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Credit Agricole reports profit plunge on BES bank collapse

French bank Credit Agricole SA reported on Tuesday (Aug 5) that net profit plunged to 17 million euros in the second quarter from 696 million euros a year ago, hit by the collapse of Portuguese bank BES.

PARIS: French bank Credit Agricole SA reported on Tuesday (Aug 5) that net profit plunged to 17 million euros in the second quarter from 696 million euros a year ago, hit by the collapse of Portuguese bank BES.

The group said it had been deceived by the family behind the Banco Espirito Santo (BES) group of companies, and would back any legal action by a new management team at the Portuguese bank. Portugal narrowly averted a national disaster and a fresh eurozone crisis on Monday by launching a new bank as part of a rescue for BES. This crisis rescue, totalling nearly 5.0 billion euros (US$6.6 billion), is being overseen by the Portuguese central bank.

The French Agricole bank deemed its 14.6-per cent share in BES to be worthless, and the total cost of the BES disaster to be 708 million euros. Of this, 502 million euros reflected the impact of the losses at BES and 206 million euros the impact of the asset write-down.

Credit Agricole SA (CASA) is the holding company of the Credit Agricole bank, a leading European bank grouping regional banks in France. This entity reported that its net profit fell by 49.0 per cent to 705 million euros. Excluding exceptional items, principally the impact of the collapse of BES, Credit Agricole would have made a net profit of 1.69 billion euros, and its stock-market quoted parent CASA a profit of 1.0 billion euros.

The chief executive at CASA, Jean-Paul Chifflet told a telephone press conference: "Of course we support the action by the Bank of Portugal (central bank)."

CONSIDERING LEGAL ACTION

Chifflet added: "Like it, we can only deplore the fact that we have been deceived by a family with which Credit Agricole tried to create a real partnership to build up the biggest private bank in Portugal. We are drawing all the consequences, notably in the context of actions which will be begun by the new management at BES which has said it will study the launching of legal action. We associate ourselves with this and will take all useful measures to defend our interests."

The CASA group did not rule out taking legal action alone once the outcome of investigations under way was known.

CASA had been involved with the Espirito Santo family since the beginning of the 1980s, and became a shareholder in BES in 1990. But it began to reduce its involvement from 2012 as part of a refocusng of its strategy. At the end of last year, having already taken a write-down of 267 million euros on its investment in BES, its holding in the bank was worth 816 million euros.

Since then BES raised new capital earlier this year which diluted the holding held by CASA and reduced its exposure to the collapse.

Under Portugal's rescue plan for BES, in dire straits after record losses, insolvency and allegations of accounting fraud, a new entity Novo Banco will be given 4.9 billion euros (US$6.6 billion) of capital, while Banco Espirito Santo (BES) is left holding its bad assets. BES will be closed down, the European Commission said on Monday, with shareholders -- like Credit Agricole -- and all second-line creditors carrying much of the cost.