French banks hit as SocGen ditches assets

Societe Generale said it would cut costs and sell assets to free up 4 billion euros in fresh capital on Monday, although the surpise move failed to stem a sell-off in French bank shares, driven by fears of a Greek debt default.
A rapid decline in French bank stock prices since the beginning of the summer has led to speculation that the French state may have to intervene and recapitalise its banks, in the same way as the British and other governments were forced to during the first wave of the financial crisis.
BNP Paribas led the falls, with its shares down 13.5 percent, while SocGen and Credit Agricole were both more than 9 percent lower at 1224 GMT. They are trading at levels not seen since at least early 2009, when recession stalked much of the developed world. Although SocGen Chief Frederic Oudea promised fresh asset sales, cost cuts and staff reductions in a bid to fight what he called "extreme" volatility on financial markets, some investors said it mattered little in the current context.
"The plan remains of minor interest as long as SocGen is caught in this spiral of negativity on financials," said Yohan Salleron, fund manager at Mandarine Gestion. "Banks' own announcements are fading into the background." "It smells of 2008, 2009," a London-based bank analyst said. "The market is increasingly pricing in the need for the French government to intervene...The question is, is it going to be through nationalisation or through injecting equity?"
Bank of France Governor Christian Noyer insisted on Monday that French banks had no liquidity or solvency problems and could withstand any crisis relating to Greece. During a hastily convened conference call to announce fresh asset sales, SocGen Chief Executive Frederic Oudea said that French banks were "solid" and that there were no discussions going on concerning a possible state intervention.
"There is extreme nervousness and volatility on financial markets," Oudea told reporters. Oudea said the bank would sell assets - primarily in its asset-management and specialised financial services divisions - to raise 4 billion euros in capital by 2013 and cut back on financing activities that were not very profitable.