Societe Generale, Credit Agricole Ratings Downgraded by S&P

Societe Generale, Credit Agricole Ratings Downgraded by S&P
The headquarters of Societe Generale SA in the La Defense business district in Paris. Photographer: Chris Ratcliffe/Bloomberg

Societe Generale SA and Credit Agricole SA were among French banks to have their credit grades cut by Standard & Poor’s after France was stripped of its top rating earlier this month.

Societe Generale, France’s second-largest bank by market value, and Credit Agricole, the third biggest, had their debt downgraded to A from A+ with a stable outlook, S&P said yesterday in statements. Caisse des Depots et Consignations was also cut, to AA+ from AAA.

European nations are grappling with a debt crisis now in its third year as they seek to restore budget order. France’s credit was lowered to AA+ from AAA on Jan. 13 amid downgrades that left Germany the sole nation in the euro area with a stable top rating. The assessments for Societe Generale and Credit Agricole incorporate one level of government support rather than two levels that an AAA rated sovereign would provide, S&P said.

“The downgrade of some of these banks follows the downgrade of France,” S&P said in a statement.

Societe Generale declined 5.4 percent to 21.57 euros in Paris trading. The stock is up 25 percent since the start of the year. Credit Agricole fell 4.1 percent to 5 euros.

Societe Generale said S&P’s decision was anticipated.

“This downgrade is a direct consequence of the methodology used by S&P, which builds into our rating an element of systemic support by the French state, whose own sovereign rating has been recently cut,” the bank said in a statement.

Funding Needs

S&P said it expects lower investment-banking revenues to weigh on Societe Generale’s operating income. The bank announced in November that it won’t pay a dividend for 2011. The rating on Credit Agricole assumes “the bank will continue to improve its structural funding and liquidity position as part of the plan it announced at the end of 2011, and which provided for a significant reduction in funding needs,” it said.

The banks are likely to meet their 2012 funding needs through some combination of public and private placements, or covered bonds, according to S&P.

“We see the French government as supportive to its banking sector,” the ratings firm said.

S&P said it expects credit losses in France this year and next to rise “only moderately” from 2011.

The ratings company also affirmed the AA- long-term grade for BNP Paribas SA, France’s biggest bank, and Credit Logement SA.

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