MercoPress. South Atlantic News Agency

French banks take their toll from the subprime crisis

France's biggest retail bank Credit Agricole, is contemplating asking shareholders for an estimated 9.1 billion US dollars to help its financial position after further subprime losses. The move comes after more write-downs at its Calyon investment banking unit as a result of the credit squeeze.

Meanwhile, the country's second-largest bank, Societe Generale, said its own write-downs had led to a 23% fall in profits in the first quarter of 2008. Net profit fell to 1.1 billion Euros in the period from 1.43 billion Euros a year ago. Losses at Societé General's global investment management arm were blamed for the dip. In January this year, SocGen announced 4.9 billion Euros of losses which it blamed on rogue deals carried out by Jerome Kerviel - a junior trader at the bank. The bank said it's taking 1.2 billion euros of write-downs in its investment banking arm, with 596 million Euros from its exposure to U.S. subprime mortgages and bond insurers. The remaining 583 million Euros came from the extension of write-downs to new asset classes, including a portfolio of European asset-backed securities. However, the bank said that it was managing the fall-out of those losses. Credit Agricole said it will also scale back Calyon investment banking arm by reducing the proportion of capital allocated to it and "significantly" reducing its fixed cost base. The announcement came after a report in France's Les Echos newspaper that the bank was planning to raise several billion Euros and that investment banking chief Mark Litzler would leave. A spokeswoman for Credit Agricole declined to comment on Litzler or whether there will be significant job cuts. Calyon unit is set to write off 1.2bn euros during the first three months of the year as a result of the credit crunch She added the bank will publish its first-quarter results as scheduled on Thursday. Credit Agricole expects to make a net profit of 892 million Euros in the quarter - down 66% from last year and worse than many analysts had predicted. Credit Agricole's shares fell sharply on news of the rights issue - down by more than 6% by Tuesday midday trading in Paris.