mlkrborn
13 years ago
UPDATE: French Bank Shares Soar On Coordinated Central Banks' Dollar Move
Date : 09/15/2011 @ 11:18AM
Source : Dow Jones News
Stock : Credit Agricole S.A. ADS (CRARY)
Quote : 3.55 -0.23 (-6.08%) @ 12:21PM
UPDATE: French Bank Shares Soar On Coordinated Central Banks' Dollar Move
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PARIS--French bank shares soared Thursday after the world's biggest central banks said they would pump dollars into the banking system, easing concerns about funding constraints that have hammered the largest French financial institutions.
BNP Paribas SA (BNP.FR) jumped the most, gaining over 20% before easing back to trade up 12% in recent activity. Societe Generale SA (GLE.FR) shares were up 5.7% and Credit Agricole SA (ACA.FR) gained 5.6%. France's broader CAC-40 index was up 3.1% while the Stoxx Europe 600 banks index was up 4.1%.
"Coordinated actions always reassure markets, especially in light of the recent cacophony," Jean-Francois Robin, a strategist at French investment bank Natixis in Paris, said. He said the move would have "a strong psychological impact and appease market's irrational fears."
French banks have been caught up in the continuing European sovereign debt crisis, battered by fears about their exposure to Greece and signs that U.S. money market funds have pulled back in lending dollars to them.
Moody's Investors Service Wednesday stressed that the continuing European sovereign debt crisis is denting the key source of funding for the French banks, as it cut the long-term debt ratings of Societe Generale and Credit Agricole and kept BNP Paribas on review for a downgrade.
The ratings agency said the banks were able to cope with the short-term impact of the contraction in dollar funding and that euro funding remains plentiful, but that persistent sovereign debt worries threaten to make wholesale money markets fragile for some time.
Bank stocks were already in positive territory before the announcement that five major central banks would act in concert to pump dollars into the European banking system by arranging three new funding operations, an action aimed at stemming a new liquidity crisis. "News of concerted action...is sending them through the roof," Geoffroy Perreira, a trader with H & Associes, said.
BNP Paribas and Societe Generale have acknowledged that access to dollars through U.S. money market funds has been drying up and both have said they have secured alternative sources of dollars. They have also indicated they are cutting back on dollar-denominated lending and seeking to sell assets in a bid to bolster their capital, a potentially worrying development for slowing economies in France and elsewhere that the coordinated central bank actions seemed designed to ward off.
Societe Generale, Credit Agricole and BNP Paribas all declined to comment on the central bank move. The Bank of France also declined to comment.
-By Inti Landauro and Noemie Bisserbe, Dow Jones Newswires; +33 1 4017 1740; inti.landauro@dowjones.com
--Ruth Bender contributed to this story.
mlkrborn
13 years ago
Agustino Fontevecchia
Agustino Fontevecchia, Forbes Staff
Bringing You The Bull And Bear Case From The Markets Desk
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9/14/2011 @ 12:09PM |435 views
Moody's Downgrade: SocGen, Credit Agricole's Liquidity Problems Larger Than Greece
Stocks Mixed After Moody's Downgrades SocGen And Geithner Rejects Lehman-Moment
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After weeks in the eye of the storm, Societe General and Credit Agricole saw their credit ratings axed one notch by Moody’s on concerns over sizeable exposures to the Greek economy and “potentially persistent fragility in the bank financing markets.”
The downgrades both confirms weakness in the French banking sector, recently targeted by investors, and once again attested to the power of credit rating agencies, shaking markets and sending shares in both banks well in the red through most of the day, despite late rallies.
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It comes as no surprise that SocGen was downgraded on Wednesday. The bank had made repeated headlines after its share prices came under heavy downward pressure on fears that it might go broke, forcing management to come out and defend the bank and even pledge to free up about €4 billion ($5.5 billion) in assets to build up its defenses.
Moody’s confirmed the bank looked week, downgrading its debt and deposit rating by one notch to Aa3 from Aa2, while keeping its Bank Financial Strength Rating (BFSR) at C+ (equivalent to A2) but putting both of them on a negative outlook.
Credit Agricole, much less talked about in the financial media, was also under fire recently. Moody’s confirmed single-notch downgrades for both its debt and deposits (to Aa2 from Aa1) and its BFSR (to C from C+). As with SocGen, Credit Agricole was put on a negative outlook meaning more downgrades could come.
SocGen’s exposure to Greece, Portugal, Ireland, Spain, and Italy is sizeable but manageable, Moody’s noted. SocGen’s sovereign exposure to Greece remains at €1.9 billion ($2.6 billion), while its private sector exposure is €4.3 billion ($5.9 billion) in poor quality loans. Cumulative sovereign exposure to the remaining PIIGS totals €8.3 billion ($11.4 billion) while private sector exposure reaches €3.7 billion ($5.1 billion).
In the case of Credit Agricole, residual net exposure to Greek sovereigns stands at €891 million ($1.2 billion), less than 2% of its core tier 1 capital. Sovereign exposure to the other PIIGS reaches €11.5 billion ($15.8 billion), mainly concentrated in Italy. Private exposure to Greece, concentrated in its local subsidiary Emporiki Bank of Greece, reaches €24 billion ($33 billion). Private sector exposure to the remaining peripherals totals €5.7 billion ($7.8 billion).
Under adverse scenarios with large haircuts, both banks would take a big hit but would be able to survive, absorbing the losses, Moody’s notes.
The main problem, though, is funding. In both cases Moody’s sites vulnerability due to excess reliance short-term wholesale funding. As money market funds in the U.S. have become increasingly risk averse, European banks have lost a main source of U.S. dollar funding. While both SocGen and Credit Agricole have full access to Eurosystem central bank liquidity in major currencies, a deterioration in market sentiment makes them particularly vulnerable given their exposure to short-term wholesale funding. (Read Euro Banks Stocking Up On Dollars To Avoid Liquidity Squeeze).
The downgrades sent shares in both banks well into the red through most of the day in Paris, but a late session rally reversed most of those losses. As French central banker Christian Noyer came out in defense of his country’s banks, shares in SocGen closed the day down 2.1% after having traded well below 7%, while shares in Credit Agricole actually jumped back up into positive terrain, closing up 1.2%.
mlkrborn
13 years ago
Timely Board. Waiting meeting between Greece, Germany, France representatives tomorrow.
SocGen, ING drag Europe stocks sharply lower
12:20p ET September 12, 2011 (MarketWatch)
MADRID (MarketWatch) -- European stock markets ended lower Monday on increased fears that Greece is headed for default, as French banks led losses on speculation they could be downgraded over their exposure to that troubled euro-zone nation.
"This is an environment in which normal rules don't hold anymore," said Peter Dixon, strategist at Commerzbank. "This is fear, uncertainty and all the other nasty things associated with market panics. You can forget fundamentals, valuations."
The Stoxx Europe 600 index slid 2.5% to close at 218.93. The market closed down 2.6% on Friday, rattled by news that Juergen Stark, a member of the European Central Bank's executive board and governing council, will step down by year's end.
Stark cited "personal reasons," but news reports pointed to discord over the ECB's bond-buying program. The Stoxx 600 lost 3.7% for the week overall.
European-sovereign-debt worries continued afresh on Monday, driving Asia stocks lower, while Wall Street opened lower as well.
The French CAC 40 index , which dropped 4% to close at 2,854.81, bore the brunt of Monday's losses with BNP Paribas SA plunging 12.3%, and Credit Agricole SA and Societe Generale SA each falling more than 10%. Insurer Axa SA slid 9.7%.
Societe Generale released a statement Monday, trying to reassure investors over its exposure to Greek debt. The firm also said it will free up 4 billion euros ($5.4 billion) in capital by 2013 via business asset disposals. Read more on Societe Generale's plans
That came amid weekend media reports citing persons with knowledge of the situation that French banks could be facing a downgrade from Moody's over their exposure to Greek debt.
Chief Executive Frederic Oudea said that a possible downgrade by Moody's "won't change the outlook of the bank." He spoke on a conference call on Monday related to the bank's earlier statement, according to a report by Dow Jones Newswires.
Also in France, one person was killed and three injured at a blast at a French nuclear waste treatment site in the south of the country.
Meanwhile, fears that Greece may not meet the terms of its aid package have been growing and the cost of protecting European bank and government debt against default surged on Monday.
Media reports said German officials have been meeting to figure out how to protect the nation's banks from a potential Greek default.
The German DAX 30 index fell 2.3% to close at 5,072.33, with shares of Deutsche Bank AG sinking 7.3%. COMMERZBANK AG fell 8.3%.
Jitters rattled throughout Europe's banking sector, with Italy's UniCredit SpA down10.9% and Banco Santander SA dropping 4.7% in Madrid. Italy's FTSE MIB index fell 3.9% and the Spain IBEX 35 index declined 3.4%.
"Investors currently value European banks at levels last seen when Lehman Brothers Holdings Inc. collapsed," said Stephen Pope, managing partner at Spotlight Ideas, in emailed comments.
"One cannot overstate the fear that exists over a Greek default and a following debt contagion escalation. An index of European banks has 46 lenders trading at 0.58 times book value; cheapest since the post-Lehman lows of March 2009," he said.
The Athens General Index fell 4.4%, with losses of nearly 8% for National Bank of Greece SA.
Also in banking news, shares of ING dropped 8.6%. The Federal Reserve reportedly scrutinized the proposed acquisition of ING's U.S. online-banking business by Capital One Financial Group .
The Wall Street Journal reported that the Fed sent a two-page letter on Aug. 29 to Capital One asking for details about the "nature and dollar volume" of financial activities in which both financial organizations are involved.
Banks also fell in London as overall European bank sector weakness weighed, though generally losses were less severe. The FTSE 100 index fell 1.6% to settle at 5,129.62.
Weighing on the index, shares of HSBC Holdings PLC sank 2.4%, after dropping to a more than 2-year low in Hong Kong following Friday's surprise resignation of Mark McCombe, the chief executive of the group's Hong Kong unit. The group is also heavily exposed to Europe.
A report on Reuters Monday said HSBC has launched a sale of its non-life insurance business. A spokesman from the investment bank declined to comment.
Shares of Royal Bank of Scotland Group PLC fell 3.4%.
The U.K.'s Independent Commission on Banking said in its final report Monday that the annual pretax cost of banking-sector reforms could be up to 7 billion pounds ($11.1 billion) and it recommended a lengthy deadline for implementation of its proposals. Analysts said the report was mostly well-flagged.Read about the ICB report.
Resource stocks weighed on the London index, as commodities sold off across the board on macroeconomic worries and fears about Europe's sovereign debt crisis.
Among heavy hitters weighing on the index, shares of Royal Dutch Shell Plc sank 1.4% and Rio Tinto PLC fell 1.5%. BHP Billiton PLC dropped 1.4%.
tykundegex
13 years ago
Article: SocGen sound, liquidity satisfactory: CEO in paper
http://www.reuters.com/article/2011/09/13/us-societegenerale-ceo-idUSTRE78C1G820110913
FRANKFURT | Tue Sep 13, 2011 7:40am EDT
(Reuters) - French bank Societe Generale's (SOGN.PA) exposure to periphery euro zone bonds is low and its liquidity situation is comfortable, chief executive Frederic Oudea told a German newspaper.
Asked in an interview by financial daily Handelsblatt if losses could be expected after financial sector weakness in August, Oudea said he could not speak for all banks "but we have communicated clearly that we have no problem."
Oudea, who also spoke at a financial conference sponsored by Handelsblatt last week, said: "Societe Generale has a solid basis. Our exposure to Greek, Irish, Italian, Portuguese and Spanish bonds is low and manageable under all conceivable scenarios.
"The group's activities are profitable and our liquidity situation is very satisfactory."
Oudea said European governments needed more fiscal discipline and convergence and he expected some sort of transfer mechanism to be established to help smooth the bloc's imbalances, although he said he was unsure whether euro sovereign bonds were the right solution.
(Reporting by Jonathan Gould; Editing by Dan Lalor)
tykundegex
13 years ago
A relevant quote from an article I just read:
The governor of the Bank of France, Christian Noyer, also moved to ease worries over the impact on his nation's banks.
''I have no concerns over French banks because even if we take extreme hypotheses, of very large losses on French banks' positions in Greece, that would only cut relatively modest amounts from annual results,'' said Mr Noyer, who is also a member of the governing council of the European Central Bank.
Brokerage Nomura said potential write-downs were largely ''manageable'' in the context of €1.8 trillion of equity capital sitting in Europe's banks.
Read more: http://www.smh.com.au/business/banks-threatened-as-greece-teeters-on-edge-20110616-1g641.html#ixzz1Xpf3ghUb
P.S. SocGen rebounding nicely today in Paris .. up 7% from the close, 12% from today's lows...
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