Bloomberg News

European Bank Loans in Spain, France Rose in Second Quarter

October 20, 2011

(Updates with breakdown of Greek, French holdings from eighth paragraph.)

Oct. 20 (Bloomberg) -- European banks continued to lend to borrowers in Italy, Spain and France, while they were replaced by the public sector in Greece, Portugal and Ireland, according to the Bank for International Settlements.

European banks boosted lending to French borrowers 8 percent to $925 billion in the three months ended June 30, according to data released yesterday by the BIS, based in Basel, Switzerland. That was driven by a 23 percent increase in loans to the French public sector by British banks and an 11 percent jump in lending to French banks by their German counterparts.

While the data indicates that U.S. banks increased their lending to French, Italian and Spanish banks by a combined 24 percent to $239 billion in the period, the BIS said in a footnote to the numbers that “U.S. data are likely to be significantly revised” later. It didn’t elaborate.

Lending to Spanish borrowers rose 1 percent to $643 billion due to an increase in loans to banks, and to Italians by 2 percent to $837 billion on higher public loans, the BIS said.

Separately, Banco Santander SA, Banco Bilbao Vizcaya Argentaria SA and three other Spanish lenders were downgraded by Moody’s Investors Service a day after the ratings company cut the nation’s credit rating for the third time in 13 months.

Long-term senior debt and deposit ratings for the five banks, which include CaixaBank, La Caixa and Confederacion Espanola de Cajas de Ahorros, were cut one level and given a negative outlook, Moody’s said yesterday.

Greek Loans

Lending by European banks to the Greek public sector, which is surviving on emergency loans from the European Union and the International Monetary Fund, fell 15 percent to $36.6 billion. Greece’s total debt is 345 billion euros ($476 billion), according to data compiled by Bloomberg. Greek banks, which are turning more to the European Central Bank for funding, cut their borrowings at European banks by 16 percent to $6.7 billion.

German and French lenders continued to reduce their Greek government bond holdings in particular. German banks’ holdings, which excludes the 7.2 billion euros in Greek government bonds held by FMS Wertmanagement GmbH, the “bad bank” of Germany’s Hypo Real Estate Holdings AG, fell 12 percent to $12.4 billion.

French banks, which still led the group of Greek creditors among foreign banks with overall claims amounting to $55.8 billion, trailed their German peers on sovereign debt with $10.7 billion, 20 percent less than three months earlier. The overall figure for French banks is inflated by $43.5 billion in lending to companies and households, mainly because of Credit Agricole SA’s Greek division, Emporiki Bank SA. German lenders have no major units in the country.

French Holdings

Along with Greece, French banks also have most at risk in Italy and Belgium, again because of subsidiaries they have in the countries. About half of European banks’ lending to Italian borrowers, or $416 billion, is on the books of French banks. In Belgium, they have more than half, or $230 billion, according to the BIS numbers. BNP Paribas SA, France’s biggest lender, has units in both Italy and Belgium.

British banks have lent the most to France, with $305 billion, and about half of that was to banks in the country, according to the BIS.

European banks’ credit to all classes of borrowers also declined in Portugal and it was little changed in Ireland. Both countries are receiving emergency loans from the EU and the IMF and its banks rely on the ECB for funding.

The BIS collects cross-border bank lending data from central banks worldwide. The data don’t cover lending by non- banks such as insurers or hedge funds. The subset that is broken down into borrower categories is based on data from 24 countries including all major developed economies, while excluding countries such as China and Russia. The data are preliminary with final numbers due to be published Dec. 12.

The BIS data are converted from all other currencies into U.S. dollars at the rate of the period’s last day. By June 30, the euro had risen to $1.4502 from $1.4158 three months earlier.

--With assistance from Fabio Benedetti-Valentini in Paris and Nathaniel Espino in Warsaw. Editors: Stephen Taylor, Steve Bailey

To contact the reporter on this story: Boris Groendahl in Vienna at bgroendahl@bloomberg.net

To contact the editor responsible for this story: Angela Cullen at acullen8@bloomberg.net


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