French banking shares plummet as ratings downgrade looms

PARIS –Shares in French banks plummeted on Monday despite assurances by France’s central bank and calls by lenders Societe Generale and BNP Paribas to put downgrade rumors into perspective.

At opening, French bank shares immediately slid by more than 10 percent. In afternoon trade, Societe Generale was down 8.57 percent, BNP Paribas 13.67 percent and Credit Agricole 9.42 percent.

The falls were fueled by widespread talk of a possible downgrade by Moody’s credit agency later this week. The agency warned three months ago that French banks could suffer from the eurozone debt crisis and their exposure to Greek sovereign debt.

Societe Generale has lost 62 percent in share value since July 1 and on Monday executives said that any upcoming downgrade had already been priced in to the bank’s share price.

“It is an event that is largely (included) in the market,” Frederic Oudea said in a phone conference Monday in which the company also announced a cost-cutting program, with job cuts and asset sales, in an effort to assuage the markets.

Oudea noted that a two-notch downgrade by Moody’s would bring its rating in line with those of the other two main ratings agencies.

During the call, Oudea said that 2,000 jobs were to be cut in Russia, where Societe Generale owns Rosbank, the country’s largest private lender.

Christian Noyer, head of the French central bank, said that French banks “have no liquidity or solvency problems.”

“No matter what the Greek scenario and the provisions required, French banks have the means to face up to it,” the central bank said in an official translation of Noyer’s comments.

BNP Paribas, France’s largest bank, said it would remain one of the best rated in the world even after a potential downgrade by Moody’s.