Europe's banks post big losses from Greek bonds

THE SCARS of Greece’s debt crisis were laid bare in heavy losses from a string of European banks yesterday, and bosses warned the region’s precarious finances would continue to threaten economic growth and earnings.

From France to Germany, Britain to Belgium, four of the region’s biggest banks lined up to reveal they lost more than €8 billion last year from their Greek bonds holdings.

“We are in the worst economic crisis since 1929,” Crédit Agricole chief executive Jean-Paul Chifflet said. Crédit Agricole reported a record quarterly net loss of €3.07 billion, performing worse than expected from the cost of shrinking its balance sheet and after a €220 million charge on its Greek debt. For 2011 as a whole, the bank took a hit of €1.3 billion on its Greek debt.

Britain’s Royal Bank of Scotland has marked its Greek bonds at a 79 per cent loss – or £1.1 billion – for 2011. The state-owned bank posted a fourth quarter loss of nearly £2 billion yesterday,

Germany’s Commerzbank, whose fourth-quarter earnings were spoiled by a €942 million hit on Greek sovereign debt and on interest rate derivatives used to hedge it, needs to find €5.3 billion to meet the stringent new capital requirements set by Europe’s banking regulator. For the whole of 2011, it lost over €2 billion on its Greek bonds.

“The high degree of uncertainty associated with the European sovereign debt crisis will . . . continue to pose challenges for us,” chief executive Martin Blessing said. Commerzbank has prepared an emergency plan in case of a Greek default and a break up of the euro zone.

The bank had little option but to take part in the Greek debt swap deal, he said: “The voluntariness (of the Greek debt swap) is about as voluntary as a confession at a Spanish inquisition trial.”

European governments are hoping to avoid more state bailouts to prop up the banking sector, and to limit the fallout should any bank collapse. Bailed out Franco-Belgian bank Dexia warned yesterday that it risked going out of business. It suffered a 2011 net loss of €11.6 billion, hit by its break up and exposure to Greek debt and other toxic assets. – (Reuters)