By Noemie Bisserbe
PARIS-- Crédit Agricole SA said Tuesday that plans to revise its
complex structure have hit a hurdle as it has yet to agree terms
with European regulators, sending its shares sharply lower.
The French bank had been working on a plan for over a year to
simplify its corporate structure--which has for a long time dragged
on its valuation--in a bid to relieve tensions within the bank.
Crédit Agricole is 56%-owned by the group's regional retail banks.
In turn it controls 25% of these lenders--a structure analysts say
is too complex.
"For such a plan to be implemented, certain restrictions would
have to be lifted by regulators," said Chief Executive Philippe
Brassac, without giving details.
Tuesday's announcement dashed investors' hopes of getting a
special dividend following any major restructuring. A new structure
could also have helped boost Crédit Agricole's capital cushions
amid rising pressure from regulators who are still trying to fix
the financial system following the crisis six years ago. The bank's
core tier-one ratio, which compares top-quality capital such as
equity and retained earnings with risk-weighted assets, was flat at
10.2% from March.
By midafternoon the bank's shares were down 11%.
"This new delay may put off some investors," says Nomura analyst
Jon Peace.
While the bank didn't specify the European regulators' concerns,
Deputy CEO Xavier Musca said:
"Regulators are not in a position to clearly answer some of our
questions, as this would pre-empt a larger debate on harmonization
in Europe."
The slump in the stock came after Crédit Agricole posted a sharp
jump in second-quarter net profit, recovering from massive losses
it made in Portugal last year.
The bank said net profit rose to EUR920 million ($1.01 billion)
in the three months to the end of June, from EUR77 million a year
earlier. In the same quarter last year, the crisis facing
Portuguese lender Banco Espírito Santo SA, in which Crédit Agricole
held a 14.6% stake, nearly wiped out the French bank's profit.
Revenue was up 18% at EUR4.63 billion, lifted by its asset
management, insurance and corporate and investment banking
businesses.
Crédit Agricole booked a new provision of EUR350 million, as it
nears an agreement with U.S. authorities to settle allegations of
potential sanctions breaches, raising its total provisions to cover
all potential litigation costs to about EUR1.6 billion.
The French bank is expected to reach a settlement in the next
few months.
It remains unclear what fraction of this total provision the
bank expects to pay to settle the sanctions probe. According to
company filings, Crédit Agricole is also under investigation by
U.S. authorities over its role in the alleged rigging of benchmark
interest rates--the London interbank offered rate and the euro
interbank offered rate.
Write to Noemie Bisserbe at noemie.bisserbe@wsj.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires