Credit Agricole says it cuts bad debt provisions

, Comments 0 comments

France's Credit Agricole, one of Europe's biggest banks, said on Wednesday it was cutting its 2010 so-called toxic debt provisions by half to 750 million euros (915 million dollars).

"We are planning to halve (our provisions) for 2010" from last year's 1.5 billion euros, chief executive Jean-Paul Chifflet told the annual shareholders' meeting.

The results showed that the bank took charges of 1.45 billion euros in 2009 on bad debt totalling about 12.5 billion euros at the end of the year, compared with 3.4 billion euros in 2008.

Provisions are charges for effective, or possible, under performance of some assets as well as for unexpected costs. They have the effect of reducing declarable profit, or increasing a loss.

But if, eventually, they turn out to have been based on unduly pessimistic estimates, unused provisions return as a contribution to final profits at a later date.

The portfolio of Credit Agricole's bad debt includes highly speculative investments linked to the US subprime or higher-risk home loan market which collapsed in 2007, taking many banks with it.

"We think that most (of the provisions needed against these holdings) have now been made," Chifflet said, but several hundred million euros more would likely be needed next year.

The problem overall should be resolved in 2011 when the US property market is expected to finally recover, he added.

© 2010 AFP

0 Comments To This Article