French banking giant Credit Agricole said on Tuesday it was seeking 5.9 billion euros (9.2 billion dollars) in fresh cash from shareholders after taking new charges of 1.2 billion euros for problems in the US subprime market.
(Credit Agricole and giant UBS are just drawing fresh cash from shareholders into the market before the crash happens. If this would be a game of chess – and for the elite behind the scenes it is. They are not after money. They have all the money in the world. They are after POWER. – then one could really admire those people for their excellent moves. They have left (almost) nothing out. – The Infinite Unknown)
The bank said its first quarter net profit would be 892 million euros, tumbling from the year-earlier 2.66 billion euros, after a write-down of 1.21 billion euros to cover credit problems at Calyon, its investment bank.
Analyst forecasts had been for a first quarter net profit of around 1.2 billion euros.
Credit Agricole said it would be reorganising Calyon to focus on its key competencies and on clients with a low-risk profile.
The group would also cut the proportion of funds allocated to these activities and embark on a general cost-cutting programme, it said.
In March, Credit Agricole, France’s biggest retail bank, announced its net income for 2007 had fallen 16.8 percent to 4.04 billion euros in the wake of the US residential mortgage, or subprime, crisis.
The crisis has led to a global credit squeeze as the banks have become increasingly cautious about lending, raising fears of a sharp economic slowdown after a series of boom years when money was cheap.
Many banks have posted huge losses as a result, with Swiss banking giant UBS the worst hit so far, having taken write-downs of about 37 billion dollars and asked shareholders for fresh funds.
Credit Agricole said the 5.9 billion euros rights issue would give it a Tier One capital ratio — a key measure of a bank’s financial health — of 8.5 percent, well above the recommended minimum of four percent for this category.
It said it would increase the relative weight of its retail banking and specialised business in its overall activities and expected steady growth in these areas.
Shares in Credit Agricole fell sharply after the news, losing 6.46 percent to 19.39 euros in Paris midday trading.
“It’s difficult to know what to say at this early stage but it’s clear this was unexpected and we’re not out of the woods with the banking sector,” said a dealer at a Paris-based brokerage who requested anonymity.
“The fact that they need another six billion euros of capital is worrying and I’m staying cautious (on the stock),” another Paris dealer said.
Credit Agricole made no mention about recent press reports that Calyon chief Marc Litzler will be replaced.
Detailed results for the first quarter will be released Thursday.
Tue May 13, 7:33 AM ET