Basilea III - Banche francesi
French banks among worst hit by capital uncertainty
Published on Tue, Apr 13, 2010 at 08:58 | Updated at Tue, Apr 13, 2010 at 13:12 | Source : Reuters
French banks may be among the most exposed in Europe to tighter capital requirements due in 2012, despite having emerged relatively unscathed from the global financial crisis.
Fears that stricter guidelines will leave French banks like Credit Agricole and Natixis short of billions of euros in core capital have hurt their share valuations and are likely to persist until more clarity emerges.
France is not alone. Banks across Europe are expected to need USD 65 billion in fresh capital to meet so-called "Basel III" proposals, according to one study by UBS. The proposals are still at the consultation stage.
But Credit Agricole and Natixis seem more exposed than many others because of their cross-shareholdings in regional and cooperative banks, which Basel may disqualify as core capital.
"The market has priced in more risk for the capital of cooperative banks than for other banks," said Vincent Durel, a Fidelity fund manager who manages some 300 million euros (USD 400 million) in assets.
Credit Agricole and Natixis are trading at a 20-25% discount to their European peers based on 2012 price-to-earnings ratios, according to Durel. Credit Agricole is also potentially heavily exposed to a stricter Basel view on capital linked to banks' insurance capital.
French banks in general are trading at a 10% discount, said Durel. The negative sentiment is likely to continue until the latter half of this year, when more clarity on regulation is expected, he added.
BNP Paribas and Societe Generale have not been as affected as banks with stakes in cooperatives, though they will also likely take a hit if Basel rules out other forms of capital or if it imposes a minimum leverage ratio.
