BNP Paribas, SocGen Rise as Funding Concerns Rejected

BNP Paribas Tumbles Amid Funding, Sovereign Debt Concern
BNP Paribas, France’s largest bank, fell as low as 23.05 euros, the lowest since March 9, 2009. Photographer: Antoine Antoniol/Bloomberg

BNP Paribas SA, France’s biggest bank, and Societe Generale SA rebounded in Paris trading after rejecting concerns over their access to funding.

BNP Paribas, which plunged as much as 12 percent, closed 7.2 percent higher, the biggest gain in more than a year. Societe Generale, which slid as much 8.1 percent, jumped almost 15 percent after Chief Executive Officer Frederic Oudea said in an interview with Bloomberg Television in New York that the bank’s exposure to European sovereign debt was “manageable” and that it could do without access to U.S. money-market funds.

“For our bank, the exposure to sovereign debt is low, absolutely manageable,” Oudea said. “We have plenty of buffers of liquidity and we are adjusting to the reduction in the money-market fund exposure.”

The two banks dropped more than 10 percent yesterday on a possible ratings cut by Moody’s Investors Service because of their holdings in Greece. French lenders top the list of Greek creditors with $56.7 billion in overall exposure to private and public debt, according to a June report by the Basel, Switzerland-based Bank for International Settlements.

“The market will be looking to figure the worst case impact of a Greek default for the banks -- and Oudea’s comments put this nicely into context -- and the impact of lack of U.S. dollar funding, which affect many banks, and not solely the French banking system,” said Jonathan Tyce, senior banks analyst at Bloomberg Industries.

Funding Concern

BNP Paribas rebounded to 28 euros after falling to 23.05, euros, its lowest level since March 9, 2009. Societe Generale rose 15 percent to 17.90 euros. For both banks, it was the biggest gain since May 10, 2010.

U.S. money-market fund managers have cut their lending to French banks at a pace that may force the banks to raise capital by selling assets, according to a Sept. 9 report by William Prophet, a desk analyst at Deutsche Bank Securities Inc.

“French banks have been strongly hit by funding concerns, sovereign exposure and nationalization fears,” said Herve Samour-Cachian, senior equity fund manager at Natixis Asset Management in Paris.

Nicolas Lecaussin, director of development at France’s Institute for Economic and Fiscal Research, wrote in an opinion piece in The Wall Street Journal today that an unidentified BNP official told him the bank could no longer borrow in dollars.

BNP Paribas denied the claim in an e-mailed statement, saying it is able to finance its dollar needs at normal levels “directly and through foreign-exchange swaps.”

‘Excess Liquidity’

Prime money funds in the U.S. reduced their holdings in certificates of deposits issued by French banks by about 40 percent in the three months through Aug. 11, Prophet wrote in his report, based on a review of seven of the 10 largest funds eligible to purchase corporate debt. The proportion of the remaining holdings maturing in less than a month increased to 56 percent on Aug. 11 from 17 percent on June 11.

BNP Paribas has “an excess of short-term liquidity” in U.S. dollars and has to deposit the extra funds at the Federal Reserve, according a note the banks sent to clients and investors dated Sept. 6. BNP Paribas in August had “some decrease” in financing from U.S. money-market funds.

The company has “very abundant” short-term funding in euros, BNP Paribas also said. The interbanking market situation “today is very different” compared with the crisis tied to the collapse of Lehman Brothers Holdings Inc., it said.

Asset Sales

Societe Generale could withstand a freezing of financing from U.S. money-market funds “forever,” Oudea said.

“Even if it were to go to zero, there would be no problem,” he said. Societe Generale has 105 billion euros ($143 billion) of liquidity “buffers” and has reduced its funding needs in dollars, Oudea said.

The Paris-based bank said yesterday it plans to sell assets to free up 4 billion euros of capital by 2013 in an effort to reassure investors about its finances. The bank has “manageable” exposure to Greece, Portugal, Ireland, Italy and Spain, Oudea said.

Bank of France Governor Christian Noyer said yesterday that French banks are capable of facing any Greek situation. They don’t have liquidity or solvency problems, he said.

Group of Seven finance chiefs vowed on Sept. 9 to support banks and buoy slowing economic growth as Europe’s debt crisis roiled markets and threatened a global recession. Renewed fears that policy makers are failing to prevent a Greek default and contain their debt woes prompted investors to sell stocks and push the euro to a six-month low against the dollar.

“We will take all necessary actions to ensure the resilience of banking systems and financial markets,” G-7 finance ministers and central bankers said in a statement released during talks in Marseille, France.

(Removes reference to fund managers in bank report in seventh paragraph of story published Sept. 13)
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