BNP Paribas avoids Moody’s downgrade of French banks

MOODY’s downgraded Credit Agricole and Société Générale – two of France’s biggest lenders – yesterday on the basis of Credit Agricole’s exposure to Greece’s ailing public finances and SocGen’s reliance on wholesale funding.

But BNP Paribas avoided a downgrade and fought back against its critics by unveiling a dramatic restructuring that will see the bank offload €70bn of assets.

In a conference presentation in New York, the bank’s chief executive Baudouin Prot also outlined plans – some already in motion – to shrink its investment bank’s funding needs by €60bn by the end of next year and to exit the UK, Hungary and Switzerland.

The sell-off, which will also include non-core assets like yacht and jets-leasing businesses, will deliver a ten per cent reduction in the group’s leverage ratio, Prot said. He aims to boost the bank’s common tier one equity ratio by one per cent compared to June of this year.

He claimed that the bank is on track to meet its target of a nine per cent common equity ratio under Basel III definitions by the end of 2012.

The bank emphasised that it has so far reduced its investment bank’s funding needs by €22bn since June 2010.