(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...)
Friday, 28 October 2011
French Bankers Brace For Squeeze Ahead Of Results
By Lionel Laurent and Sophie Sassard
PARIS/LONDON, Oct 28 (Reuters) - French bankers are bracing themselves for a rough end to the year as job cuts, pressure on bonuses and a broad drive to slash costs cast a shadow over BNP Paribas and Societe Generale's upcoming quarterly results announcements.
French lenders have already announced sweeping asset sales and are now looking for additional measures to plug an estimated capital shortfall of 8.8 billion euros ($12.4 billion) without help from shareholders or the taxpayer.
Bankers, union sources and headhunters say this will inevitably lead to hundreds of job cuts at BNP and SocGen, with the burden falling largely on corporate and investment banking (CIB) and in particular asset financing.
Some say New York and London will be harder hit than Paris, where labour laws are stricter and layoffs more tightly regulated.
"We know that CIB will be hit hard," said a union representative at BNP, which is expected to give more details when it reports quarterly results on Nov. 3.
"The bank has said it is pulling out of some markets, some international platforms, New York, the Gulf, Asia...There's going to be an impact."
Thursday, 27 October 2011
Crisis Flames Lick At BNP Chief Pebereau's Legacy
PARIS |
(Reuters) - In the spring of 1999, Michel Pebereau, chief executive of Banque Nationale de Paris (BNP), gathered a dozen of his top bankers to propose an audacious plan to buy not one, but two rivals and create a French national champion.
It was a big gamble for the one-time top civil servant. Having overseen the state's sale of its stake in BNP (BNPP.PA), he now sensed an opportunity to create a dominant player by snapping up investment bank Paribas and retail rival Societe Generale (SOGN.PA).
"It was a race to be the biggest," recalled one of the bankers present at the meeting.
Pebereau failed to win SocGen, but he got Paribas.
This served as a springboard for BNP's ten-year transformation into one of the world's largest banks with assets of around 2 trillion euros ($2.7 trillion), equivalent to about a year of French GDP, and a reputation as a risk-averse sector monolith that emerged from the 2008 financial crisis virtually unscathed.
More than a decade on from that meeting, a euro zone debt crisis rages and the 69-year-old prepares to step down as chairman on December 1.
BNP's size and its business model are no longer perceived as ironclad. Its shares are trading at half their book value after heightened eurozone fears this summer forced French banks into announcing sweeping asset sales.
And the once-widespread view of Pebereau as a banking Midas has been undermined by the possibility that BNP and its peers could be forced to take state funds as part of a plan to shore up Europe's banks, as Greece threatens to lurch into default.
"BNP is like the Roman Empire. And the barbarians are at the gates," as one analyst puts it.
Tuesday, 11 October 2011
Generali France Employee Arrested In Probe
(Fun little scoop!)
By Lionel Laurent and Nicolas Bertin
By Lionel Laurent and Nicolas Bertin
Paris |
Paris, Oct 11 (Reuters) -- Police have raided the French offices of Italian insurer Assicurazioni Generali and arrested one employee as part of an ongoing investigation into an alleged fraud, a company official said on Tuesday.
The employee, who worked in a back-office function, is suspected of being part of an alleged fraud ring that attempted to embezzle around 1.2 million euros ($1.64 million) of client funds, according to two sources familiar with the case.
Such developments are rare in the normally staid world of the French personal-insurance market, a 1.4 trillion-euro behemoth that remains a firm favourite with risk-averse savers thanks to its beneficial tax treatment.
Police arrested the Generali employee -- who has not been named -- at his home on Sept. 27 before they searched his workplace at the company's offices in the Paris suburb of Seine-Saint-Denis, according to Generali France's head of legal affairs, Michel Becker.
The alleged fraud itself dates back to 2009 and was rapidly detected by the company, which filed a complaint with the Paris prosecutor in August of that year, Becker said.
"The financial fraud squad began an investigation that led to the identification of a suspicious person among our employees," he said.
However, two sources familiar with the case said that so far up to three Generali employees had been placed under investigation as part of the probe, which had uncovered an alleged fraud ring of around 15 people.
The scheme had siphoned off 1.2 million euros of client funds but was intercepted as it attempted to move them to separate accounts and shell companies, the sources said.
Becker declined to comment on these details. He said the alleged fraud had had "no negative impact" on the company's clients.
A police spokeswoman declined to comment because the investigation was "ongoing".
Friday, 7 October 2011
SocGen CEO Frederic Oudea Tells Reuters Bank Recaps Won't Solve Crisis
(Click here to see my video interview with Frederic Oudea, Chief Executive of Societe Generale)
(Reuters) - A recapitalization of European banks is not needed and would not solve a crisis of confidence in the euro zone's ability to manage its sovereign debts, Societe Generale's chief executive told Reuters Insider TV on Friday.
PARIS |
Shares in France's second-largest bank have plunged nearly 50 percent over the last three months as concerns have grown about its financial strength, prompting it to announce a plan to cut costs and sell assets to free up 4 billion euros in capital.
Calling on euro zone leaders to sort out the unfolding Greek debt drama "as quickly as possible," Frederic Oudea said the main problem for banks was not one of capital but one of liquidity as funding-market confidence peels away.
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