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Europe’s Biggest Banks Face $30 Billion Writedown on Greek Debt

By Gavin Finch and Liam Vaughan - 2011-07-22T11:19:55Z

Europe’s Biggest Banks Face $30B Greek Writedown

Loic Venance/AFP/Getty Images

France’s BNP Paribas (BNP) SA stands to lose about 1 billion euros, Societe Generale (GLE) SA 500 million euros, Deutsche Bank AG (DBK) 317 million euros and Credit Agricole SA (ACA) about 138 million euros from the writedowns, analysts at Sanford C. Bernstein & Co. led by Dirk Hoffmann-Becking and Marcello Zanardo said in a note to clients today.

EU Debt Deal Creates 'Safety Net' for Banks July 22

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July 22 (Bloomberg) -- Virginie Maisonneuve, head of global equities at Schroder Investment Management Ltd., talks about the European Union aid package for Greece and the outlook for U.S. negotiations on raising the debt limit. She speaks with Maryam Nemazee on Bloomberg Television’s “The Pulse.” (Source: Bloomberg)

Europe’s biggest banks stand to lose 20.6 billion euros ($29.7 billion) on their Greek government bonds after lenders in the region pledged to contribute to a new rescue package for Greece.

Banks will voluntarily agree to write down the value of their Greek securities by 21 percent as part of the bond exchange and debt buyback program, the Institute of International Finance said in a statement today. Europe’s 90 biggest banks hold about 98 billion euros of Greek debt, according to the European Banking Authority.

European leaders are trying to contain a debt crisis that started with Greece from engulfing Spain and Italy. The Greek aid package, which requires banks to contribute 54 billion euros, followed weeks of discussions among banking officials as well as meetings with European Union leaders during the emergency summit in Brussels yesterday.

“Banks should be able to digest any haircuts on Greek debt, and it is already priced in to their shares,” said Andreas Plaesier, a Hamburg-based banking analyst at M.M. Warburg. “What was really key was supplying capital to Greek banks and stopping the possible chain reaction to lenders outside the country that hold Greek banking assets.”

Greek 10-year government bonds are trading at 61.5 cents on the euro, up from 55.4 cents yesterday and 50.5 cents on Monday, according to data compiled by Bloomberg. Irish government bonds are trading at 63.7 cents, compared with 61.8 cents yesterday.

The Bloomberg Europe Banks and Financial Services Index rose 1.2 percent today, taking its gain this week to 6.8 percent.

To contact the reporters on this story: Gavin Finch in London at gfinch@bloomberg.net; Liam Vaughan in London at lvaughan6@bloomberg.net

To contact the editor responsible for this story: Edward Evans at eevans3@bloomberg.net