France’s biggest banks are rushing to cut the more than 140 billion euros ($171 billion) they provide their operations in Europe’s troubled economies, seeking to protect themselves against a possible breakup of the euro.
In a retreat, French banks, especially BNP Paribas SA (BNP) and Credit Agricole SA — the largest by assets — are trying to make their businesses in Italy, Spain, Greece, Portugal and Ireland less reliant on funds from the parent company.
In the decade after the creation of the euro, French banks were among the region’s most ambitious and acquisitive, investing about $36 billion in the five countries, lured by the prospect of growth in those markets. Their pullback now reflects the banks’ attempt to defend themselves against the risk, however remote, of an exit from the euro of any of the countries.
“It’s an unhealthy sign,” said Philippe Bodereau, the London-based head of research for financial firms at Pacific Investment Management Co., the world’s largest bond investor. “It’s like shifting sands, with European banks protecting against invisible currency risks within the euro zone.”
Like other financial institutions in Europe, French banks are trying to match assets and liabilities on a national level to minimize risk. Reducing assets in the five countries to limit cross-border exposure may erode BNP Paribas’s after-tax earnings by 4.7 percent and Credit Agricole’s by 7.2 percent, estimates Benoit Petrarque, a Kepler Capital Markets analyst in Paris.
Bloomberg
