That is a fraction of the €30 billion in risk-weighted assets the bank—which in December 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 unfavorable impact under Basel III.”
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. Private equity assets are seen as among the most risky under Basel III regulations, making them more attractive to sell, whether banks are well capitalized 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 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, estimated 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. It is also considering selling a portfolio of some $700 million of private equity investments, people have said.
French insurer AXA has had its own private equity unit—substantially larger than Credit Agricole’s—on the block for months now.
Disposals by banks accounted for 46 percent of the so-called secondaries market in 2011, according to Campbell Lutyen’s own research, a figure Liaudet expects to be broadly similar in 2012. “We see a significant rise in deal flow coming from insurance companies,” Liaudet added.
Credit Agricole, which expanded its global footprint through acquisitions right up to the 2008 financial crisis, is trying to reduce financing needs by €50 billion by the end of 2012. Both it and French rivals have been hit by a liquidity drought while they struggle to reduce risk and boost their financial strength to comply with tough new capital regulations.
The bank, which under recently named Chief Executive Jean-Paul Chifflet is going back to its roots after an abortive global expansion plan, also cut 2,350 jobs in a cull of its investment banking operations that will see it exit entire business lines such as commodities and equity derivatives.
“More and more, the banks are now being forced to sell their business lines, sometimes even growth units, which raises many doubts about their future results,” said Benoit Peloille, a strategist with Natixis.
(Lionel Laurent is a correspondent for Reuters in Paris; additional reporting by Simon Meads, Christian Plumb, Matthieu Protard and Alexandre Boksenbaum-Granier.)