Spanish Banks Ratings Kept; European Stocks Down

Arthi Gupta, Mayank Mehta and Sanjay Barot
22 Jun, 2010
New York City

European markets fell after Fitch downgrades BNP Paribas

[R]4:30 PM Frankfurt - European markets fell after Fitch downgrades BNP Paribas’ credit rating by a notch and S&P kept its ratings on Spanish banks but increased loan loss reserves. The euro area current account deficit in April was €5.1 billion. German business climate rebounds in June.[/R]

Standard & Poor''s held its credit ratings on six Spanish banks, although it increased its estimate for loan loss provisioning for these banks.

The Netherlands-based Aegon NV may sell its U.S. based insurance and brokerage unit Transamerica.

In London FTSE 100 Index traded lower 58.09 or 1.10% to 5,241.02, in Paris CAC 40 Index decreased 34.12 or 0.91% to close at 3,702.03, in Frankfurt DAX Index traded lower 33.27 or 0.53% to close at 6,259.70. In Zurich trading SMI Index decreased 64.39 or 0.99% to close at 6,455.18.

Fitch downgraded its debt rating on BNP Paribas SA, the largest bank in the euro-zone by deposits by one notch on Monday reviving worries that the euro area sovereign debt crisis will slow growth. Fitch slashed BNP''s long-term rating to AA-minus from AA on deteriorating asset quality.

The euro area current account recorded a seasonally adjusted €5.1 billion deficit in April compared to a surplus of €1.5 billion in March, according to data from the European Central Bank released today.

The twelve-month cumulated seasonally adjusted current account recorded a deficit of €32.3 billion in April, which is around 0.4% of euro area GDP, compared with a deficit of €153.8 billion a year earlier.

German business climate unexpectedly rebounded in June, according to results of a key survey released today. The business climate index climbed to 101.8 in June from 101.5 in May, the Munich-based Ifo Institute for Economic Research said.

Euro-zone should address weaknesses in economic policy framework and institutions, which failed to prevent the emergence of severe fiscal and other macroeconomic imbalances, rating agency Fitch said on Monday. However, it added that the risk of a break-up of the euro-zone over the short to medium term remains low.

Nonetheless, further episodes of extreme market volatility are likely until economic recovery and deficit and debt reduction are firmly secured and the European Stabilization Mechanism is operational, Fitch said.

Standard & Poor’s held its credit ratings on six Spanish banks on Monday amid speculation of tension in the Spanish banking system, according to reports.

The agency confirmed its A/A-1 rating on Caja Madrid, Banco Popular, Banco de Sabadell, Ibercaja and Bankinter, and also its A/A-1+ rating on La Caixa. Spain''s biggest banks - Banco Santander and BBVA - were excluded because of their multinational presence.

Aegon is contemplating to sell its Transamerica life reinsurance business in the U.S. and plans to restructure its UK operations.

Aegon is looking for a """"suitable buyer"""" for the Transamerica business. According to a statement released by Aegon today, it """"believes that, over the longer term, there is only a limited strategic fit between Transamerica Reinsurance and Aegon''s core activities.""""

The company said its priority is to repay the remaining €2 billion or $2.5 billion of capital it received from the Dutch government at the height of the financial crisis in 2008.

As for its U.K. businesses, Aegon said it would cut 25% of costs by 2011 and withdraw from the """"bulk annuities"""" market.

Gainers & Losers

Air France-KLM SA rose 1.8% to €11.31 after the global airlines company upgraded its recommendation on shares to “overweight” from “underweight” at JPMorgan Chase & Co.

BNP Paribas SA, the bank rose 0.2% to €50.32.

Bouygues SA, the construction company fell 0.1% to €35.29.

Bureau Veritas SA rose 1.4% to €45.95 after the goods inspection company announced an agreement with UK-based company Inspicio to acquire its subsidiary Inspectorate for £450 million. The transaction is expected to be completed during Q3 2010, upon clearance from the relevant competition authorities.

Casino Guichard Perrachon SA, the food retailer fell 0.5% to €64.90.

Commerzbank AG, the bank fell 0.8% to €6.11 and Credit Agricole SA, the bank fell 4.9% to €9.47

Deutsche Bank AG, the global investment bank fell 0.8% to €49.90.

Deutsche Lufthansa AG rose 0.7% to €11.81 after the airline was upgraded its recommendation on the shares to “overweight” from “neutral” at JPMorgan.

Electricite de France SA, the integrated energy operator traded unchanged at €36.06

France Telecom SA, the telecommunications operator fell 0.5% to €15.22.

HeidelbergCement AG, the producer of cement, concrete and building materials fell 2.8% to €44.88.

Ipsen SA, the pharmaceutical company rose 2.3% to €26.97.

Societe Generale SA, the bank fell 4.7% to €37.07.

Technip fell 3.7% to 52.2 pence after the operator of gas and oil engineering technologies and projects was downgraded to “hold” from “buy” at Societe Generale.

ThyssenKrupp AG, the technology company fell 0.4% to €22.50.

Volkswagen AG, the automobile manufacturer fell 1.0% to €72.42.