Subprime Crisis Costs Natixis $603 Million in Third Quarter

French investment bank Natixis on Sunday put the cost of the financial crisis prompted by the U.S. subprime mortgage turmoil at 407 million euros ($602.6 million) for its third-quarter results.

The bank, formed in December 2006 out of the merger of Ixis and Natexis, is the most severely hit among French banks by the crisis. Its two parent companies on Nov. 22 bailed out the subsidiary by taking over the CIFG bond insurance unit.

They plan a CIFG capital injection of around $1.5 billion.

The parents are non-listed Banque Populaire and Caisse d'Epargne which each have a 34.49 percent stake in Natixis.

Natixis, which brought the publication of its results forward from Thursday, said it took a 140 million euros loss at CIFG due to a drop in the value of credit default swaps, 238 million euros for its corporate investment banking activities and 28 million in asset management.

The bank said its third-quarter net attributable profit was up 16 percent to 437 million euros, but this included a gain on the sale of its former headquarters.

Stripping out these one-off effects, the quarterly profit was down 38 percent to 240 million.

For the nine months its underlying net income was 1.687 billion, down 3 percent. Natixis forecast at the half-year stage that it was on track for a full-year underlying net income of 2.15 billion euros, which now seems hard to achieve.

Natixis declined comment on its outlook.

The third quarter operating profit fell 47 percent to 219 million and revenues, net banking income, were down 17 percent to 1.364 billion euros.

It said its Tier One capital ratio at the end of September was 8.3 percent. Natixis said the costs of selling CIFG would be taken in the fourth quarter.

Details Exposure

Natixis said that its outstanding financing to subprime mortgage originators had been brought down to zero from 1.5 billion euros at the end of 2006.

It said it had a portfolio of loans awaiting securitisation of 258 million euros at end September, or a 14 percent discount.

Natixis added its indirect exposure was limited, with a portfolio of Residential Mortgage Backed Securities of 887 million euros at end September, rated for 89 percent at least AA. The portfolio had been written down by 106 million euros.

It also has a portfolio of collateralized debt obligations of asset backed securities of 356 million euros at end September.

Natixis said its outstanding leveraged buy-out (LBO) financing stood at 5.4 billion euros at end September, of which 400 million is being syndicated.

It added that conduits sponsored by Natixis were limited at 6 billion euros of assets, of which less than 10 percent include subprime underlying, which it called one of the lowest levels among major banks.

Natixis has a 2.5 percent stake in German bank IKB, which nearly collapsed due to the subprime crisis.

Natixis shares lost some 38.5 percent this year and its market capital stands at 16.6 billion euros.

Larger rival BNP lost 17.18 percent and Societe Generale 27 percent while Credit Agricole shed 33 percent of its stock market value this year.