To see if the market believes a Greek bailout is on the way, look no further than to French bank stocks, to see how they’re trading on a given day.Today Soc Gen, Credit Agricole, and BNP Paribas are all up over 12% from yesterday. (Soc Gen and Credit Agricole are now up over 13%.)
French banks have been on the rise ever since a Greek bailout – in one form or another – became more likely.
Although no official statement has confirmed a bailout yet, the number of rumours flying around yesterday about the form one might take, as well as the talks this weekend, like at the IMF conference in Washington DC, for example, suggest that plans have indeed escalated. There is even some hint that implementation of some plan is near – at least more so than it was last week.
One of the reasons a bailout would be a positive event for shareholders of French banks is that it would delay uncertainty about whether or not their exposure to Greek sovereign debt (the Greek sovereign bonds they own) would cause a massive loss to hit their balance sheet. If Greece defaults, the loss would be huge. French banks hold around €75 billion in Greek sovereign bonds, which would be worthless if the country defaults on its debt.
The Independent estimates that their individual exposures to Greek debt breaks down like this:
BNP holds about €14bn of Greek debt… France’s two other big banks, SocGen and Crédit Agricole, have similar exposures, and about €56bn of Greek sovereign bonds between them.
The party on the other side of the trade: the CDS holders.
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