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Soc Gen CEO Frederic Oudea announced a plan to raise 4 billion Euros, cut staff and costs today, but the sell-off in European banks, French banks in particular, continues.And now market participants are anticipating government intervention of some form.
The French bank stock plunge comes after this weekend, when two key things happened.
First, word hit that three of the biggest French banks, Soc Gen, BNP, and Credit Agricole, were said to be preparing for imminent ratings downgrades by Moody’s.
Second, the G7 leaders said they are prepared to offer monetary support to prop up Euro banks if need be and it looks like that’s what is coming. A bailout of some form.
The catalyst is the deteriorating debt situation in Greece.
And now, it sounds like everyone except French officials and the Soc Gen CEO expects Europe to intervene if this continues. A London-based bank analyst told Reuters: “It smells of 2008, 2009… The market is increasingly pricing in the need for the French government to intervene…The question is, is it going to be through nationalization or through injecting equity?“
However Frederic Oudea and French officials are refuting that there’s a need for the government to intervene.
Oudea told reporters today that French banks were “solid” and that there were no discussions going on concerning a possible state intervention, according to Reuters. And Bank of France Governor Christian Noyer insisted that French banks had no liquidity or solvency problems and could withstand any crisis relating to Greece.
SocGen said the same in a memo to employees on Friday, writing that a takeover of the bank would not be a solution, nor was it at risk of happening. The memo also said legal action against the Daily Mail was pending after the newspaper published a story in August saying the bank was close to collapse, according to Reuters.
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