FRENCH BANK shares suffered a fresh sell-off yesterday as concerns about the euro zone sovereign debt crisis intensified, despite an attempt by Société Générale to assuage market concerns by pledging to accelerate asset disposals and cut costs.
SocGen tumbled to a 20-year low of € 14.80, down 10 per cent on the day and 70 per cent off its February highs. Shares in BNP Paribas fell more than 12 per cent to € 25.41, while Crédit Agricole’s dropped 10 per cent to € 4.65.
Broader euro zone bank shares also suffered, plunging to depths they only surpassed for three days in early 2009 during the financial crisis. They have now fallen 55 per cent since their peak in February. UniCredit and Intesa Sanpaolo of Italy were down 11 and 10 per cent respectively as Italian 10-year bond yields rose above 5.5 per cent again. Greek 10-year yields brushed close to 23 per cent as investors fretted about a possible default from Athens.
SocGen said its legacy asset portfolio, largely assets impaired in the credit crisis, was reduced by € 8 billion, including € 3.5 billion of disposals in the third quarter, and vowed to continue “at a high pace”.
It promised to raise € 4 billion by 2013 through business asset disposals and said “strong headcount reductions” are taking place, focused on Russia, Romania and Egypt as well as some in the group’s investment banking division.
SocGen said it had managed to reduce its level of dollar funding – which fell sharply from $72 billion at the end of June to $53 billion by mid-August – through currency swaps, increased disposals of dollar legacy assets, reductions in short-term market positions and the increased use of secured dollar funding.
The decision to publish the statement detailing its debt exposure and funding situation follows a similar move by BNP Paribas last week, in which France’s largest bank said it had € 75 billion of euro zone sovereign debt in its banking book portfolio at the end of June.
French banks will learn this week whether they will be downgraded by Moody’s, the credit rating agency. – Copyright The Financial Times Limited 2011
