Crédit Agricole S.A. - CASHA

[Newman]

Crédit Agricole Hit by $3.6 Billion Charge

The Wall Street Journal

1 Feb 2013
By NADYA MASIDLOVER
PARIS—French bank Crédit Agricole SA said Friday that its fourth-quarter results will be hit by goodwill impairment charges totaling €2.68 billion ($3.64 billion), citing tighter regulatory requirements and the current financial environment.

The charges come in addition to impairments already announced last week, when the bank said net profit would be negatively impacted by €160 million due to a €651 million impairment charge at the regional banks level following a change in accounting methods.

The net impairment charge won't affect its solvency or liquidity as goodwill is already fully deducted during the calculation of solvency ratios, Crédit Agricole said in a statement.

Goodwill is an intangible asset created when companies capitalize the premium they pay in acquisitions. When acquisitions don't pan out, companies have to recognize the difference by writing down the value of the goodwill. They are often slow to do so, partly because valuing assets accurately is difficult.

The bank also said other negative nonoperating items will be recorded, including an impact on revenues of about €850 million on the revaluation of its own debt due to the improvement of funding conditions during the quarter and a tax expense of around €130 million related to an exceptional 7% tax on the capitalization reserve of the group's insurance companies.

[Newman]

Last night the share price of Credit Agricole SA was down 5.42% to 7.12 Euros.

[Newman]

The share price of Credit Agricole nosedived to 6.18 Euros after Cyprus agreed to a deal that qualifies the eurozone member for a bailout -- but only after a radical downsizing of the island's financial sector.
"Eurogroup head Jeroen Dijsssebloem told the Financial Times and Reuters the hard-won agreement to liquidate a major Cypriot lender could become a model for other troubled corners of the eurozone".

Further, Moody's Investors Service on Monday said it still viewed the outlook for France's top four banks as negative, citing their continued reliance on wholesale funding.

The risks associated with CASHA deeply subordinated notes seems greater now than 3 months ago. If bank deposit could be taken to solve financial troubles what else is safe? If Credit Agricole decides not to redeem the notes on 19 December 2018 noteholders would be paid 3-month interest rate plus a margin of 1.9% at best, a bad situation for bondholders. The annual report of Credit Agricole leased to NZX yesterday shows that at least two deeply subordinated notes have not been redeemded after their first call dates.