France’s third-biggest bank Credit Agricole has announced plans to let 2,350 of its employees go, mostly from its investment-banking sector, in an effort to cut costs in the face of the Eurozone debt crisis.
Among the cuts are 600 jobs in Credit Agricole’s factoring and consumer finance branch and 1,750 jobs at its corporate and investment bank, which has a staff of 13,000 total. Among the 1,750 corporate and investment positions to be axed, 500 will be cut in France.
Stock Down 52% in 2011
Credit Agricole shares fell more than 1.5% after the announcement. The bank’s stocks have plummeted more than 52% so far in 2011, well above the sector’s 34% average. The bank may also pull out of 40% of the countries where it has corporate and investment banking activities, which spans 50 countries in all.
Credit Agricole is not the first bank to feel the backlash of the EU debt crisis. Competitors Societe Generale and BNP Paribas have also announced they will be shedding job, mostly in investment banking, to reduce debt and gain some independence from funding markets left in bad shape due to the economic downturn. Paribas announced it will shed 1,400 jobs from its operations worldwide.
The Eurozone debt crisis has dealt a serious blow to investment banks all over the world, dragging down their bond and stock trading revenues and sparking widespread job cuts in the US, the EU and Asia. The banking sector has seen 120,000 jobs axed in 2011, with no signs of letting up as we venture into 2012.
A 55% stake in Credit Agricole is held by 39 French cooperative regional banks collectively. The bank is in a particularly vulnerable position in the face of the Eurozone debt crisis because of its local bank subsidiaries in Greece and Italy, and it holds a large share of Italian state debt.
The bank, whose third-quarter net revenues are down 65%, had announced its intention to reduce its debt by $65 billion between September 2011 and December 2012 through making structural changes.
Moody’s Ominous Tone for French Banks
Moody’s Investors Service has downgraded France’s top three banks. Credit Agricole, BNP and Societe Generale took a ratings hit under the cloud of more potential losses due to their stakes in Italian and Green state bonds as the EU crisis threatens to get worse.
Moody’s encouraged a strong political approach to the debt crisis to avoid certain countries, including Greece, defaulting on their debts and being forced to leave the eurozone. The credit rating agency also warned that French banks could look to full or partial nationalization if they fail to raise money.
The banks have announced they will sell assets to raise money to shield against any further crisis-related loss.
Key Statistics – Banks in France (source: MarketLine)
- Top French banks combined assets just under $10.5 tillion in 2010, with yearly growth of almost 6.5% in the four-year period ending 2010.
- Bank credit sector yields most favorable results in 2010, with total assets exceeding $4.7 trillion, or 45% of overall industry value.
- Banking industry to see yearly growth rate of 6.5% from 2010 to 2015 to reach over $14.3 trillion.