Credit Agricole, Soc Gen Ratings Cut; Greece in Focus

Arthi Gupta
14 Sep, 2011
New York City

The European indexes rose after euro area production bounced back in July. Ratings agency downgraded the long term debt ratings of French banks Credit Agricole and Societe Generale. Gerry Weber first nine months of the year net rose boosted by strong growth in sales.

[R]2:00 PM Frankfurt – The European indexes rose after euro area production bounced back in July. Ratings agency downgraded the long term debt ratings of French banks Credit Agricole and Societe Generale. Gerry Weber first nine months of the year net rose boosted by strong growth in sales.[/R]

European indexes pared yesterday’s gain in early trading after ratings agency Moody''s downgraded two French banks, Societe Generale and Credit Agricole, citing their exposure to the Greek economy.

However, during the course of the day, stocks rose modestly after the European Commission president Jose Manuel Barroso said at the European Parliament plenary session that the Commission will soon present options for the introduction of euro bonds.

However, he warned that this will not bring an immediate solution for all the problems faced by the region.

Moody''s ratings agency on Wednesday downgraded the long-term debt ratings of French banks Credit Agricole SA and Societe Generale SA while leaving BNP Paribas on negative watch.

The decision was widely anticipated and the rating agency as usual has lagged the market perception.

Credit Agricole''s bank financial strength rating was also cut to C from C+. Moody''s believes these ratings are more consistent with the bank''s sizeable exposures to the Greek economy.

Credit Agricole''s long-term debt and deposit rating was downgraded one notch to Aa2 from Aa1, and Societe Generale''s long-term debt and deposit rating was cut by one notch to Aa3 from Aa2.

The ratings agency said that it will extend its review of Societe Generale''s bank financial strength rating to consider the implications of the potentially persistent fragility in the bank financing markets, given its continued reliance on wholesale funding.

Moody''s maintained its rating for BNP Paribas as Aa2, but the long-term rating remains under review, with a negative outlook.

Shares in all three banks have plummeted in recent weeks on exposure to Greek sovereign debt and turbulence caused by the euro-zone debt crisis.

BNP Paribas SA fell 2.71% to €27.24, Credit Agricole gained 2.35% to €5.27, and Societe Generale slumped 3.63% to €17.25.

U.S. Treasury Secretary Timothy Geithner is scheduled to take part in a meeting of European Financial finance ministers in Poland. There is speculation that Geithner may urge for an increase in the size of the European Financial Stability Facility.

German Chancellor Angela Merkel, French President Nicolas Sarkozy and Greek Prime Minister George Papandreou are due to hold a video conference later today on concerns that Greece is on the periphery of a default.

Elsewhere in Italy, there is subdued optimism that Prime Minister Silvio Berlusconi may secure final approval from lawmakers today for the €54 billion austerity plan to avert a possible contagion.

In Paris, CAC-40 Index gained 53.11 to 1.8% to 2,948.04 and in Frankfurt DAX Index edged higher 115.67 or 2.2% to 5,282.03.

China’s Premier Wen Jiabao urged major developed economies to develop responsible and effective monetary policies.

Euro Area Production Rebounds

Industrial production in the euro-zone bounced back in July on strong German factory output, data released by Eurostat showed today.

Industrial output increased 1% on a monthly basis in July, reversing a 0.8% drop in June.

Gainers & Losers

BNP Paribas SA fell 2.7% to €27.24 after the banking group reported $22 billion liquidity reduction, primarily in capital markets activities during the first-half of 2011.

The bank also said on its Web site that it will lower its asset base by €70 billion or $96 billion of risk-weighted assets as it seeks to boost its Tier 1 ratio to 9% by 2013.

Compagnie de Saint-Gobain SA soared 3.2% to €29.97 after the French construction materials group is reportedly in talks to acquire the pipes division of Electrotherm India for about Rs 350 crore or €50 million.

Gerry Weber International AG rose 2.77% to €23.38 after the clothing and lifestyle brand said in the first nine months of the fiscal year, group sales revenues rose 12.6% to €468.8 million from €432.3 million in the previous year. Net income for the period climbed 25.9% to €36.0 million from €28.6 million a year earlier.

Koninklijke Ahold NV dipped 0.39% to €8.14 after the Netherlands-based retail group named Jeff Carr Executive Vice President and Chief Financial Officer, starting November 12.

Telenor ASA gained 0.41% to NOK 86.25 after the Norway-based telecommunication company said it is making some strategic changes to reorganize its business divisions.

Vinci SA climbed 2.15% to €32.35 after the French construction company bagged a €108 million design-build contract covering waste-water collection, transfer and treatment systems in the Dominican Republic.