Credit Agricole May Follow Rivals With Asset Sales

(We were first to report this. The next day Credit Agricole announced a plan to sell assets.)

By Lionel Laurent

PARIS, Sept 27 | Tue Sep 27, 2011 11:25am EDT

(Reuters) - Credit Agricole , France's third-biggest bank by market value, is expected to follow bigger rivals BNP Paribas and Societe Generale in launching asset sales after the sharp falls in their share prices in recent weeks.

Retail-focused Credit Agricole is a different beast from BNP and SocGen. It has already restructured its investment bank and cut high-risk activities after an overambitious expansion in the years leading up to the 2008 crisis.

But analysts and sources familiar with the bank say it is not immune to the lethal cocktail of higher U.S. dollar funding costs and heightened fears over a Greek default that have spurred on banks to speed up asset sales.

"I find it difficult to see how they (Credit Agricole) can avoid it ... They are also likely to act," one Paris-based source familiar with the bank's strategy said.

(Read on...)

ETF Industry Braces Itself For Transparency Push

By Lionel Laurent

PARIS (Reuters) - Top heavyweights from the $1.3 trillion exchange-traded fund (ETF) industry are bracing themselves for a shift in how their fast-growing but relatively opaque products are marketed, distributed and regulated.

During a three-hour hearing in Paris on Monday, executives from ETF providers like BlackRock , Societe Generale unit Lyxor and Natixis unit Ossiam picked apart the European Securities and Markets Authority's (ESMA) recent proposals to make ETFs more transparent and ultimately less risky for investors.

But despite some pushback on details such as how ETFs should be labeled, what information should be disclosed and how their risk levels might be controlled, some executives acknowledged the broad push toward more transparency was inevitable.

"Everybody is reasonably okay with the proposals," BlackRock Director Stefan Kaiser told Reuters on the sidelines of the hearing. "People realize that something will happen, if anything because clients are demanding it."

(Read on...)

Siemens Withdrew Deposits From SocGen -Source

(We were first to identify SocGen as Siemens' bank after a previous report by the FT said the German group had withdrawn deposits from an unnamed "French bank")

By Lionel Laurent and Eva Kuehnen

PARIS/FRANKFURT, Sept 20 (Reuters) - German engineering group Siemens (SIEGn.DE) withdrew funds from Societe Generale in July because of underperformance, not fears over the French bank's financial health, a Paris-based source said on Tuesday.

The source told Reuters that the deposits at SocGen had been placed in an investment vehicle but was unable to say what the amount was.

"Siemens withdrew funds (from Societe Generale) before the publication of the outcome of the (European banking) stress tests (in July)," the source said. "The withdrawal was for reasons related to performance and not to French bank issues."

(Read on...)

INSIGHT: Behind French Bank Drama, A Relaxed Regulator?

By Lionel Laurent

(Reuters) - On a sunny morning in mid-June, France's chief bank regulator Christian Noyer seemed upbeat as he told reporters gathered at the Bank of France there were no risks facing its banks.

Profits were on the up and affordable funding was more or less the norm. Although some analysts had said banks like Societe Generale and Credit Agricole might eventually need to raise capital to meet tougher rules under the post-crisis Basel III regime, Noyer backed the view of bankers that setting aside a stream of steady future profits would be enough.

Three months on, the picture has changed dramatically.

Shares in SocGen, Credit Agricole and larger rival BNP Paribas are trading at crippled valuations after a summertime sell-off halved their share prices to levels not seen since 2009, wiping nearly 60 billion euros ($82 billion) off their market value.

With the biggest overall exposure to Greece's debt-wracked economy, according to the Bank for International Settlements, French banks are viewed as particularly vulnerable to any deterioration of the euro zone crisis.

It is not just their shares that are suffering. Ratings agency Moody's has downgraded French banks' credit rating and signaled there may be more to come.

Some analysts who have picked apart the business model of the French banks say they are viewed as more risky because of their dependence on short-term wholesale funding, their big balance sheets and their leverage.

These are all things the regulator could have -- and should have -- detected, they say.

"The French regulator has taken its eye off the ball in terms of making the banks robust enough," said Andrew Lim, an analyst at Portuguese bank Espirito Santo. "They haven't forced their banks to raise capital the same way some other countries have.

(Read on...)

SocGen plays down takeover talk, says to sue Daily Mail -memo

By Lionel Laurent

(Reuters) - A takeover of Societe Generale (SOGN.PA) is not a solution to current woes nor is it at risk of taking place, the French bank told employees in an internal memo sent on Friday.

"A takeover, today, is neither a solution nor at risk : all banks have seen their share prices drop," the memo obtained by Reuters said. "The level of instability in the environment and the banking system means that all banks are faced with the same problem. It is not a solution to the current problem, regardless of the players."

The memo also said legal action against newspaper Daily Mail was pending after the Mail on Sunday published a story in August saying SocGen was close to collapse. The newspaper subsequently issued a public apology after SocGen denied the story.

"Legal action against the Daily Mail is pending and similarly legal action will be taken against anybody who spreads unfounded rumours about our company," the memo said.

French Banks Braced For Credit-Rating Downgrade -Sources

By Lionel Laurent

PARIS, Sept 10 (Reuters) - France's top banks are bracing themselves for a likely credit rating downgrade from Moody's, sources close to the situation said on Saturday, further complicating their efforts to assure investors they are riding out the tensions in funding markets.

Several sources said on Saturday that BNP Paribas , Societe Generale and Credit Agricole were expecting an "imminent" decision from the ratings agency, which first put them under review for possible downgrade on June 15.

Moody's at the time had cited French banks' exposure to Greece's debt-stricken economy as the reason behind the review, which was due to last three months. Outside commentators said the ratings were ripe for a downgrade because of rising borrowing costs in the face of sovereign debt turmoil.

"The decision is imminent," one Paris-based source said. "It will probably be a downgrade but it's not certain yet."

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SocGen Cutting Staff, Unions Worried -Sources

By Sophie Sassard and Lionel Laurent

LONDON/PARIS, Sept 8 (Reuters) - French lender Societe Generale has started to cut staff as it adjusts its business to the worsening outlook for investment banking and the dire impact of Europe's debt crisis, employees and union sources say.

The cuts -- mainly in SocGen's corporate and investment bank (CIB) in the Paris region, where half of its staff is located -- have so far been more of a trickle than a wave, but unions say they are on alert for more to come.

"The lay-offs have already begun in CIB," said one employee. "One guy came back from vacation to find a cheque waiting for him...He was told that if he wanted to take it to an employment tribunal it would be long and arduous."

If this anecdotal evidence is accurate, the bank may be avoiding the need for a costly and tightly-regulated redundancy exercise, Paris-based lawyer Mabrouk Sassi said.

"In France there are clear rules when it comes to firing people," he said. "Rather than go into a complex layoff programme that may not be permissible in the current environment, it is possible that there might be a concerted effort by management to reduce staff levels."

A spokeswoman for SocGen said: "At the moment we are stabilising our staffing levels because of the worsening market environment." She added that the bank had not put into place any overall plan to reduce staff.

(Read on...)