Sat, Jan 14, 2012 - Page 10 News List

Greece deal likely: SocGen CEO

GIVE AND TAKE:Politicians have sought to encourage banks to purchase more sovereign debt in exchange for massive cheap funding from the European Central Bank

Reuters, PARIS

A deal with private creditors to voluntarily write down at least half the value of their Greek sovereign bonds has a good chance of happening in the coming days, Societe Generale (SocGen) chief executive Frederic Oudea has told newspaper Les Echos.

Banks have made an “exceptional” effort and the final losses could go above the initially agreed 50 percent, Oudea said in an interview published on Les Echos’ Web site on Thursday.

“[The talks] have a good chance of reaching their end in the coming days,” he said, echoing similar comments by the chairman of BNP Paribas on Thursday last week. “It’s possible that the final losses will be higher than 50 percent.”

Earlier on Thursday the head of a private-sector bondholder group said time was running short to clinch a deal on the voluntary debt exchange, while eurozone sources said Athens might force reluctant investors to accept losses.

The ripples of Greece’s debt crisis have spread far beyond the eurozone’s periphery and now threaten core economies like France, which could soon lose its cherished “AAA” credit rating.

Oudea told Les Echos that a downgrade of France “is already priced into the market. We must start getting used to lower ratings as the rating agencies’ way of thinking has changed.”

Commenting on the broader issue of banks’ appetite for sovereign debt, Oudea reiterated his stance that it was not the job of banks to function as “final” investors for governments, a position which was first reported in an analyst’s note on Jan. 6.

Policymakers including French President Nicolas Sarkozy have called for banks to buy more sovereign debt in exchange for massive cheap funding from the European Central Bank (ECB).

Oudea told Les Echos that banks had rushed to take advantage of unprecedented ECB support without necessarily having immediate use for it, which explained the record number of deposits subsequently parked by banks at the bank. He also blamed tougher regulatory requirements for pushing banks away from interbank lending markets.

Banks including SocGen are cutting jobs and shrinking their balance sheets to cope with a crisis that has severely hurt their access to funding. SocGen believes its investment banking unit, which is being hit with the bulk of cutbacks, is headed for a “significant” slump in revenues this year, according to a 245-page memo.

“Profitability [at the investment bank] will be structurally weaker, but should stay above the retail bank division’s,” Oudea told Les Echos.

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