Societe Generale SA (SCGLY)

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UPDATE: French Bank Shares Soar On Coordinated Central Banks' Dollar Move
Date : 09/15/2011 @ 11:18AM
Source : Dow Jones News
Stock : Credit Agricole S.A. ADS (CRARY)
Quote : 3.55 -0.23 (-6.08%) @ 12:21PM

UPDATE: French Bank Shares Soar On Coordinated Central Banks' Dollar Move
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(Adds background, analyst comment, banks declining comment.)

PARIS--French bank shares soared Thursday after the world's biggest central banks said they would pump dollars into the banking system, easing concerns about funding constraints that have hammered the largest French financial institutions.

BNP Paribas SA (BNP.FR) jumped the most, gaining over 20% before easing back to trade up 12% in recent activity. Societe Generale SA (GLE.FR) shares were up 5.7% and Credit Agricole SA (ACA.FR) gained 5.6%. France's broader CAC-40 index was up 3.1% while the Stoxx Europe 600 banks index was up 4.1%.

"Coordinated actions always reassure markets, especially in light of the recent cacophony," Jean-Francois Robin, a strategist at French investment bank Natixis in Paris, said. He said the move would have "a strong psychological impact and appease market's irrational fears."

French banks have been caught up in the continuing European sovereign debt crisis, battered by fears about their exposure to Greece and signs that U.S. money market funds have pulled back in lending dollars to them.

Moody's Investors Service Wednesday stressed that the continuing European sovereign debt crisis is denting the key source of funding for the French banks, as it cut the long-term debt ratings of Societe Generale and Credit Agricole and kept BNP Paribas on review for a downgrade.

The ratings agency said the banks were able to cope with the short-term impact of the contraction in dollar funding and that euro funding remains plentiful, but that persistent sovereign debt worries threaten to make wholesale money markets fragile for some time.

Bank stocks were already in positive territory before the announcement that five major central banks would act in concert to pump dollars into the European banking system by arranging three new funding operations, an action aimed at stemming a new liquidity crisis. "News of concerted action...is sending them through the roof," Geoffroy Perreira, a trader with H & Associes, said.

BNP Paribas and Societe Generale have acknowledged that access to dollars through U.S. money market funds has been drying up and both have said they have secured alternative sources of dollars. They have also indicated they are cutting back on dollar-denominated lending and seeking to sell assets in a bid to bolster their capital, a potentially worrying development for slowing economies in France and elsewhere that the coordinated central bank actions seemed designed to ward off.

Societe Generale, Credit Agricole and BNP Paribas all declined to comment on the central bank move. The Bank of France also declined to comment.

-By Inti Landauro and Noemie Bisserbe, Dow Jones Newswires; [phone]; [e-mail]

--Ruth Bender contributed to this story.