French Bank Liquidity Improves but Outlook Uncertain
French bank liquidity is much improved from a year ago when the credit crisis began, and credit ratings remain stable after initial downgrades, but the worsening economy and continued financial market distress are clouding the outlook, said Fitch Ratings Service in a report this week.
Fitch applauded the French government’s commitment to stabilizing the banking system through capital injections to France’s six-largest banks this week, and the agency affirmed the ratings of those banks earlier this week.
Although the outlook for all long-term issuer default ratings assigned to leading French banks is “stable,” Fitch considers market stress to be sufficiently high and warns that rating changes may prove to be more sudden than those experienced in the past.
Among the worrisome economic signs, Fitch said home sales have fallen sharply and retail banks can no longer count on strong real estate loan demand to fuel growth.
The ratings agency said French banks with well-established commercial bank activities outside of France may be in a stronger position than their domestic-only counterparts. However, housing is also slowing in Central and Eastern Europe and Russia, where investment has been sizeable, Fitch said.
Fitch has downgraded a total of 12 French bank and financial company issuer default ratings since the beginning of the credit crisis in mid-2007. Individual bank ratings that were downgraded in the wake of the credit crisis include Natixis (KN), Groupe Caisse d’Epargne (CENCEP), Groupe Banque Populaire (GBP), Calyon and Societe General (GLE).
For details, see “Major French Banks.”
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