Europe banks seek to reassure as 2009 scars show

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Royal Bank of Scotland and Credit Agricole, two of Europe's biggest banks, said prospects were brighter for this year after annual results showed the scars of the financial crisis.

RBS, Agricole, Deutsche Postbank and Switzerland's Vontobel posted a mixed set of results on Thursday and sent conflicting messages over market conditions.

"At some point, it will be worth going back to banking shares, but for the time being we don't have enough visibility," said Montsegur Finance fund manager Francois Chaulet.

RBS, 84 percent owned by the UK government after a series of bailouts during the crisis, posted a 6.2 billion pounds (USD 9.5 billion) loss, the largest among European banks for 2009, as bad debts almost doubled to 13.9 billion pounds.

Agricole, France's biggest retail bank, said it had made a good start to 2010 but made losses in Greece, where fears persist over the country's fiscal deficit, as it posted fourth-quarter profits below forecasts.

Click here for a graphic on bank performance since last year:

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Click here for a graphic on RBS's profit and share price:

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RBS said impairments had peaked and Agricole said provisions had stabilised, but Swiss private bank Vontobel said industry conditions were "far from normal."

The DJ Stoxx European bank sector was down 1.7 percent by 1615 GMT, having lost its earlier gains as fears seeped through financial markets of a possible downgrade to Greece's debt.

RBS was the top gainer in the sector, rising over 5 percent as investors were encouraged by its greater optimism on bad debts and stellar profits from its investment bank arm.

"When they reported a year ago, they came in with some pretty big shocks, whereas now there weren't any," said fund manager Colin Morton at Rensburg. But he said it was still too soon for him to return to buy RBS shares.

Agricole and Deutsche Postbank were both slightly lower after giving up early gains.

Greek Pain

Credit Agricole's net profit rose to 433 million euros (USD 583.5 million), swinging from a loss a year ago but almost 10% short of expectations due to losses at its Greek bank Emporiki.

Emporiki and other Greek banks have been hit by the country's economic woes and fiscal deficit. Emporiki made a 2009 loss of 583 million euros, but Agricole said it had no plans to sell the division.

Deutsche Postbank said lower loan loss provisions and reduced writedowns on toxic assets will help it achieve a pretax profit in 2010 as it unveiled a pretax loss for 2009.

Germany's largest retail bank by number of customers showed a near 400 million euro loss for 2009 after a big trading loss. It said it expects the level of provisions for problem loans to decline in the quarters ahead, however, after last week announcing a more aggressive approach toward booking losses.

Yet even as the banks say problem loans are easing, the loan market itself appears to be tightening. European Central Bank data released Thursday showed lending to euro zone firms hit an 18-month low in January.

Hard Slog

RBS Chief Executive Stephen Hester said 2010 will be "a year of hard slog" and said attracting and retaining its best staff was the biggest problem he faced as he is under even more pressure than rivals to clamp down on payouts.

"We were treading an unenviable tightrope walk," Hester said in regard to 2009 bonuses, which totalled 1.3 billion pounds. "We believe that in the context of the industry in which we operate we have been restrained and responsible."

RBS said its payment processing business WorldPay had attracted "considerable buyer interest", but the sale of over 300 branches is complex and not expected until 2011.

Agricole has also been restructuring and trimming back much of its investment banking activities, and Natixis is also rebuilding after being hit hard during the crisis.

Natixis reported a better-than-expected quarterly profit of 748 million euros and pledged to cut over 200 million euros in costs as part of a four-year turnaround plan.