Fallout from Portuguese bank costs French financial group Credit Agricole $950 million

PARIS – French bank Credit Agricole said Tuesday its second-quarter profit was nearly cut in half by the cost of writing off completely its stake in the Portuguese bank that needed a bailout this week.

In its second-quarter earnings report, Credit Agricole Group said it lost 708 million euros ($950 million) from writing down to zero the value of its 14.6 per cent stake in Banco Espirito Santo.

The Paris-based group is the first major foreign shareholder to detail its losses in Portugal’s biggest banking scandal, a case of alleged fraud that blindsided regulators.

Authorities on Sunday put up 4.9 billion euros ($6.6 billion) to bail out Banco Espirito Santo and decided to split it in two. A new company, called Novo Banco, will take on the healthy parts while Banco Espirito Santo will take on the losses from the scandal and eventually be liquidated. That means the stakes of investors like Credit Agricole may be worth little or nothing.

The move is part of the Portuguese government’s effort to pin the cost of bailouts on investors, not taxpayers.

Besides the Espirito Santo family, Credit Agricole was among the biggest shareholders. It said the loss contributed to a drop in its second-quarter net profit to 705 million euros ($946 million) from 1.39 billion euros in the same period of 2013.

Despite rocking global stocks for a day last month, the Portuguese banking scandal has had a limited impact on markets more recently as further information about the losses emerged. That suggests investors do not see an imminent threat to other major banks.