Standard & Poor’s (S & P) has downgraded the credit rating of the French group BNP Paribas, the largest European bank, from “AA” to “AA-“, and confirmed the ratings of other large French banks, including Societe Generale and Credit Agricole, to “A +” in the French banking system evaluation. Rating agency has downgraded French banking sector risk in Group 2 from Group 1, Reuters writes.
The evaluation of S & P includes 10 groups, the last level being the most risky. “We see weaker economic outlook for Europe, including countries from the periphery, to which some French banks are significantly exposed. We anticipate lower profits because of this difficult environment, and higher funding costs”, it reads a statement from S & P.
The Agency believes that French banks will strengthen their capital by 2013.
“Until then, we put more emphasis on the calculation of current ratings on capital positions, which are moderate”, reads the statement. For Societe Generale, Credit Agricole, Credit Mutuel and BPCE, banks whit ratings that were confirmed, S & P expects government support in problematic situations. Prospects of the five bank ratings are stable. French banks are facing severe pressure since July, mainly due to high exposure to public debt of Greece.
European leaders and economists are increasingly making calls to recapitalize the European banking sector, arguing that French banks have the most urgent need of additional capital. Meanwhile, representatives of the major French financial groups insist that they do not need capital injections.
BNP Paribas and Societe Generale recently announced plans to “download” the portfolio of risk-weighted assets by a total of 150 billion euros. French Prime Minister Francois Fillon said on Friday that French banks may use profits and other resources to strengthen their financial position. France has shown that, if necessary, will use public funds to recapitalize banks and will not appeal to the European Financial Stability Fund.
Fitch Ratings has placed on Thursday the ratings for BNP Paribas, Credit Agricole and Societe Generale under evaluation for possible downgrade. Moody’s cut ratings in September for Societe Generale and Credit Agricole, and placed BNP Paribas under evaluation with a negative outlook.