French bank Credit Agricole will take a 2 billion euro ($2.6 billion) loss on the sale of its ailing Greek lender Emporiki, closing the final chapter in its dismal investment in the crisis-torn country.
Credit Agricole was the most exposed to Greece among French banks, which have spent the past year slashing investments there after an expansion spree during the boom times was torpedoed by the euro zone debt crisis.
Although Credit Agricole's shares have rallied since the summer on hopes of an end to its Greek ordeal, it is still not clear how the sale will change the bank's capital ratios under tougher Basel III rules aimed a preventing a repeat of the 2008 financial crisis.
The bank gave no new disclosure on Wednesday and some analysts and investors fear it is still too far behind rivals.
"We've had the good news, now we've come back to the question of how much Credit Agricole is worth," said Yohan Salleron, fund manager at Mandarine Gestion in Paris.
"It's maybe not the best-placed bank to withstand tougher regulation and capital requirements."
Shares of Credit Agricole were down 3% to 6.203 euros at 1355 GMT. The stock has gained 20% since the bank said on Oct. 1 it was in talks to pay 550 million euros to Alpha Bank to take Emporiki off its hands.
Credit Agricole reiterated that the Greek deal would help it reach its end-2013 solvency targets, without giving fresh details. The bank's deposit-rich parent group of regional cooperative banks is aiming for a Basel III capital ratio of more than 10% at the end of next year.
The lack of disclosure at the listed entity level means that it is difficult to compare Credit Agricole with BNP Paribas , which is targeting a Basel III Tier 1 ratio of 9% by end-2012, and Societe Generale, which is targeting a ratio of 9 to 9.5% by end-2013.
Analysts' estimates for Credit Agricole's listed entity vary, from below 7% to 8.9% at end-2013.
The bank's chief financial officer refused to comment on the possibility of a future cash call.
"This is not a question for today," CFO Bernard Delpit told an analyst conference call on Wednesday, asked if the bank would seek a capital increase.
The final loss disclosed by Credit Agricole, to be reflected in the bank's third-quarter results, was broadly in line with what analysts had estimated.
Societe Generale analyst Sebastien Lemaire wrote in a note that a tax credit on Credit Agricole's injection of 4.3 billion euros of capital into Emporiki would limit the loss.
But questions are likely to linger over Agricole's capital strength compared with its rivals.
"There's not much official detail in the statement on the impact of the Emporiki sale on capital targets," a London-based analyst said. "The Credit Agricole parent group is well capitalised, but we know that there is a certain gap between the group and its (listed) subsidiary."
