Credit Agricole SA, France’s third- largest bank, is exiting Greece by agreeing to sell Emporiki Bank to Alpha Bank SA on terms that will cut net income by about 2 billion euros ($2.6 billion) in the third quarter.
Credit Agricole (ACA) is selling the unit for a token price of 1 euro, the company, based outside Paris, said today. It will inject more funds into Emporiki, bringing the total capital boost since July to 2.85 billion euros, and buy 150 million euros of convertible bonds issued by Alpha Bank as part of the deal.
Credit Agricole is ending a six-year investment in Europe’s most indebted country as concern lingers over Greece’s future in the euro area. Credit Agricole’s need to fund the unit makes the bank the foreign lender with the most to lose should Greece leave the single currency. The boards of both companies and the Hellenic Financial Stability Fund have approved the sale, which the banks aim to complete by year-end, Credit Agricole said.
“Greek talks with its creditors could still put a spanner in the works and the outstanding funding line means that the bank has downside risk should there be a Greek exit,” said Benjie Creelan-Sandford, an analyst at Macquarie Bank in London, who rates Credit Agricole underperform. “Away from Greece, Credit Agricole still faces peripheral sovereign bond exposure.”
Credit Agricole fell 3.4 percent to 6.18 euros by 10:10 a.m. in Paris. The shares have gained about 15 percent since the lenders entered exclusive talks on Emporiki on Oct. 1. Alpha shares rose as much as 2.5 percent to 2.09 euros in Athens.
Capital Boost
Credit Agricole’s net funding to Emporiki was 2.1 billion euros at the end of September, and the latest capital injection and purchase of convertible bonds will “immediately” lower that by 700 million euros, the bank said.
Alpha Bank (ALPHA) will cover the remaining funding gap in three installments, with the last payment due by the end of 2014, and Credit Agricole may also buy assets of Alpha and Emporiki to reduce the funding gap.
Credit Agricole already provided about 2.3 billion euros in capital to Emporiki in July following a request from the Bank of Greece.
The French bank, founded in 1894 as a lender to farmers, invested 2.2 billion euros in 2006 to buy a majority stake in Emporiki, the least profitable of Greece’s top five banks at the time. Since then, Emporiki has been unprofitable every year except 2007, with accumulated losses for Credit Agricole of about 5.7 billion euros through the end of June.
Bloomberg
