Moody's cuts SocGen, Agricole ratings

(FT) -- Moody's has downgraded its credit ratings on Crédit Agricole and Société Générale and kept France's biggest bank BNP Paribas on review for a downgrade.

The decision on Wednesday follows days of uncertainty surrounding French banks' exposure to Greek sovereign debt, which has led to violent swings in their share prices.

French officials have resisted pressure to shore up their besieged banking sector as senior eurozone officials instead increased efforts to avert a Greek default.

Christian Noyer, governor of France's central bank, insisted on Wednesday that the country's banks had enough capital to withstand any losses from a Greek default and said the downgrades of Crédit Agricole and Société Générale were "relatively good news".

"French banks have an excellent rating, the same level as other major European banks, HSBC, Barclays, Deutsche Bank, Credit Suisse. There's no really bad news on the way, and Moody's says the level of capital of French banks allows them to absorb any potential losses on sovereign debt," he told RTL radio.

"It's a very small downgrade, and Moody's had a higher rating than the other agencies so it's just put them on the same level or slightly better than the others."Moody's cited "persistent fragility in the bank financing markets" for a one-notch downgrade to SocGen's long-term debt, given the bank's continued reliance on the wholesale funding markets. Crédit Agricole's large exposure to the risks of further deterioration in Greece were cited as the reasons behind a one-notch downgrade in its bank financial strength rating, from C-plus to C.

Moody's said it was keeping BNP Paribas' long-term Aa2 ratings under review while it assessed the potential impact of funding difficulties on the bank's credit profile.

SocGen and BNP Paribas shares were among the worst performers in Europe on Wednesday. SocGen shares, which ended up 15 per cent on Tuesday after a fall of nearly 11 per cent on Monday, fell back 5.6 per cent to €16.88 in early trade. BNP's shares, which rose more than 7 per cent on Tuesday, fell 5.5 per cent to €26.52 and Crédit Agricole's were 3.5 per cent weaker at €4.99

The Moody's downgrade coincided with an announcement from BNP that it plans to sell €70bn ($95.7bn) of risk-weighted assets to help ease mounting investor fears about French bank leverage and funding, two days after SocGen unveiled a similar plan.

The bank said the asset sales would reduce its balance sheet by around 10 per cent. BNP Paribas also said it will reduce its US dollar funding needs by $60bn by the end of 2012 in a bid to cut costs that have increased significantly recently following jitters on the US money markets about the euro debt crisis.