- Title: FRANCE: French bank stocks drop after BNP downgrade
- Date: 26th October 2012
- Summary: VARIOUS OF MONITORS SHOWING BNP PARIBAS SHARE PRICE GAUDICHON LOOKING AT SCREEN MONITOR
- Embargoed: 10th November 2012 12:00
- Location: France
- Country: France
- Topics: Economy
- Reuters ID: LVA90THO90GQ52CRNSTQY486JHI3
- Aspect Ratio:
- Story Text: Several French banks, including BNP Paribas, saw their ratings downgraded on Friday (October 26) by rating agency Standards & Poors (S&P).
Shares of BNP Paribas fell alongside those of domestic rivals after Standard & Poor's cut BNP's credit rating and said French banks were vulnerable to a protracted recession in the euro zone.
Although BNP's smaller listed rivals Societe Generale and Credit Agricole escaped a ratings cut, their outlook was cut to "negative" from "stable" by S&P.
"This news, of course, has a negative impact on the financial markets and we see all the stocks in the red side this morning, all declining around three percent," Jeremy Gaudichon from Paris-based fund managers KBL Richelieu said.
BNP, France's No. 1 listed bank, fell 3.1 percent to 38.39 euros in early Friday trade, behind SocGen and Credit Agricole, respectively down 3.7 and 3.4 percent.
They were among the biggest decliners in the STOXX Europe 600 bank index, down 1.5 percent.
The agency cited an array of economic risks which had prompted the downgrade.
"The main reason they gave is the current macro-economic environment in France which is weak and also the current low rate environment will put pressure on banks' revenues during the next two years," Gaudichon said, adding that ongoing woes in the euro zone were also a contributing factor.
While French banks have been cutting costs and slashing their exposure to peripheral, crisis-stricken eurozone economies like Greece - helping their shares gain between 30 and 45 percent year-to-date - they have among the biggest cross-border exposures to Italy, which is in recession.
They are also exposed to regulatory uncertainty as France's Socialist government hammers out the terms of a campaign promise to curb banks' risky trading activities.
But Gaudichon was keen to put Friday's market reaction in context.
"It needs to be put into perspective because since the end of July, the banks' (share prices) had risen strongly thanks to the declarations of the European Central Bank (ECB) so this little fall of three percent is relatively weak in comparison to the strong rise which we've seen since the end of July," he said.
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