BNP Paribas, France's largest bank, was among the country's lenders whose credit rating was cut by Standard and Poor's on concern it may be hurt by Europe's prolonged economic weakness and a housing slump at home.
BNP Paribas's long-term counterparty credit grade was lowered one level to A+ from AA-, S&P said in a statement late yesterday.
S&P also revised its outlook to negative from stable for 10 other French banks, including Credit Agricole and Societe Generale.
Shares of the three banks tumbled in Paris. France's 13-year-high unemployment rate, government debt approaching 90 per cent of gross domestic product and trade deficits "are being aggravated in our view by the on-going euro-zone crisis, a more protracted recession across Europe, and lower domestic-growth prospects," S&P said.
French banks also face "potentially limited, but still noteworthy, impact from an ongoing correction in the housing market," it said.
The S&P verdict comes as France's largest banks have found their funding situation stabilizing, thanks to €1 trillion in long-term loans by the European Central Bank to the region's lenders and the ECB president Mario Draghi's agreement last month to buy the bonds, under some conditions, of euro nations whose sovereign yields have skyrocketed.
As the biggest holders of private and public debt in the euro-area's problem economies, French banks have had the most to gain from the ECB's moves as the crisis enters its fourth year.
Shares of the three banks slid in Paris today, with BNP Paribas falling as much as 3.6 per cent and trading down 2.7 per cent at €38.56 by 11.03 am to give the bank a market value of about €48 billion.
Societe Generale fell 2.8 per cent to €24.19 and Credit Agricole declined 3.5 per cent to €5.79.
Bloomberg
