Greek Bonds, Dexia Trash, French Postal Service, & Profit

Wolf Richter's picture

Wolf Richter

Two freaks—Greek bonds and bailout-queen Dexia—wormed their way into another earnings announcement today, this one by the French postal service. Nevertheless, La Poste made a profit and is going to pay a dividend to its owner, the French government. It has its share of strategic problems and government interference, much like the United States Postal Service, but only the USPS is run by 535 clueless micromanagers in Washington.

The USPS is a big business with $64 billion in sales last year, and a loss of $10.6 billion, counting the retiree health benefits that it deferred to 2012. In the first quarter this year, it had a loss of $3.3 billion. Revenues were down 1.1%, not bad. But volume was down 6%. So it needs to get its costs in line—but as its quarterly report points out, “the return to financial stability requires legislation....”

Requires legislation. Even decisions normally made by middle management—such as product pricing, delivery schedules, location of retail outlets and distributions centers—have to be approved by Congress whose 535 agendas are focused on reelection and bringing home the bacon, and not on turning the Postal Service into a real business. And the situation is dire. The Postal Service announced that it might default on its health benefit pre-payments this year and that it might run out of cash. Not exactly the kind of Wall Street hype investors drool over.

So the French postal service announced its earnings today. Not only did La Poste, which includes the retail bank, Banque Postale, make money, but it also dressed up its numbers in Wall Street hype. How refreshing!

It had €21.3 billion in revenues in 2011, up 1.2%, with an “adjusted income” of—drum roll—€931 million, up 20.1%. It then posted a less “adjusted income” of €661 million, up 22.9%. And finally, well, it posted a net income of €478 million, down 13.1%. Higher postage and new services along with package delivery and express mail made up for a 3% decline in mail volume. Everything in its report had a positive twist.

Why can’t the USPS dress up its announcements like that? I'd suggest $1 billion in “adjusted income”; and after accounting adjustments, write-offs, and other charges, a net loss of $3.3 billion. We’d take the $1 billion and run with it. If the USPS ever wants to become a real American corporation, it will have to learn how to properly present its financials. Doom and gloom don’t inspire confidence. How come a French government-owned enterprise can speak our language better than we can?

La Poste is being privatized at a snail’s pace and against popular resistance. In 2010, it became a corporation with the state as the sole stockholder. The sale of a 2.99% stake is back on the table. Expect some strikes along the way.

Its subsidiary, Banque Postale, has over 11 million clients with bank accounts, out of a total population of 65 million! It recently added consumer credit and insurance products to its offerings, thus becoming more like its publically traded sisters. And, like them, it had loaded up on a secure investment, Greek bonds.

So it announced that it would participate in the Greek debt swap. And it wrote down its Greek bond holdings by €241 million. For more on the Greek debacle, read.... “The Bottomless Barrel,” As Germans Say.

And then, tucked into the report, is bailout queen Dexia, the Franco-Belgian mega-bank that collapsed and was bailed out in 2008 only to re-collapse and get re-bailed out in 2011. Among its many reckless acts, it had sold structured loans to French municipalities and communities that had no clue what they were getting into. These loans were based on the Swiss franc. When the franc skyrocketed, interest on these loans skyrocketed as well. Towns and communities could no longer pay. And voilà, toxic subprime à la française.

With €25 billion in loss guarantees from the taxpayer, the Banque Postale and the Caisse des Dépôts (France's state-owned investment bank) took on these toxic loans. They will regroup them into a joint venture owned 65% by the former and 35% by the latter.

Dexia inflicted much more treacherous wounds on the tiny Kingdom of Belgium which guaranteed its debt, nationalized subsidiaries, and bailed out the rest of the financial sector. Exposure: €162 billion—41% of GDP! And it’s turning into a nightmare as Dexia announced monumental losses. But finally there is some resistance against these endless bailouts. Read.... Belgians Get Cold Feet As Bailout Queen Dexia Drags Them Toward Abyss.

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NEOSERF's picture

Like the ideas in this article...personally, I've been living the last 20 years fairly happily in this fraud induced consumerism dream and I really need it to last at least another 10 years so bring on more of this type of Madoff sensibility and let me retire in peace...this game is over anyway so might as well enjoy the next 10 years before the real write offs start...

falak pema's picture

La POste and Banque Postale, as NAtixis and Banque Populaire, as Credit Agricole and AMA insurance,  are prime examples of France's state subsidised form of monopoly crony capitalism in niche markets. All for one and one for one big free fall!

The writing on the French banking wall : Dexia, Natixis and Banque Populaire, are the VISIBLE part of the banking Iceberg...Play on Oligarchy land of electronically created money. When you mark to market we will know how the cookie will truly crumble. Until then, its can kicking in Euro land!

toadold's picture

A couple of years ago I had an interesting discusion with a USPS union steward. He said that it was the worst of both worlds, you had the usual upper union management that was only interested in feathering their own nest along with Federal regulations that pretty much gutted the ability of the union to prevent mistreatment of employees.  In his opinion there were fewer and fewer people of initiative and intelligence in the USPS.  He himself was trying to game the system so he could get out early before he went "postal'. 

RunningMan's picture

@toadold: I suspect this behavior is far more pervasive than just the USPS. I have both seen and heard this "game the system...get out early" mentality played out at many companies. The game never changes if we all continue to play along. Humanity is its own worst enemy.

LawsofPhysics's picture

Precisely, the game only ends when the vast majority stop playing.  Only then will shit get real.  Same as it ever was.

skepticCarl's picture

Do not the Greek and Dexia bailouts demonstrate, clearly, that Zombies can be kept undead forever.  The complexities are designed into the system so that there are always alternate routes for refunding, recapitalizing, or simply redoing. Waiting for a climax to these financial dramas is endless, and fruitless.  Let's just embrace the suck.

Ungaro's picture

Given the Hellenic mess, I wonder why would anyone pay any debt at all. Just go to the creditor and offer a 75% haircut on existing debt, take out a new loan to pay all past-due interest or threaten to default. Very clever, these Greeks!

Buck Johnson's picture

Just wait, I have a bad feeling that Greece isn't over by a longshot.  I can't believe a thing that comes from them or EU officials anymore.  I remember around 9 in the morning on the east coast they where at 50% and then they magically got to 95%.  What incentive was given to the holdouts to say okay lets do it, nothing.  Because Greece and the EU are playing with words and numbers.

disabledvet's picture

After the Goldrush Belgium:
"In the name of King Leopold II" of course...
and "here's some diplomacy for you" while you're at the latest EU dinner:

Midas's picture

Maybe if the USPS charged the equivalent of .58 euros ($0.75) per letter they wouldn't have budget problems.

Sudden Debt's picture

When i buy something on ebay, it's mostly cheaper to get it shipped from the US than to get it shipped 75 miles from my door.

SilverFocker's picture

Maybe if congress would let them they would. Yet they are stuck to no more than the CPI, which we all know is bullshit.