Another major financial institution in Western Europe has taken a savage hit to its bottom line due to exposure to troubled Greek debt

Credit Agricole S.A., the third largest bank in France, said its profits plunged by 65 percent (from the year-ago period) in the third quarter after accounting for losses on its Greek sovereign debt holdings.

The drop in profits was about double what analysts were expecting.

Agricole said its results included a 637 million euros ($865 million) charge related to the write down of 60 percent of its Greek debt assets.

However, the banks revenues climbed by 6.2 percent.

Moreover, Agricole’s French and international retail bank businesses performed well but not enough to offset the poor results in its corporate and investment banking segments.

Agricole is 55 percent-owned by 39 French co-operative regional banks.

However, Agricole’s problems may just be starting. According to the Bank for International Settlements, French banks have the largest foreign exposure to Italian bonds – the next likely domino to fall from the Eurozone crisis.

Borrowing costs in Italy have recently soared above 7 percent – the danger level where a financial rescue becomes imperative.
As such, Agricole said it is bracing itself for "difficult" times ahead.

Separately, the bank said it plans to conduct a massive sale of assets in order to raise its capital, although Agricole’s chief financial officer Bernard Delpit said in a conference call that he would not divulge details of the restructuring plan.

ING analyst Tom van Kempen told Reuters: "This doesn't really change the problems at Credit Agricole. The Greek situation seems to be worsening, non- performing loans are continuing to increase and loan-loss provisions have increased pretty significantly over the quarter."

French banks Societe Generale and BNP Paribas have also heavily written down their Greek debt holdings.

Germany’s Commerzbank also recently posted losses due to its exposure to Greece.