PARIS — Credit Agricole SA (CRARY, ACA.FR) is making contingency plans to abandon its troubled Greek bank or merge it with a conglomerate of domestic banks in the event of Greece leaving the euro zone, according to a person with direct knowledge of the plans.

The admission offers the starkest evidence yet of international companies preparing for the worst in Greece, just days ahead of elections that could set it on a path to leave the currency union. It also underscores the lengths to which France's third-largest listed bank will potentially go to draw a line under its disastrous foray into Greece.

Credit Agricole Chief Executive Jean-Paul Chifflet has said publicly he doesn't see a Greek exit as the most likely scenario. But the bank is pressing ahead with contingency planning focusing on two possible options, the person familiar with the matter said: consolidating its Emporiki Bank of Greece SA (TEMP.AT) unit into a larger conglomerate of Greek banks, in which the French lender's stake would get diluted down to 10%, or simply walking away and letting Emporiki fail.

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"Politically, if Greece were to exit the euro zone, Credit Agricole would have no obligation to stay," said this person. The Paris-based lender is also mulling plans to transfer some "good" assets from Emporiki to Credit Agricole, the person said, without disclosing details.

A Credit Agricole spokeswoman declined to comment on the bank's contingency plans.

Abandoning Greece's largest foreign-owned retail bank could expose Credit Agricole to legal and reputational risks and would echo its abrupt departure from its Argentine bank units 10 years ago after the Latin American country defaulted on its debt.

Analysts estimate a Greek exit from the euro zone would cost the bank at least EUR5.2 billion ($6.5 billion). Credit Agricole's direct funding to Emporiki stood at EUR4.6 billion in March.

In a recent internal memo, Mr. Chifflet and Credit Agricole President Jean-Marie Sander said Credit Agricole had bought Emporiki in a "different context," according to the person familiar with the matter. The group has "fulfilled its duty as majority shareholder and even gone beyond it," the memo added.

Credit Agricole has been scrambling over the past year to stem the red ink at its Greek operations. Its acquisition of Emporiki in 2006 saddled the French lender with billions of euros in losses and is one of the reasons its shares have plunged more than 70% over the past year, sparking uproar among shareholders. Emporiki is Greece's sixth-largest bank.

Last week, the bank secured a small bit of breathing space when Emporiki finally succeeded in getting funding from Greece's central bank, the Credit Agricole spokeswoman said. Credit Agricole had lodged numerous similar requests to borrow from the Greek central bank's so-called Emergency Liquidity Assistance program, and was repeatedly turned down because Emporiki is foreign-owned. According to the person close to the matter, Greece's central bank finally agreed to the request, after Credit Agricole said it would otherwise leave the country.

Societe Generale SA (SCGLY, GLR.FR) also owns a Greek lender--Geniki Bank--but it is much smaller than Emporiki and the Paris-based lender has been able to weather the Greek crisis better than its cross-town rival. Chief Executive Frederic Oudea has said that the bank would be "protected no matter what the scenario is."

A host of international companies have admitted they are working on contingency plans in the event of Greece exiting the euro, with many concerned about how to retrieve cash in the country under such a scenario. But none have disclosed potentially walking away from assets in Greece.

Any effort by Credit Agricole to push Emporiki into a larger Greek bank would come amid signs of consolidation in the country's banking sector. Greek government officials have long pointed to the need to merge local lenders in order to help them withstand mounting problems that include huge losses arising from Greece's debt restructuring, and soaring non-performing loans in the recession-ravaged economy.

Despite several failed past attempts, analysts now say the government could finally force this process through after it takes over a majority stake in Greece's four largest commercial banks — National Bank of Greece SA (NBG, ETE.AT), EFG Eurobank Ergasias SA (EGFEY, EUROB.AT), Alpha Bank AE (ALBKY, ALPHA.AT) and Piraeus Bank SA (TPEIR.AT).

The state's bank bailout fund, the Hellenic Financial Stability Fund, is expected to underwrite about 90% of the four banks' capital increases scheduled for later this year, effectively nationalizing the banks. Emporiki could therefore be swallowed by one of the new merged entities, but it remains unclear how advanced talks are. A spokesman for the Hellenic Financial Stability Fund declined to comment.

Even if Greece remains in the euro zone, the French lender will need to deal with rising defaults and deteriorating economic conditions. In the first quarter alone, Emporiki, which carries net loans worth EUR18.7 billion on its balance sheet, posted a EUR905 million loss.

Last week, Moody's Investor Services downgraded Emporiki's rating two notches further into junk territory.

In a sign that the French lender is increasing its crisis-busting efforts in Greece, the bank Wednesday appointed Xavier Musca, former chief of staff of President Nicolas Sarkozy, as executive vice president for international retail banking, asset management and insurance.

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