BNP Paribas SA, Societe Generale SA, Credit Agricole SA and Groupe BPCE, France’s biggest banks, are struggling to fund about 37 billion euros (US$48 billion) of debt payments due in the first quarter.
As their access to US dollar short-term funds dries, and faced with soaring costs in the bond market, French lenders are raising money by selling their debt through structured products and issuing bonds backed by mortgages on properties in Paris and regions including Cote-d’Azur, the French Riviera playground of the rich. They may also tap the three-year European Central Bank (ECB) facility, which opened yesterday.
“It’s gotten harder and harder to get refinancing on the markets, and as time goes by rating agencies are taking negative actions, pushing up already high funding costs,” said Jacques-Pascal Porta, who helps manage 500 million euros at Ofi Gestion Privee in Paris and owns BNP Paribas shares.
French banks’ credit ratings were cut this month by Moody’s Investors Service, which cited funding constraints and a worsening European debt crisis. Their ability to raise money is limited by their public and private debt holdings in the five countries at the heart of Europe’s crisis — Greece, Portugal, Ireland, Spain and Italy — which as of June were the world’s biggest at US$681 billion.
Also, with France’s “AAA” rating at risk, the state might find it hard to aid them like it did when Lehman Brothers Holdings Inc’s collapse sparked a crisis in 2008.
European banks overall will have about 300 billion euros of redemptions in senior debt and covered bonds in the first three months, the most in the past two years and the highest quarterly amount next year, according to Barclays Capital estimates.
BNP Paribas, France’s largest bank, has 15.7 billion euros coming due between next month and March, or about half of its annual redemptions, while Societe Generale, the second-largest, has 6.6 billion euros, according to data compiled by Bloomberg.
The region’s crisis dried up the banks’ access to short-term US dollar funding, with the eight largest prime US money-market mutual funds cutting holdings of French bank debt by 68 percent last month. They have reduced the debt holdings by US$76.8 billion in the past 12 months.
French banks’ woes have also moved to longer-term debt. BNP Paribas and Societe Generale, which got more than 30 percent of this year’s medium and long-term refinancing through senior debt sales, said they have not tapped the market since the summer.
BNP Paribas, which completed its 35 billion euros medium-and long-term funding plan in July, sold 8 billion euros in debt by the end of October through private placements, distribution in networks and home-loan covered bonds. It has achieved about a third of next year’s medium and long-term funding program.
Societe Generale has shrunk its long-term refinancing plans for next year by about 50 percent to up to 15 billion euros, and said its needs are “fully achievable.”
The Paris-based bank, with 21.8 billion euros of redemptions next year, its highest annual amount, said it has a “regular repayment schedule, with more than 65 percent of the outstanding maturing beyond 2013.”
French banks, like other lenders across the eurozone region, might be able to tap the ECB’s funding window.
The ECB, while balking at broadening its sovereign bond-buying program, yesterday began offering unlimited funding against collateral for as long as three years in ECB President Mario Draghi’s effort to get cash flowing in the financial system.