Founded in 1863, Credit Lyonnais quickly became one of one of the most lucrative banks in France. Success led to an international expansion in the early 1900s, but along with most other French banks, Credit Lyonnais was nationalized under a post-WWII agreement in 1945. From that point the bank had its ups and downs: it was the top ranked bank in the country until the 1960s, but suffered in the next decade due to rising oil prices, a lengthy labor strike, and a recession. Things eventually picked up, however, and by the early 1990s, Credit Lyonnais became the world's largest non-Japanese bank, and Europe's richest, with a worldwide network of businesses offering retail banking, financial information systems, capital markets, insurance, leasing and factoring.

Beware of bad loans

Much of this growth came thanks to now-infamous chairman Jean-Yves Haberer, who led the bank on a reckless five-year acquisition spree. Known for his extravagance and his extremely lax management skills, Haberer will be forever remembered for installing a floating floor for his office, complete with dining room, sitting room and a private bathroom. He was implicated in numerous scandals, which were uncovered in 1993. The bank eventually had to write off $35 billion in bad-loans, and the French government spent an estimated $24.4 billion dollars to prop up the institution. The largest of these scandals involves Italian businessmen Giancarlo Parreti and Florio Fiorini, who bribed CLS bankers into loaning them $2 billion dollars, which they then used to purchase Metro-Goldwyn Mayer in 1990. Both Haberer and his general manager were charged with fraudulent complicity in the scandal, and are still under investigation.

You're out!

Haberer was ousted that year, and the government replaced him with Jean Peyrelevade, who led the bank's turnaround. He increased productivity by reducing staff and installing a new computer system; and he improved business by introducing a number of new services in Credit Lyonnais' retail banks - including evening and weekend hours, internet banking, and flex-time options for employees. The company also disposed a number of subsidiaries, including its Credito Bergamasco in Italy, and Woodchester in Ireland. Industry analysts also remark that Peyrelevade has been particularly successful in getting money out of the French government.

European adventures

In May of 1998, the French government and European Union authorities agreed to a corporate bailout of the bank, resulting in the privatization of Credit Lyonnais by the end of 1999. Worth about 120 billion francs ($20 billion US), the deal will be the largest corporate bailout in European history. The bank will be required to sell off most of its operations outside France, but will be allowed to retain key businesses in London, Switzerland, and Luxembourg, as well as its holdings in Asia and North America. In July of 1998, it sold off its Austrian, Danish and Swedish subsidiaries, and there is talk of the impending disposal of its Australian division.

Rumors and risk

By the end of this year, CL will sell up to a third of its shares to investors. Then, in 1999, the majority of the bank's shares will be sold on the Paris stock market. It is rumored that the bank will raise the capital to reinforce its solvency ratio by selling shares to a small group of friendly investors, which includes the German insurer Allianz and a US pension fund. Sources say Peyrelevade may also be interested in merging with another bank after the privatization. However, the final decision concerning the way Credit Lyonnais is eventually sold lies with the French Government - as part of the privatization agreement, it retains that right, though its share in the bank will be reduced to less than 10 percent by October 1999.

Worldwide outlook

CLS Asia is one of the bank's most successful regional divisions, and intends to expand its own operations into Latin America and Eastern Europe. In March 1988, the division took over Credit Lyonnais' existing stock brokerage firms in Latin America, and plans to manage that business through its New York office. CLS Asia plans to launch brokerage businesses in Russia, Poland, Hungary, Turkey, and the Czech Republic.

Unequal treatment?

As if the Hollywood scandal were not enough, CLS was slapped with a class action suit filed on behalf of African-American employees in the New York City office. In October 1997, they charged the company of denying them equal employment opportunities and for condoning discriminatory policies and actions, including racial slurs against black workers. The plaintiffs charged that black employees were consistently passed over for promotions and were systematically excluded from entering a number of departments within the company.

Au Revoir BFG