PARIS Credit Agricole (CAGR.PA) on Wednesday posted its biggest full-year loss since it went public 11 years ago, hit by unexpected costs from exiting Greece, weaker revenues and hefty asset writedowns.
Investors warmed to the French bank's promise of a turnaround in 2013 and a pledge to cut 650 million euros from costs by 2016 through savings on back-office technology, equipment and real-estate.
But it will pay no dividend after posting a net 2012 loss of 6.5 billion euros ($8.7 billion), hit by a surprise 838 million euro tax demand linked to the sale of Greek unit Emporiki.
Striking a more confident tone for this year, chief financial officer Bernard Delpit said the bank expected to post "significantly positive" results in 2013.
Credit Agricole shares were up around 4.4 percent, to 7.67 euros, by 1612 GMT, making them the top gainers in the European sector .SX7P, with investors buoyed by the optimistic outlook and a promise of a strategic plan in the fall with financial targets.
The 119-year-old lender has spent the last year grappling with the legacy of ill-fated expansion binges into Italy, Spain and Greece, and shrinking its investment bank to focus on French retail banking.
Domestic rivals such as BNP Paribas (BNPP.PA) and Societe Generale (SOGN.PA) have also promised more detail on strategy this year.
Like European peers, French banks are under pressure to find paths to growth against a backdrop of recession in the eurozone, rising regulation and uncertain financial markets.
"The bank has options to improve its solvency and appears to be cautiously optimistic for 2013," Natixis analyst Alex Koagne said, citing its solid underlying business and its deposit-rich parent network of regional lending banks. "Analysts may end up upgrading their (profit) forecasts."
Bank executives told reporters an unexpected decision by French tax authorities to disallow a tax deduction the bank was seeking for the sale of Emporiki Bank triggered an 838 million euro tax hit, pushing fourth-quarter writedowns to 4.53 billion.
"The government told us very recently - (Monday) to tell the truth - that we could no longer deduct taxes from these losses," Delpit told a conference call.
"Leaving Greece cost us dearly but it was a necessary decision," said Chief Executive Jean-Paul Chifflet.
"In 2012, we turned the page and profoundly transformed the group," he added.
The tax bill, on a 2.9 billion euro capital injection into Emporiki by Credit Agricole prior to the Greek bank's sale to Alpha Bank, had been in dispute because the transaction took place before a change in French tax law in August.
"It seems like the Emporiki capital increase took place before the change of policy by the government," said one London-based analyst. "It shows the attitude toward the banking sector really. It seems to be retroactive."
Socialist President Francois Hollande declared in last year's presidential campaign that he viewed the world of finance as his enemy, although he has since unveiled a banking reform bill widely seen as treating the sector with kid gloves.
Perhaps more importantly, France has been struggling to meet public-deficit targets, raising pressure on the government to tighten its belt and also find new revenue sources.
The tax expense, on top of previous writedowns mostly related to the impact of a worsening economic outlook on goodwill, pushed the quarterly loss at France's No. 3 bank to 3.982 billion euros.
It said its "normalized" profit excluding one-off items rose 10 percent from a year ago to 548 million euros, ahead of the 402 million forecast in a Thomson Reuters I/B/E/S poll.
Chifflet said the bank was "working to respond to the external inquiries" relating to Libor and Euribor, adding that the bank had made no specific provisions for expenses concerning the probes.
So far this year, Credit Agricole shares have surged 23 percent, nearly triple the rate of gain in the sector, as investors have flocked to riskier, higher volatility stocks and analysts bet that it offers good value.
The bank trades at 0.47 times book value, compared with an average ratio of 0.69 for peers, according to Thomson Reuters data.
Quarterly revenue fell 23 percent including the negative accounting impact of the rising value of the bank's own debt to 3.33 billion euros, compared with a forecast for 3.69 billion.
($1 = 0.7487 euros)
(Additional reporting by Jennifer Clark in Milan and Lionel Laurent in Paris; Editing by David Cowell)