European lenders hit by Greek sovereign-debt deal
Updated: 2012-02-24 07:47
The headquarters of Royal Bank of Scotland Group PLC in Edinburgh. The bank reported a net loss for 2011 of 2 billion pounds ($3.14 billion) after taking a Greek sovereign-debt impairment of 1.1 billion pounds. [Mike Wilkinson / Bloomberg]
Commerzbank, Credit Agricole, RBS see writedowns of at least 74%
FRANKFURT - Royal Bank of Scotland Group PLC, Commerzbank AG of Germany and France's Credit Agricole SA booked losses on their Greek government debt two days after creditors agreed to the biggest sovereign restructuring in history.
RBS, Britain's biggest government-owned lender, posted a wider-than-expected full-year loss after taking a sovereign-debt impairment of 1.1 billion pounds ($1.7 billion). Commerzbank, Germany's second-biggest lender, booked a 700-million-euro ($1.1 billion) writedown on Greek debt in the fourth quarter. Credit Agricole, France's third-largest bank, reported a quarterly loss after 220 million euros in impairments on Greek debt.
Greece's private creditors agreed to a debt swap on Tuesday, paving the way for a second bailout of the debt-ridden nation and averting what Deutsche Bank AG Chief Executive Officer Josef Ackermann said would have been a "meltdown" worse than the collapse of Lehman Brothers Holdings Inc.
RBS, Commerzbank and Credit Agricole have all written down their Greek debt by at least 74 percent, in line with the estimated loss in the securities' net present value from the swap.
"Earnings were hit by Greek writedowns, but at least the worst is now behind us," said Lutz Roehmeyer, who helps oversee about 11.5 billion euros at Landesbank Berlin Investment in Germany's capital. "By aggressively writing down their holdings, banks want to show that they can cope even if Greece defaults down the road."
Europe's largest lenders and insurers are likely to accede to the Greek swap because they've already written down their sovereign holdings and want to avert the risk of a default, analysts said earlier this week. The success of the swap depends on how many investors participate in the transaction.
Under the deal, investors will forgive 53.5 percent of their principal and exchange their remaining holdings for new Greek government bonds and notes from the European Financial Stability Facility.
The plan seeks to reduce Greece's debt burden by 107 billion euros, the Institute of International Finance, which led negotiations, said earlier this week.
The swap is meant to help reduce the country's debt to 120.5 percent of gross domestic product by 2020.
RBS reported a net loss for 2011 of 2 billion pounds compared with a deficit of 1.1 billion pounds a year earlier.
That was worse than the 1.1 billion-pound median estimate of 11 analysts surveyed by Bloomberg.
Credit Agricole, based outside Paris, reported a fourth-quarter net loss of 3.07 billion euros, wider than analysts' estimates.
Chief Executive Officer Jean-Paul Chifflet set aside money at the lender's Greek consumer-banking network and booked about 2.6 billion euros in writedowns on investments including its stake in Spain's Bankinter SA and Banco Espirito Santo SA of Portugal in the quarter.
Commerzbank said full-year profit slid to 638 million euros from 1.43 billion euros, hurt by Greek losses.
The lender also announced it will ask investors to swap hybrid capital instruments trading below face value for new shares, adding to measures by the German lender to boost its financial strength.