not sure."
Credit Agricole declined to comment on its plans for
Cheuvreux, citing a pre-earnings "blackout period".
Cheuvreux's fate - and that of its 710 employees worldwide -
is just the latest conundrum as Credit Agricole looks to refocus
on retail banking after a series of misadventures in investment
SOCGEN PARTNERSHIP EYED
"If I were working at Cheuvreux at the moment I'd be
extremely nervous about my future," said one London-based
analyst speaking on condition of anonymity.
Credit Agricole could cut costs by shuttering some of
Cheuvreux's local offices, which exist in locations from Boston
to Tokyo according to the bank's web site.
"The issue is that Cheuvreux is loss-making when the markets
are weak and breaks even when the markets are good so they have
to address that," said KBW analyst Jean-Pierre Lambert. "They
have to focus on the profitable activities and weed away the
activities that are value destructive."
More drastic options include an outright sale or a merger
with another broker, with some analysts pointing to a 2004
decision by Credit Agricole's larger French rival BNP Paribas
to partner with independent securities house Exane.
Societe Generale, already Credit Agricole's joint
venture partner in the Amundi asset management business and in
futures and clearing brokerage Newedge, would be a potential
partner, the investment banker said.
A management buyout has also been considered, he said,
adding that he was unsure where that option now stands.
Credit Agricole may have weakened Cheuvreux's potential to
turn a profit by shuttering its entire equity derivatives
business as part of a wider cull of its investment bank aimed at
helping the lender meet tougher capital standards.
"That's where the margins are," the London-based analyst
said. "You have cash equities to support that. So clearly with
(equity derivatives) going, the cash equities side is
The struggles of the firm, which offers research on European
small- and mid-cap companies as well as French ones, are the
latest in a broader shakeout among equities brokerages dictated
by the challenges of turning a profit.
Credit Agricole does not break out Cheuvreux's results in
its earnings, instead including it in a "capital markets and
investment banking" business line which reported a
fourth-quarter operating loss of 106 million euros ($139
The equity brokerage business was "adversely affected by a
general volume decline in both Europe and Asia", the bank said
at the time.