S&P Cuts BNP Paribas Rating on French Bank Sector Risks

October 15 00:00 2011

New York, October 15 (RainbowNewsLine.com) – Standard & Poor’s has downgraded the credit rating of BNP Paribas to AA-minus from AA as part of a downward revision of the French bank-sector which is perceived to have been hit by tougher economic and funding conditions. S&P also revised the country risk assessment of the French banking industry, or BICRA, to Group 2 from the lower-risk Group 1.

In a statement, S&P said, “We see weaker economic prospects for Europe, including the peripheral countries to which some French banks are significantly exposed. We expect lower earnings due to this more difficult environment and higher funding costs.”

The rating agency expressed the hope that French banks will increase their capital ratios by 2013. “But until then, we are placing more emphasis on their currently moderate capital positions in our ratings,” it said.

However, S&P while expecting extraordinary government support for the other four largest French banks – BPCE, Credit Agricole, Credit Mutuel and Societe Generale, affirmed their ratings. S&P said that the outlook on all five banks is stable.

The pressure on French banks mounted during the summer when there was a major sell-off of their shares because of concerns regarding their exposure to the deepening euro zone sovereign debt crisis. Banks are being asked to recapitalize but French banks have repeatedly said that they can do without capital injections.