France’s largest banks plan to exit the Greek market

Published 5:00 am Thursday, August 30, 2012

PARIS — France’s biggest banks are preparing to pull out of Greece in the coming weeks, the latest large international business to abandon the country as it grapples with a debilitating recession and nagging questions about its future in the eurozone.

Societe Generale said Wednesday that it was in advanced discussions to sell its 99.1 percent stake in Geniki Bank, one of Greece’s biggest financial institutions, to Piraeus Bank of Greece. On Tuesday, Credit Agricole, another large French lender, said it expected to sign a deal to sell its troubled Greek arm, Emporiki Bank, to another Greek bank in a matter of weeks.

The French banks had embarked on a strategy of expanding in Greece and other Southern European countries when times were good, moving to take advantage of buoyant housing markets and rapid economic growth. When a deterioration in Greece’s finances helped ignite the European debt crisis three years ago, Societe Generale and Credit Agricole wound up being among the most exposed of any European banks to Greece.

Their earnings were hit last year when a swath of Greek government bonds they had invested in turned toxic as the crisis deepened. At the same time, losses mounted at their Greek operations as the country’s economy plunged, triggering a surge of defaults on loans to consumers and businesses.

Prime Minister Antonis Samaras of Greece has been on a charm offensive in European capitals recently to reinforce the message that Greece wants to stay in the eurozone. To show that his government means business, Samaras is scrambling to get politicians in his coalition government to agree quickly to 11.5 billion euros, or $14.4 billion, worth of new austerity measures for 2013 and 2014 in order to secure a loan installment of 31.5 billion euros, which is needed to keep Greece’s economy afloat.

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