Credit Agricole slims down with private equity sale

Credit Agricole, is selling its private equity unit for more than 300 million euros ($390 million), a banking source close to the deal said, as the French bank looks to cut its exposure to risky assets. In spite of large disposals in 2011, banks still have tens of billions of dollars in private equity assets. That raises the prospect of more sales as they try to shrink balance sheets.
The sale to Coller Capital, a British-based firm which specialises in buying secondary private equity assets, will reduce the risk-weighted assets of Credit Agricole by 900 million euros, the French bank said on Friday. That is a fraction of the 30 billion euros in risk-weighted assets the bank - which this week announced its second profit warning of the year - has said it aims to ditch by January 2013.
"In terms of risk-weighted assets, it is peanuts compared with Credit Agricole's total of 370 billion," said one London-based analyst. "But it is another sign that banks are unwinding all the kinds of activities that were very sexy during the leverage boom. This kind of thing takes up management time and has an unfavourable impact under Basel III." Private equity assets are seen as among the most risky under Basel III regulations, making them more attractive to sell, whether banks are well capitalised or not.
"Here in Europe, I think the scale of opportunity for buyers is large, diverse and going to accelerate through 2012 and 2013," said Tim Jones, deputy chief investment officer at Coller Capital. Credit Agricole shares, down 60 percent in the last 12 months, were up 1.2 percent by 1510 GMT, outperforming the European sector, which was 0.4 percent higher. Credit Agricole and Coller Capital declined to provide further details of the deal.
Many European banks invested in private equity funds throughout the buyout boom to get a seat at the table for financing and advising on some of the largest deals of the last decade. Others such Credit Agricole, under the guidance of Fabien Prevost, chairman of the private equity group, built up teams to invest mainly bank money and that of its insurance arm, directly in buyouts, venture capital, infrastructure and other sectors. Now many of those banks and insurers that invested heavily in the sector are scrambling to unload non-core divisions as they face tougher capital and solvency requirements.
Europe's banks still have $40 billion to $45 billion of private equity assets to sell, estimates Thomas Liaudet, partner at Campbell Lutyens, a firm that advises on the sale of private equity assets. Credit Agricole's larger rival BNP Paribas is mulling a sale of its majority stake in property unit Klepierre, financial daily Les Echos reported on Friday.