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France Credit Agricole bank to repay 3 bln State Aid

By Amarendra Bhushan for CEOWORLD Magazine Updated:October 14, 2009

Credit Agricole SA (EPA:ACA), France’s biggest bank by branches, will reimburse 3 billion euros ($4.46 billion) it borrowed from the state last year to help sustain lending and bolster capital.

Credit Agricole is selling debt to fully repay the state funds on Oct. 27, the Paris-based bank said in an e-mailed statement today. BNP Paribas SA (EPA:BNP) and Societe Generale SA (OTC:SCGLY) (EPA:GLE) are planning capital increases to repay the state. Unlike BNP Paribas and Societe Generale, Credit Agricole didn’t sell preferred shares to the government.

Among other leading French banks, Societe Generale (SOGN.PA) last week launched a 4.8 billion euro rights issue to repay state support and fund takeovers, a week after BNP Paribas (BNPP.PA) said it would tap investors for 4.3 billion.

The French government offered banks a total EUR21 billion in state funds in two tranches, the first late last year and the second in the first quarter of this year. Agricole took funds first time around but said it didn’t need any more when the second tranche was offered.

The bank said the decision to reimburse the state was based on its financial strength, as reflected in relatively high solvency ratios. At June 30 it had a Tier 1 ratio of 9.2% and a core Tier 1 ratio of 8.6%. Shareholder equity was EUR43.7 billion.

Agricole’s announcement comes as other banks are clambering to take advantage of the stock market’s renewed support for rights issues to rid themselves of sometimes costly state cash.

Last week, Societe Generale launched a EUR4.8 billion rights issue to repay EUR3.4 billion in state funds, using the remainder to buy the 20% stake it doesn’t own in its Credit du Nord unit and to make acquisitions.

France’s biggest bank by market value, BNP Paribas, a week earlier was the first French bank to say it would repay state aid, launching a EUR4.3 billion rights issue to help it return over EUR5 billion in government cash.

French mutual bank Credit Mutuel was recently reported to have already repaid the nearly EUR1.2 billion it took in state funds. The bank declined to comment.

Agricole issued $850 million in perpetual highly subordinated notes in June and later increased it to $1.35 billion. The issue was taken up mainly by private banks in Europe and Asia.

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