(exclusively on Reuters)
By Lionel Laurent
PARIS Tue Nov 15, 2011 12:41pm EST
PARIS Nov 15 (Reuters) - The chief executive of Societe Generale is not ruling out a recession in France in 2012 and says the bank will have to cut "hundreds" of jobs to beef up its balance sheet and restore investor confidence, according to a trade-union memo obtained by Reuters.
Frederic Oudea, who met with trade unions on Tuesday to discuss planned job cuts, also said there would be asset sales at the bank's GIMS asset-gathering arm and its Specialised Financial Services arm by mid-2012, according to the memo.
"Oudea does not rule out a recession in France in 2012," the memo sent to union members said. "He does not believe he can avoid - as at other banks - layoffs (several hundred in France and internationally)."
The chief executive also said that there would be a freeze of the highest salaries at the bank and that broader salary policy was for an increase of below 1 percent and below 2.5 percent for the bottom earners.
Tuesday 15 November 2011
Friday 11 November 2011
French Banks Have More To Do To Reassure Markets
By Lionel Laurent
PARIS Fri Nov 11, 2011 10:15am EST
PARIS Nov 11 (Reuters) - French banks such as BNP Paribas and Societe Generale, which suffered huge share-price declines in the summer as investors fled euro zone risk, have yet to reassure financial markets they are doing enough to withstand the crisis.
Their cost of funding -- a crucial sign of market confidence that also affects profitability -- remains stubbornly high, even after a raft of announcements including sweeping asset sales and more aggressive writedowns on Greek debt that were designed to cut borrowings and soothe market fears.
Some investors and analysts fear that French banks, which nonetheless managed to stay profitable in the third quarter, are still reacting too slowly to the spread of the euro zone debt crisis as it plunges Greece and Italy into political turmoil and pushes up borrowing costs for France.
"When you look at the French banks' results, a big part of their profitability comes from the fact they are booking gains from their own debt," said Yannick Naud, portfolio manager at Glendevon King Asset Management.
"(Borrowing costs) are still at abnormally high levels, not too far from 2008-2009."
Credit default swap prices show the cost of insuring BNP, SocGen and Credit Agricole's 5-year and 10-year debt has gone up by around 15 to 25 percent over the past month. Other industry-wide gauges such as the euro-dollar basis swap are at crisis-era levels, said Glendevon King's Naud.
The recent rise in French sovereign borrowing rates, exacerbated by Italy's ills but also by Thursday's erroneous downgrade of France by Standard & Poor's, is especially unnerving.
France's status as a core "AAA" economy with low levels of household debt was a key reason why its banks could borrow cheaply on wholesale markets up until the summer.
MORE ASSET SALES?
While a 'bazooka' deal to solve the eurozone's ills would no doubt help ease the pain, some believe that ultimately French banks will be forced to act first by cutting their balance sheets more aggressively than previous announcements suggest.
This is likely to hurt the global economy as banks move from cutting their U.S. dollar lending -- such as aircraft, shipping and real-estate funding -- to hacking into euro-denominated assets, even if there is room to focus on trading portfolios.
BNP, France's biggest listed bank, still needs to cut its "risk-weighted" balance sheet by a whopping 155.3 billion euros to meet tougher Basel III solvency targets, on top of the 70 billion euros in asset sales that have already been promised, according to research from Mediobanca.
Taken together, BNP, SocGen and Credit Agricole would need to sell some 600 to 800 billion euros in notional funded assets through to 2013, or double what has already been announced, according to research from UBS.
"(This) will come cheap to neither the domestic economy nor bank (profits) in the interim," UBS analyst Omar Fall said.
Some stock-pickers say that regardless of the outlook for future profits, French banks are trading at crippled valuations -- less than half their book value -- and offer a lot of upside if the worst fears for the eurozone do not come to pass.
But the choice, as one London-based analyst puts it, is between two unprecedented outcomes: a French sovereign downgrade with skyrocketing bond yields, or a radical move by the European Central Bank.
"If you start assuming France is going to go the way of Italy you don't want to own these banks, because funding costs are going to skyrocket," he said. "But I think that the European Central Bank will intervene before anything like that happens."
(Read on...)
PARIS Fri Nov 11, 2011 10:15am EST
PARIS Nov 11 (Reuters) - French banks such as BNP Paribas and Societe Generale, which suffered huge share-price declines in the summer as investors fled euro zone risk, have yet to reassure financial markets they are doing enough to withstand the crisis.
Their cost of funding -- a crucial sign of market confidence that also affects profitability -- remains stubbornly high, even after a raft of announcements including sweeping asset sales and more aggressive writedowns on Greek debt that were designed to cut borrowings and soothe market fears.
Some investors and analysts fear that French banks, which nonetheless managed to stay profitable in the third quarter, are still reacting too slowly to the spread of the euro zone debt crisis as it plunges Greece and Italy into political turmoil and pushes up borrowing costs for France.
"When you look at the French banks' results, a big part of their profitability comes from the fact they are booking gains from their own debt," said Yannick Naud, portfolio manager at Glendevon King Asset Management.
"(Borrowing costs) are still at abnormally high levels, not too far from 2008-2009."
Credit default swap prices show the cost of insuring BNP, SocGen and Credit Agricole's 5-year and 10-year debt has gone up by around 15 to 25 percent over the past month. Other industry-wide gauges such as the euro-dollar basis swap are at crisis-era levels, said Glendevon King's Naud.
The recent rise in French sovereign borrowing rates, exacerbated by Italy's ills but also by Thursday's erroneous downgrade of France by Standard & Poor's, is especially unnerving.
France's status as a core "AAA" economy with low levels of household debt was a key reason why its banks could borrow cheaply on wholesale markets up until the summer.
MORE ASSET SALES?
While a 'bazooka' deal to solve the eurozone's ills would no doubt help ease the pain, some believe that ultimately French banks will be forced to act first by cutting their balance sheets more aggressively than previous announcements suggest.
This is likely to hurt the global economy as banks move from cutting their U.S. dollar lending -- such as aircraft, shipping and real-estate funding -- to hacking into euro-denominated assets, even if there is room to focus on trading portfolios.
BNP, France's biggest listed bank, still needs to cut its "risk-weighted" balance sheet by a whopping 155.3 billion euros to meet tougher Basel III solvency targets, on top of the 70 billion euros in asset sales that have already been promised, according to research from Mediobanca.
Taken together, BNP, SocGen and Credit Agricole would need to sell some 600 to 800 billion euros in notional funded assets through to 2013, or double what has already been announced, according to research from UBS.
"(This) will come cheap to neither the domestic economy nor bank (profits) in the interim," UBS analyst Omar Fall said.
Some stock-pickers say that regardless of the outlook for future profits, French banks are trading at crippled valuations -- less than half their book value -- and offer a lot of upside if the worst fears for the eurozone do not come to pass.
But the choice, as one London-based analyst puts it, is between two unprecedented outcomes: a French sovereign downgrade with skyrocketing bond yields, or a radical move by the European Central Bank.
"If you start assuming France is going to go the way of Italy you don't want to own these banks, because funding costs are going to skyrocket," he said. "But I think that the European Central Bank will intervene before anything like that happens."
(Read on...)
Tuesday 1 November 2011
Occupy The Champs-Elysees? Non, Merci!
By Lionel Laurent
PARIS Tue Nov 1, 2011 11:01am EDT
PARIS (Reuters) - Hordes of seething protesters, tents of rage and clashes with the police have become regular sights in New York, London, Madrid and Rome. But over in Paris, despite a history of revolution, the French just aren't taking the bait.
Although activists in Paris are hoping to rekindle the spark this Friday in time for the G20 summit in Cannes, French attempts at launching movements akin to the "Indignados" in Spain or anti-banker "Occupy" sit-ins across the Channel and the Atlantic -- which have galvanised hundreds of thousands of supporters -- have so far fallen flat.
In May an estimated 1,000 people gathered in Paris' Place de la Bastille, a symbolic location after the fall of the hated Bastille prison to revolutionaries in 1789, but police cleared them out. Subsequent marches were in the hundreds of people but failed to take root, with the holiday season putting the brakes on anger.
Student leaders are now pinning their hopes on a new bid to "Occupy La Defense" - the business district west of Paris that houses the headquarters of French bank Societe Generale, among others - on Friday. But they admit that rabble-rousing is a tough business these days, even with the G20 landing in Cannes.
"We don't know how it's going to go...We're hoping it will take off but we just don't know," said Baki Youssoufou, a 30-year-old Sorbonne graduate who heads a student union taking part in the event. "Will we see the same numbers that we saw in Madrid or in New York? I don't think so. We'll need a few more weeks for that."
(Read on...)
PARIS Tue Nov 1, 2011 11:01am EDT
PARIS (Reuters) - Hordes of seething protesters, tents of rage and clashes with the police have become regular sights in New York, London, Madrid and Rome. But over in Paris, despite a history of revolution, the French just aren't taking the bait.
Although activists in Paris are hoping to rekindle the spark this Friday in time for the G20 summit in Cannes, French attempts at launching movements akin to the "Indignados" in Spain or anti-banker "Occupy" sit-ins across the Channel and the Atlantic -- which have galvanised hundreds of thousands of supporters -- have so far fallen flat.
In May an estimated 1,000 people gathered in Paris' Place de la Bastille, a symbolic location after the fall of the hated Bastille prison to revolutionaries in 1789, but police cleared them out. Subsequent marches were in the hundreds of people but failed to take root, with the holiday season putting the brakes on anger.
Student leaders are now pinning their hopes on a new bid to "Occupy La Defense" - the business district west of Paris that houses the headquarters of French bank Societe Generale, among others - on Friday. But they admit that rabble-rousing is a tough business these days, even with the G20 landing in Cannes.
"We don't know how it's going to go...We're hoping it will take off but we just don't know," said Baki Youssoufou, a 30-year-old Sorbonne graduate who heads a student union taking part in the event. "Will we see the same numbers that we saw in Madrid or in New York? I don't think so. We'll need a few more weeks for that."
(Read on...)
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