Funding at BNP, Societe Generale Is ‘Skewed’ to Short Term, Barclays Says
French lenders BNP Paribas (BNP) SA, Societe Generale SA and Credit Agricole SA (ACA) are more geared toward short-term funding compared with banks such as Deutsche Bank AG and JPMorgan Chase & Co., according to Barclays Capital.
“French bank funding structures appear skewed to short- term wholesale, light on longer-term debt, although not off the scale,” London-based Barclays Capital’s analysts Jeremy Sigee and Kiri Vijayarajah wrote in a note today. “Some credit investors seem to have been spooked by recent SocGen disclosures.”
Societe Generale, France’s second-biggest lender, reduced its short-term funding in dollars by 26 percent as the sovereign-debt crisis led U.S. money market funds to lend less to Europe’s banks.
Dollar funding fell to 53 billion euros ($74.6 billion) by mid-August from 72 billion euros at the end of June, the Paris- based bank said in a presentation on its website dated Aug. 30. Its total short-term funding needs shrank 9.5 percent to 134 billion euros in the same period.
Societe Generale (GLE) has lost more than half of its market value this year in Paris trading amid funding concerns and the European sovereign crisis. BNP Paribas, France’s largest bank, has declined about 37 percent in 2011, while Credit Agricole, the third biggest, has fallen about 40 percent.
“The funding concerns on the French banks originated from their apparent large exposures to troubled sovereigns,” the Barclays Capital analysts said. “Overall, these sovereign exposures remain manageable.”
Based on current bond prices, aggregate additional markdowns on Greek, Portuguese, Irish, Italian and Spanish sovereign-debt holdings would be about 3.8 billion euros for BNP Paribas, 939 million euros for Credit Agricole and 816 million euros for Societe Generale, the Barclays Capital analysts estimated.
“Marking sovereign exposures to market would cause relatively limited damage to tangible book values,” they said.
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