Europe banks take Greek hit

Frankfurt/Munich/Brussels/London: Royal Bank of Scotland Group, Commerzbank of Germany and France's Credit Agricole booked losses on their Greek government debt two days after creditors agreed to the biggest sovereign restructuring in history.

RBS, Britain's biggest government-owned lender, posted a wider-than-expected full-year loss after taking a sovereign-debt impairment of £1.1 billion (Dh6 billion). Commerzbank, Germany's second-biggest lender, booked a €700 million (Dh3 billion) write-down on Greek debt in the fourth quarter. Credit Agricole, France's third-largest bank, reported a quarterly loss after €220 million in impairments on Greek debt.

Dexia and Allianz also announced Greek writedowns on Thursday. The nation's private creditors agreed to a debt swap on Tuesday, paving the way for a second bailout and averting what Deutsche Bank Chief Executive Officer Josef Ackermann said would have been a "meltdown" worse than the collapse of Lehman Brothers Holdings.

"Earnings were hit by Greek writedowns, but at least the worst is now behind us," said Lutz Roehmeyer, who helps oversee about €11.5 billion at Landesbank Berlin Investment in Germany's capital.

"By aggressively writing down their holdings, banks want to show that they can cope even if Greece defaults down the road."

RBS, Commerzbank and Credit Agricole have all written down their Greek debt by at least 74 per cent, in line with estimated losses in the securities' net present value from the swap.

Debt swap

The banks' share performance was mixed as investors gauged whether the worst of the sovereign-debt crisis, writedowns and capital-raising to boost financial cushions were over. RBS shares jumped 4.8 per cent to 28.63 pence as of 12.06pm in London on optimism that Chief Executive Officer Stephen Hester has completed the worst of the writedowns and as demand recovered at its US business.

Commerzbank slid 4.6 per cent to €1.98 in Frankfurt as the German lender unveiled a plan to increase core Tier 1 capital by more than €1 billion by buying back hybrid instruments with new shares.

Credit Agricole, which controls Greece's Emporiki Bank of Greece, declined 3.7 per cent to €4.83. The bank said it can't commit to any target to stem Emporiki's losses. Allianz, Europe's biggest insurer, posted fourth-quarter earnings that missed estimates as the Munich-based company booked €1.9 billion of non-operating impairments on Greek sovereign debt and investments, particularly in financials, for the year.

The insurer wrote down its Greek bonds to market values at the end of 2011, representing 24.7 per cent of their nominal value. Shares of Allianz were up 0.8 per cent to €90.57.