Credit Agricole (ACA) SA received bids from Greece’s biggest lenders for its unprofitable Emporiki Bank unit, moving the French company closer to an exit from Greece.
National Bank of Greece SA and Eurobank Ergasias SA submitted offers for Emporiki, they said in statements yesterday. They join Alpha Bank SA, Greece’s No. 3 lender, in their pursuit of Athens-based Emporiki, six years after Credit Agricole (ACA) took control of the company. The banks didn’t disclose financial terms.
Emporiki’s 23 billion euros ($28.4 billion) of Greek loans make Credit Agricole the foreign bank with most at risk should Greece abandon the euro. A sale of Emporiki would make it easier for Credit Agricole to reduce future losses in Greece, while the purchase may ease the buyer’s capital needs if the French parent injects fresh funds.
“Any buyer is going to want to pay a very limited amount on a bank newly recapitalized but still with lots of risks,” said Benoit Petrarque, a Paris-based analyst at Kepler Capital Markets SA with a “reduce” rating on Credit Agricole.
Emporiki’s quarterly losses probably wiped out most of 600 million euros of capital it had from its parent at the end of March, Petrarque said. A recapitalization of between 2 billion euros and 2.5 billion euros would be needed to lift Emporiki’s core capital ratio to 10 percent, Petrarque said.
Credit Agricole, France’s third-largest bank by market value, is slated to publish second-quarter earnings on Aug. 28. Charlotte de Chavagnac, a Credit Agricole spokeswoman, declined to comment on Emporiki’s capital needs.
Credit Agricole received “binding offers from several Greek banks interested in acquiring the entire capital of Emporiki,” the company, based near Paris, said in a statement today, without identifying the bidders. Credit Agricole “is currently assessing these offers and no strategic decision has yet been taken.”
Credit Agricole rose 1 percent to 4.01 euros by 11:03 a.m. in Paris trading, giving the company a market value of 10 billion euros. The stock has fallen 42 percent in the past 12 months, trailing the 6.2 percent decline in the 38-member Bloomberg Europe Banks and Financial Services Index.
Credit Agricole, owned by a group of regional lenders, injected 2 billion euros of capital into Emporiki in January to replenish funds depleted by losses. Credit Agricole’s capital exposure to Emporiki shrank to about 600 million euros at the end of March, while its funding to the Greek division fell to 4.6 billion euros from 5.5 billion euros at the end of 2011, partly as deposits rose in the first quarter.
Greece is overhauling its banks after lenders sustained losses on their holdings of Greek government bonds in the country’s debt swap, the biggest sovereign restructuring in history. The country obtained a 130 billion-euro bailout in March from the European Union and International Monetary Fund which earmarked 50 billion euros for recapitalizing the banks.
The Hellenic Financial Stability Fund is helping to oversee Emporiki’s sale as preparations continue to put capital into the country’s banks. Completing the recapitalization of Greek lenders by September is “unrealistic,” Eurobank Ergasias Deputy Chief Executive Officer Michalis Colakides said July 23.
Emporiki’s loans, which are equivalent to almost 10 percent of Greece’s gross domestic product, exceed deposits, requiring Credit Agricole to provide funding to the unit. Buyers will seek to limit their exposure to that funding gap, analysts said.
Credit Agricole’s accumulated losses from Emporiki represent on average more than 15 million euros for every one of the unit’s 337 branches. The loss since 2008 is about 4,000 euros per client.
A quest for growth drove Credit Agricole and its French rivals BNP Paribas SA and Societe Generale SA to markets outside their home turf, especially in southern Europe, eastern Europe and Belgium, over the last decade. French banks held $534 billion in private and public debt in Greece, Ireland, Italy, Portugal and Spain at the end of March, the most by foreign lenders, Bank for International Settlements data show.
Credit Agricole, under the leadership of former Chief Executive Officer Georges Pauget and former Chairman Rene Carron, invested 2.2 billion euros in 2006 to buy a majority stake in Emporiki, the least profitable of Greece’s top banks at the time. Since then, Emporiki has been unprofitable every year except 2007, with cumulated net losses for Credit Agricole of 5.3 billion euros.
The offers for Emporiki come after Piraeus Bank SA (TPEIR), Greece’s fourth-biggest lender, agreed on July 27 to acquire Agricultural Bank of Greece (TELL) SA for 95 million euros, in a transaction that may move Eurobank and Alpha down the list of Greece’s largest banks. With assets of 74 billion euros, Piraeus now says it is the country’s No. 2 by assets, behind National Bank of Greece.
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