Credit Agricole hit by Banco Espirito Santo troubles
French bank Credit Agricole said profits almost halved after it wrote off the value of its stake in the troubled Portuguese Banco Espirito Santo (BES) to zero.
Credit Agricole said 708m euros (£563m) had been written off.
The French bank apologised to investors, saying that it had been "misled".
Portugal unveiled a plan to rescue BES on Monday after record losses of 3.6bn euros for the first half of the year.
Credit Agricole, which has a 14.6% stake BES, said second quarter net income was 705m euros compared with profits last year of 1.3bn euros.
"We can only regret having been misled by the family with which Credit Agricole was trying to create a true partnership to build the biggest private bank in Portugal," CA's chief executive Jean-Paul Chifflet said.
Mr Chifflet added that Credit Agricole was closely following investigations and audits underway at BES.
Credit Agricole reserves the right to take legal action should any issues arise out of the probes, a spokeswoman for the bank said.
"The new management [of BES] has indicated that it would consider taking legal action, and we will take part," Mr Chifflet told journalists.
Despite CA's problems, the company's shares opened almost 5% higher on Tuesday. Analysts said the bank's profit before tax was higher than expected.
Nigel Cassidy, BBC Europe business reporter
With so much unfinished business when it comes to rationalising, refinancing and regulating EU banks, this latest and severe collateral damage to Credit Agricole is a reminder that it's not just known troubled lenders that have to bite the bullet, declare write-downs and clean up their balance sheets.
Yet it may be too hasty to see these latest events as a new leg of a European banking crisis that won't quite go away.
Dig beneath the surface and it's as much a more straightforward case of thwarted ambition.
France's second-largest listed bank by assets has become the victim of its own long-standing plan to become a major banking force in southern Europe.
It has already shelled out a fortune extricating itself from what turned out to be unwise investments in Greek and Spanish lenders.
In the case of Portugal and Banco Espirito Santo, it wasn't just hit by the business failure at the biggest private bank in Portugal, in which it had made a large investment.
Credit Agricole's chief Jean-Paul Chifflet has alleged publically that his bank was misled by the patriarch of the powerful Espirito Santo family, whose interests span hotels and commercial property at home and abroad.
Legal action may eventually get to grips with the specifics here, but what's crystal clear is that this is just the latest sign that the "systemic risks" banking regulators like to harp on about remain real.
Europe still has too many over-ambitious and under-capitalised banks - and by no means all of them are in southern Europe.
On Sunday, Portugal revealed 4.9bn-euro rescue plan for BES.
Shares in the Portuguese bank have plunged 89% since June, when concerns about the financial health of the company first came to light.
Last week BES reported a 3.6bn euro loss, which wiped out its existing capital buffer of nearly 2.1bn euros and cut it to below the minimum level required by banking regulators.