Crédit Agricole’s second-quarter profits have been nearly wiped out by a €708m writedown on its stake in Portugal’s Banco Espírito Santo, following the implementation of a tough rescue plan for the European lender, reports The Financial Times.
The French bank, which has been a key BES shareholder since the 1990s, wrote down the value of its 15 per cent equity stake to zero, reducing its net income for the second quarter to just €17m, down from €696m in the same quarter of 2013.
Shares in BES lost almost all of their value after the bank reported a €3.58bn net loss in the second quarter, prompting Portuguese authorities to implement a €4.9bn rescue earlier this week and begin investigations in the Espírito banking family.
BES has been split into “good” and “bad” banks as part of a plan that protects taxpayers and senior creditors but leaves shareholders and junior bondholders holding only toxic assets.
Jean-Paul Chifflet, chief executive of Crédit Agricole, said: “Today the group must deal with the issues specific to the Espírito Santo family and which took place outside the sphere of the bank’s corporate governance and which were unknown.
“We can only regret having been misled by the family with which Crédit Agricole was trying to create a true partnership to build the biggest private bank in Portugal,” he added.
Excluding the BES charge and other one-time financial costs, second-quarter profit at the French bank rose by 46 per cent to €1bn, thanks in part to cost savings and higher investment banking revenue.
Read more of this report from The Financial Times.