Thu, Sep 15, 2011 page10

• SocGen, Credit Agricole downgraded

  Moody’s told two banks in the middle of June, along with BNP Paribas, that they would be reviewed for a downgrade because of Greece’s debt woes

  NOT UNEXPECTED:

  • AP and Reuters, PARIS
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  Moody’s yesterday downgraded the credit ratings of French banks Societe Generale (SocGen) and Credit Agricole as worries grew about their potential exposure to the debts of Greece.

  The decision has been widely expected this week — the agency had put them and rival BNP Paribas on review for downgrade in mid-June.

  While cutting its rating on Societe Generale’s debt and deposit rating by one notch to “Aa3” and Credit Agricole’s by the same amount to “Aa1,” Moody’s also warned that BNP Paribas could see its “Aa2” rating downgraded by one notch as well.

  Following the downgrade, Societe Generale said Moody’s analysis shows that the bank’s exposure to Greece “to be modest and manageable.”

  Earlier this week, Societe Generale’s chief executive Frederic Oudea said that the bank was prepared for a downgrade and that it would not change its outlook.

  The downgrades come as Europe scrambles to deal with the Greek debt crisis amid mounting fears that the debt-laden nation may have to default. French President Nicolas Sarkozy and German Chancellor Angela Merkel are due to speak with Greek Prime Minister George Papandreou in a teleconference to discuss the crisis.

  French banks have been in the spotlight in recent days over their potential exposure to Greece. Both Societe Generale and BNP Paribas issued statements seeking to diminish market fears.

  Bank of France Governor Christian Noyer said the Moody’s action was relatively good news.

  “It’s a very small downgrade and Moody’s had a higher rating than the other agencies so it’s just put them on the same level or slightly better than the others,” Noyer said.

  In an attempt to restore confidence, BNP Paribas yesterday announced a plan to sell 70 billion euros (US$95.7 billion) of risk-weighted assets to help ease mounting investor fears about French bank leverage and funding as its main rivals were hit by ratings downgrades.

  BNP announced the move two days after smaller rival Societe Generale unveiled a similar plan.

  In a presentation posted on BNP’s Web site yesterday, the bank said the asset sales would reduce its balance sheet by around 10 percent. The bank will also reduce its US dollar funding needs by US$60 billion by the end of next year, it said.

  US dollar funding costs have ramped up recently as European banks are forced to diversify their sources following jitters on the US money markets about the euro debt crisis.

  By selling assets and freeing up capital, BNP will be in shape to reach a core Tier 1 ratio of 9 percent on Jan. 1, 2013 under the new Basel III regime of tougher capital requirements, the bank said.

  Addressing concerns over its exposure to Greek sovereign debt, which is the highest among France’s banks, BNP said that a hypothetical 55 percent additional write-down of its portfolio would lead to a “manageable” loss before tax of 1.7 billion euros.

  Its first-half pre-tax profit was 7.4 billion euros.

  The bank said there would be a potential hit in the third quarter from its Greek debt exposure.
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