Bloomberg News

French Stocks Slump, Head for Biggest Three-Day Drop Since 2008

September 13, 2011

Sept. 13 (Bloomberg) -- French stocks headed for their biggest three-day drop since November 2008, led by tumbling bank shares, on speculation that lenders are struggling to fund themselves and their debt ratings will be cut.

BNP Paribas SA slumped 7.6 percent as the country’s biggest bank denied a Wall Street Journal article that said the Paris- based lender cannot access funding in U.S. dollars. Societe Generale SA and Credit Agricole SA decreased more than 1 percent.

The benchmark CAC 40 Index tumbled 2.5 percent to 2,783.32 at 12:17 p.m. in Paris, extending the gauge’s three-day loss to 9.9 percent. The broader SBF 120 Index dropped 2.4 percent today.

U.S. money-market fund managers have cut their lending to French banks, according to analysts at brokerages including Deutsche Bank AG, as concern grows that Greece may default. The banks may have their credit ratings cut as soon as this week by Moody’s Investors Service because of their Greek holdings, two people with knowledge of the matter said on Sept. 10.

“People’s frustration with this crisis is going to remain high and the consequence of that is you should avoid the banks,” Neil Dwane, who helps oversee $154 billion as chief investment officer at Allianz Global Investors’ RCM unit, said in an interview on Sept. 8. “You wouldn’t know what you are buying. We are underweight banks and don’t own any European banks.”

Greek two-year notes fell today, pushing the yield on the securities up 460 basis points to 74.15 percent as speculation escalated that the European nation won’t be able to pay back its debt. Moody’s placed the three French banks’ ratings on review on June 15. The ratings company will focus on their holdings of Greek public and private debt.

BNP Paribas, SocGen

BNP fell 7.6 percent to 24.14 euros, extending its three- day plunge to 25 percent.

The WSJ cited an unidentified bank official as saying that without access to dollars, BNP is creating a market in euros, and if that doesn’t work, “the downward spiral will be hell,” since “we will no longer be trusted at all and no one will lend to us anymore.”

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

Societe Generale, France’s second-biggest bank, retreated 2.5 percent to 15.18 euros. Thibault Nardin, a Morgan Stanley analyst, cut his earnings estimates for SocGen and said the bank will probably not pay dividends for the next two years.

Credit Agricole lost 1.1 percent to 4.78 euros.

--Editor: Will Hadfield

To contact the reporters on this story: Alexis Xydias in London at axydias@bloomberg.net; Sarah Jones at sjones35@bloomberg.net

To contact the editor responsible for this story: Andrew Rummer at arummer@bloomberg.net


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