Credit Agricole posted its biggest full-year loss since it went public 11 years ago after an unexpected €838 million tax demand from France’s Socialist Government compounded weaker revenues and hefty asset write-downs.
The French bank’s full-year loss ballooned to €6.5 billion as taxes on the sale of Emporiki Bank pushed Credit Agricole deeper into the red than expected.
Chief financial officer Bernard Delpit later told a news conference Credit Agricole expects to achieve a “significantly positive” result this year, though he did not give a precise target.
Investors seemed reassured, bidding its stock up by more than 4.5 per cent, even though significant obstacles such as its continued reliance on stagnant French and Italian economies remain.
Bank executives told reporters an unexpected decision by French tax authorities to disallow a tax deduction the bank was seeking for the sale of Emporiki Bank triggered an €838-million tax hit, pushing fourth-quarter write-downs to €4.53 billion.
“The Government told us very recently – Monday to tell the truth – that we could no longer deduct taxes from these losses,” Delpit told a conference call.
The tax bill, on a €2.9 billion capital injection into Emporiki by Credit Agricole prior to the Greek bank’s sale to Alpha Bank, had been in dispute because the transaction took place before a change in French tax law in August.
“It seems like the Emporiki capital increase took place before the change of policy by the government,” said one London-based analyst. “It shows the attitude toward the banking sector really. It seems to be retroactive.”
Socialist President François Hollande famously declared in last year’s presidential campaign that he viewed the world of finance as his enemy, although he has since unveiled a banking reform bill widely seen as treating the sector with kid gloves.
Perhaps more importantly, France has been struggling to meet public-deficit targets, raising pressure on the Government to tighten its belt and also find new revenue sources.
The tax expense, on top of previous write-downs mostly related to the impact of a worsening economic outlook on goodwill, pushed the quarterly loss at France’s No. 3 bank to €3.982 billion.
The shock tax bill was the latest blow for the 119-year-old lender, which has spent the last year grappling with the legacy of ill-fated expansion binges into Italy, Spain and Greece, and shrinking its investment bank to focus on French retail banking.
Credit Agricole said yesterday its “normalised” profit excluding one-off items rose 10 per cent from a year ago to €548 million, ahead of the €402 million average forecast among analysts polled by Thomson Reuters.
Chief executive Jean-Paul Chifflet added at the press conference that Credit Agricole was “working to respond to the external inquiries” relating to Libor and Euribor, adding that the bank had made no specific provisions for expenses concerning the probes.