Credit Agricole Hit by Unauthorized N.Y. Trade


France's biggest retail bank, Credit Agricole, said on Tuesday its quarterly results would be hit by a trading loss in New York by its Calyon investment bank unit.

Credit Agricole said Calyon's third-quarter result would be significantly below last year's, mainly due to a charge related to an unauthorized trading position in its New York subsidiary.

It said the bulk of this position on diversified credit market indexes -- which it said had no relation to the problems in the U.S. subprime mortgage market -- was to a large extent built up during the last days of August, above the authorized limit.

It added that from Tuesday, the position has been brought back within the normal trading activities of Calyon.

"Taking into account the cost of unwinding this unauthorized trade, the overall impact on Calyon's third-quarter results is estimated at 250 million euros," it said.

The 250 million euros will be entirely accounted for in the third quarter. Last year, Calyon had a third-quarter net profit of 321 million euros.

"In the context of a more turbulent trading environment in September, contrary to July and August, Calyon's third-quarter net result is likely to come in significantly below that of the same period in 2006 but nonetheless remain in profit," it said.

"The relevant disciplinary measures have been taken vis-à-vis the individuals concerned. The trading limit alert and security controls were immediately strengthened in order to prevent any such incident happening in the future," the bank said, adding senior management was informed on Sept. 4.

On Aug. 30, Credit Agricole posted a rise in second-quarter net profit that beat forecasts and said the U.S. subprime crisis had only a limited impact on it.

At the time, it said its asset-management business and its Calyon investment bank did not directly hold any U.S. subprime loans and that Calyon had not initiated any new financial structuring transactions since the start of problems in the U.S. mortgage market in February.

The bank said last month that Calyon's asset-backed securities' (ABS) portfolio had 586 million euros' worth of subprime loans and it had a net exposure of 91 million euros from mezzanine collateralised debt obligations (CDO) tranches.

The total second-quarter net profit for Credit Agricole was 1.292 billion euros ($1.79 billion), helped by growth at its overseas operations.